/raid1/www/Hosts/bankrupt/TCR_Public/231126.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, November 26, 2023, Vol. 27, No. 329
Headlines
ABFC 2004-HE1: S&P Lowers Class M-1 Notes Rating to 'B (sf)'
AIMCO CLO 20: S&P Assigns BB-(sf) Rating on $16.15MM Class E Notes
ANTARES CLO 2019-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
ANTARES CLO 2023-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
ARBOR REALTY 2022-FL2: DBRS Confirms B(low) Rating on G Notes
ARES LOAN IV: Fitch Assigns Final 'BB-sf' Rating on Class E Notes
AUDAX SENIOR 8: S&P Assigns BB- (sf) Rating on Class E Notes
BANK 2020-BNK30: DBRS Confirms BB Rating on Class X-G Certs
BARCLAYS MORTGAGE 2023-NQM3: Fitch Gives Final B Rating on B2 Certs
BARINGS LOAN 1: Fitch Assigns 'BB-sf' Rating on Class E Notes
BCC MIDDLE 2023-2: S&P Assigns BB- (sf) Rating on Class E Notes
BENCHMARK 2019-B9: DBRS Confirms B Rating on Class X-H Certs
BENEFIT STREET XXXII: S&P Assigns BB- (sf) Rating on Cl. E Notes
BIRCH GROVE 7: Fitch Assigns BBsf Rating on E Notes, Outlook Stable
BLADE ENGINE 2006-1: Moody's Raises Rating on B Securities to Caa3
BMARK 2023-V4: Fitch Assigns Final 'B-sf' Rating on Cl. J-RR Certs
BRIDGECREST LENDING 2023-1: DBRS Finalizes BB Rating on E Notes
BSPRT 2022-FL9: DBRS Confirms B(low) Rating on Class H Notes
CD 2017-CD4: DBRS Confirms BB Rating on Class E Certs
CD 2019-CD8: DBRS Confirms BB(high) Rating on Class F Certs
CITIGROUP 2018-C6: Fitch Affirms B- Rating on Class J-RR Certs
COMM 2014-UBS5: DBRS Cuts Class F Certs Rating to D
COMM 2018-HCLV: S&P Affirms CCC- (sf) Rating on Class F Certs
CPS AUTO 2023-D: DBRS Finalizes BB Rating on Class E Notes
CSAIL 2018-CX11: DBRS Cuts Class G-RR Certs Rating to B(low)
CSAIL 2019-C15: DBRS Cuts Class F-RR Certs Rating to B
CSMC TRUST 2017-CALI: S&P Affirms CCC-(sf) Rating on Class F Notes
CSMC TRUST 2017-PFHP: S&P Affirms CCC- (sf) Rating on Cl. F Notes
DRYDEN 112: S&P Assigns BB-(sf) Rating on $15.8MM Class E-R Notes
ELEVATION CLO 2023-17: S&P Assigns BB- (sf) Rating on Cl. E Notes
FANNIE MAE 2023-R08: S&P Assigns 'BB' Rating on Class 1B-1Xl Notes
FORTRESS CREDIT XX: S&P Assigns Prelim BB- (sf) Rating on E Notes
FS RIALTO 2022-FL5: DBRS Confirms B(low) Rating on Class G Notes
GENERATE CLO 13: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
GOLDENTREE LOAN 18: Fitch Assigns Final B-sf Rating on Cl. F Notes
GOLUB CAPITAL 70: Fitch Assigns 'BBsf' Rating on Class E Notes
GS MORTGAGE 2013-GCJ16: DBRS Confirms B Rating on Class X-C Certs
GS MORTGAGE 2018-GS10: S&P Lowers WLS-D Certs Rating to 'CCC (sf)'
GS MORTGAGE 2018-TWR S&P Lowers Class E Notes Rating to 'CCC (sf)'
GSF 2022-1: DBRS Confirms BB(low) Rating on Class E Notes
HOME RE 2023-1: DBRS Finalizes B Rating on Class B-1 Notes
JP MORGAN 2018-AON: S&P Affirms 'CCC (sf)' Rating on HRR Certs
JP MORGAN 2020-MKST: Moody's Lowers Rating on Cl. F Certs to Caa3
JPMBB COMMERCIAL 2014-C22: DBRS Cuts Class G Certs Rating to D
KKR CLO 48: Fitch Assigns 'BB+sf' Rating on E Notes, Outlook Stable
LENDMARK FUNDING 2021-2: S&P Raises Cl. D Notes Rating to 'BB(sf)'
LOBEL AUTOMOBILE 2023-2: DBRS Finalizes BB Rating on Class D Notes
MARBLE POINT XXV: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
MCA FUND III: DBRS Confirms BB Rating on Class C Notes
MERRILL LYNCH 2004-WMC3: Moody's Cuts Rating on Cl. S Certs to Ca
MORGAN STANLEY 2019-L2: DBRS Cuts Class G-RR Certs Rating to CCC
MOSAIC SOLAR 2022-3: Fitch Affirms 'BBsf' Rating on Class D Notes
MVW 2023-2: Fitch Assigns 'BBsf' Rating on D Notes, Outlook Stable
NEUBERGER BERMAN 53: Fitch Assigns 'BB-sf' Rating on Class E Notes
OAKWOOD MORTGAGE 1999-A: Moody's Hikes Class M-1 Debt to 'Caa1'
OCTAGON 66: Fitch Assigns Final 'BB-sf' Rating on Class E-R Notes
OPEN TRUST 2023-AIR: Moody's Assigns Ba3 Rating to Cl. HRR Certs
PALMER SQUARE 2023-3: S&P Assigns Prelim BB-(sf) Rating on E Notes
PARK AVENUE 2022-2: S&P Assigns Prelim BB-(sf) Rating on D-R Notes
PIKES PEAK 15: Fitch Assigns 'BB-sf' Rating on Class E Notes
PRESTIGE AUTO 2023-2: DBRS Gives Prov. BB Rating on Class E Notes
PRKCM 2023-AFC4: DBRS Gives Prov. B Rating on Class B-2 Notes
PRPM 2023-RCF2: Fitch Assigns Final 'BBsf' Rating on Cl. M-2 Notes
RAD CLO 22: Fitch Assigns 'BBsf' Rating on E Notes, Outlook Stable
RCKT MORTGAGE 2023-CES3: Fitch Assigns Bsf Rating on Cl. B-2 Notes
REALT 2016-2: DBRS Confirms B(high) Rating on Class G Certs
REALT 2017: DBRS Confirms B Rating on Class G Certs
REGIONAL MANAGEMENT 2021-2: S&P Raises D Notes Rating to BB+ (sf)
RR 27 LTD: Fitch Assigns Final 'BBsf' Rating on Class D Notes
SEQUOIA MORTGAGE 2023-5: Fitch Assigns 'BBsf' Rating on B-4 Certs
SOUND POINT 37: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
SYMPHONY CLO 40: S&P Assigns BB- (sf) Rating on Class E Notes
TRIMARAN CAVU 2023-2: S&P Assigns BB- (sf) Rating on Cl. E Notes
UBS COMMERCIAL 2017-C4: Fitch Affirms B- Rating to 2 Tranches
UNISON TRUST 2023-2: DBRS Gives Prov. BB(low) Rating on B Notes
VERUS SECURITIZATION 2023-INV3: S&P Assigns 'B (sf)' on B-2 Notes
WARWICK CAPITAL 2: Fitch Assigns 'BB-sf' Rating on Class E Notes
WELLS FARGO 2017-RB1: DBRS Cuts Certs Rating on 2 Classes to B
WESTLAKE AUTOMOBILE 2023-4: Fitch Assigns BBsf Rating on E Notes
[*] DBRS Confirms 20 Ratings From 5 Trust Transactions
[*] DBRS Reviews 159 Classes From 14 US RMBS Transactions
[*] Fitch Affirms 11 US RMBS Transactions Issued in Q1 2023
[*] Fitch Affirms 60 Tranches From Eight CRE CDOs
[*] Fitch Affirms 74 Tranches From 16 CLOs, Outlook Stable
[*] Moody's Takes Action on $28MM of US RMBS Issued 2002-2005
[*] S&P Takes Various Actions on 102 Classes From 37 US RMBS Deals
*********
ABFC 2004-HE1: S&P Lowers Class M-1 Notes Rating to 'B (sf)'
------------------------------------------------------------
S&P Global Ratings completed its review of 21 classes from 13 U.S.
RMBS transactions issued between 2004 and 2007. The review yielded
21 downgrades.
S&P said, "The rating actions reflect our assessment of observed
interest shortfalls/missed interest payments on the affected
classes during recent remittance periods. The lowered ratings that
are due to interest shortfalls/missed interest payments are
consistent with our "S&P Global Ratings Definitions," published
June 9, 2023, which imposes a maximum rating threshold on classes
that have incurred missed interest payments resulting from credit
or liquidity erosion. In applying our ratings definitions, we
looked to see if the respective class received additional
compensation beyond the imputed interest due as direct economic
compensation for the delay in interest payments (e.g., interest on
interest) and if the missed interest payments will be repaid by the
maturity date.
"Of the 21 classes that were downgraded, 11 classes from nine
transactions received additional compensation for outstanding
interest shortfalls. Our analysis considers the likelihood that the
missed interest payments, including the capitalized interest, would
be reimbursed under our various rating scenarios. Ten classes from
four transactions were downgraded because it did not receive
additional compensation for outstanding interest shortfalls. Our
analysis focuses on our expectations regarding the length of the
interest payment interruptions to assign the rating on the class.
"We will continue to monitor our ratings on securities that
experience interest shortfalls/missed interest payments, and we
will further adjust our ratings as we consider appropriate."
Ratings list
ISSUER NAME
RATING
SERIES CLASS CUSIP TO FROM
ABFC 2004-HE1 Trust
2004-HE1 M-1 04542BJP8 B (sf) BB- (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Alternative Loan Trust 2005-J12
2005-J12 2-A-4 12668ATB1 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
Argent Securities Inc.
2004-W10 M-1 040104LN9 B- (sf) B+ (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Argent Securities Inc.
2004-W10 M-2 040104LP4 CCC (sf) B- (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Banc of America Funding 2006-D Trust
2006-D 1-A-2 058933AB8 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Banc of America Funding 2006-H Trust
2006-H 5-A-1 05950PAS2 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Credit Suisse First Boston Mortgage Securities Corp.
2005-3 VII-A-1 225458LH9 A- (sf) AA- (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
Credit Suisse First Boston Mortgage Securities Corp.
2005-3 VII-A-2 225458LJ5 A- (sf) A+ (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
Credit Suisse First Boston Mortgage Securities Corp.
2005-3 VII-A-5 225458LM8 A- (sf) A+ (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
First Franklin Mortgage Loan Trust 2006-FF5
2006-FF5 M-1 32027EAH4 D (sf) CCC (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
IndyMac INDX Mortgage Loan Trust 2006-AR27
2006-AR27 1-A-2 45661LAB4 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
IndyMac INDX Mortgage Loan Trust 2006-AR27
2006-AR27 1-A-3 45661LAC2 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
IndyMac INDX Mortgage Loan Trust 2006-AR27
2006-AR27 1-A-4 45661LAD0 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
JPMorgan Alternative Loan Trust 2007-A2
2007-A2 1-1-A1 466278AA6 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
JPMorgan Alternative Loan Trust 2007-A2
2007-A2 1-2-A1 466278AC2 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
JPMorgan Alternative Loan Trust 2007-A2
2007-A2 1-2-A4 466278AF5 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Interest shortfalls.
Morgan Stanley ABS Capital I Inc. Trust 2005-HE1
2005-HE1 M-1 61744CKN5 B (sf) BB- (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Option One Mortgage Loan Trust 2005-3
2005-3 M-3 68389FHU1 B (sf) B+ (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Park Place Securities, Inc.
2005-WHQ2 M-3 70069FHW0 BB- (sf) BB+ (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Park Place Securities, Inc.
2005-WHQ2 M-5 70069FHY6 D (sf) CC (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
Securitized Asset Backed Receivables LLC Trust 2004-DO2
2004-DO2 M-1 81375WBV7 B- (sf) B (sf)
PRIMARY RATING DRIVER(S):Ultimate repayment of missed interest
unlikely at higher rating levels.
AIMCO CLO 20: S&P Assigns BB-(sf) Rating on $16.15MM Class E Notes
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S&P Global Ratings assigned its ratings to AIMCO CLO 20 Ltd./AIMCO
CLO 20 LLC's floating- and fixed-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Allstate Investment Management Co., a
subsidiary of Allstate Corp.
The 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
AIMCO CLO 20 Ltd./AIMCO CLO 20 LLC
Class A, $304.000 million: AAA (sf)
Class B-1, $49.850 million: AA (sf)
Class B-2, $7.150 million: AA (sf)
Class C-1 (deferrable), $20.925 million: A (sf)
Class C-2 (deferrable), $7.575 million: A (sf)
Class D (deferrable), $28.500 million: BBB- (sf)
Class E (deferrable), $16.150 million: BB- (sf)
Subordinated notes, $43.250 million: Not rated
ANTARES CLO 2019-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A loans and
the class A-R, B-R, C-R, D-R, and E-R replacement notes from
Antares CLO 2019-1 Ltd./Antares CLO 2019-1 LLC, a collateralized
loan obligation (CLO) originally issued in May 2019 that is managed
by Antares Capital Advisers LLC.
On the Nov. 16, 2023, refinancing date, the proceeds from the
replacement debt were allocated towards the redemption of the
original notes. S&P withdrew its ratings on the original notes and
assigned ratings to the replacement debt.
Replacement And Original Debt Issuances
Replacement debt
Class A loans, $290.00 million: Three-month term SOFR + 2.30%
Class A-R, $20.00 million: Three-month term SOFR + 2.30%
Class B-R, $61.50 million: Three-month term SOFR + 3.35%
Class C-R, $37.40 million: Three-month term SOFR + 4.25%
Class D-R, $29.40 million: Three-month term SOFR + 6.25%
Class E-R, $32.00 million: Three-month term SOFR + 9.10%
Original debt
Class A-1, $290.00 million: Three-month term SOFR + 1.94161%
Class A-2, $9.00 million: Three-month term SOFR + 2.16161%
Class B, $46.00 million: Three-month term SOFR + 2.81161%
Class C, $37.50 million: Three-month term SOFR + 3.81161%
Class D, $28.75 million: Three-month term SOFR + 4.91161%
Class E, $31.25 million: Three-month term SOFR + 8.01161%
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
Antares CLO 2019-1 Ltd./Antares CLO 2019-1 LLC
Class A loans, $290.00 million: AAA (sf)
Class A-R, $20.00 million: AAA (sf)
Class B-R, $61.50 million: AA (sf)
Class C-R (deferrable), $37.40 million: A (sf)
Class D-R (deferrable), $29.40 million: BBB- (sf)
Class E-R (deferrable), $32.00 million: BB- (sf)
Ratings Withdrawn
Antares CLO 2019-1 Ltd./Antares CLO 2019-1 LLC
Class A-1 to NR from AAA (sf)
Class B 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)
NR--Not rated.
ANTARES CLO 2023-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Antares CLO
2023-2 Ltd./Antares CLO 2023-2 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by Antares Capital Advisers LLC, a wholly owned
subsidiary of Antares Capital L.P.
The preliminary ratings are based on information as of Nov. 16,
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
Antares CLO 2023-2 Ltd./Antares CLO 2023-2 LLC
Class A, $290.00 million: AAA (sf)
Class B, $57.50 million: AA (sf)
Class C (deferrable), $32.50 million: A (sf)
Class D (deferrable), 27.50 million: BBB- (sf)
Class E (deferrable), $27.50 million: BB- (sf)
Subordinated notes, $63.19 million: Not rated
ARBOR REALTY 2022-FL2: DBRS Confirms B(low) Rating on G Notes
-------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
commercial mortgage-backed notes issued by Arbor Realty Commercial
Real Estate Notes 2022-FL2, LLC 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 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 transaction closed in May 2022 with the initial collateral
consisting of 32 floating-rate mortgages and senior participations
secured by 40 mostly transitional properties with a cut-off balance
of $936.9 billion. Most loans were in a period of transition with
plans to stabilize performance and improve the asset value. The
transaction has a maximum funded balance of $1.1 billion and is a
managed vehicle with the Reinvestment Period scheduled to expire
with the May 2024 Payment Date. As of October 2023 reporting, the
Reinvestment Account has a balance of $4.5 million.
As of the October 2023 remittance, the pool comprises 34 loans
secured by 37 properties with a cumulative trust balance of $1.05
billion. As part of DBRS Morningstar's analysis, the Clear Fork &
Trinity Oaks loans were treated as a single loan, as were the
Hunters Ridge A1 and A3 loan notes. As of October 2023, 25 of the
original loans, representing 71.8% of the current trust balance,
remain in the trust. Since issuance, seven loans with a former
cumulative trust balance of $204.8 million, have been successfully
repaid from the pool, all of which were repaid since the previous
DBRS Morningstar credit rating action in November 2022. An
additional two loans, totaling $200.3 million, have been added to
the trust since the previous DBRS Morningstar credit rating
action.
The transaction is concentrated by property type as all loans are
secured by multifamily properties. The loans are primarily secured
by properties in suburban markets as 25 loans, representing 63.2%
of the pool, are secured by properties in suburban markets, as
defined by DBRS Morningstar, with a DBRS Morningstar Market Rank of
3, 4, or 5. An additional four loans, representing 25.0% of the
pool, are secured by properties with DBRS Morningstar Market Ranks
of 6 or 7, denoting urban markets, while five loans, representing
11.8% of the pool, are secured by properties with DBRS Morningstar
Market Ranks of 1 and 2, denoting rural and tertiary markets. In
comparison, at transaction issuance, properties in suburban markets
represented 58.2% of the collateral, urban markets represented
23.1% of the collateral, and properties in tertiary and rural
markets represented 15.0% of the collateral.
Leverage across the pool has increased slightly as of the October
2023 reporting when the current weighted-average (WA) as-is
appraised loan-to-value ratio (LTV) was 78.1%, with a current WA
stabilized LTV of 66.0%. In comparison, these figures were 71.5%
and 66.0%, 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 and 2022, and
may not reflect the current rising interest rate or widening
capitalization rate environments. In the analysis for this review,
DBRS Morningstar applied upward LTV adjustments across two loans,
representing 10.0% of the current trust balance.
As part of this review, DBRS Morningstar received updates on the
business plans for all loans in the pool. Many borrowers are in the
early stages of their respective stabilization plans with business
plan progression generally in line with expectations. Through
October 2023, the lender had advanced cumulative loan future
funding of approximately $42.2 million to 24 of the 34 outstanding
individual borrowers to aid in property stabilization efforts. The
loan with both the largest amount of future funding remaining
($14.7 million) and advanced through June 2023 ($5.2 million) is
the Hunters Ridge loan. The loan is secured by 455 units of a
487-unit multifamily condominium complex in Farmington Hills,
Michigan. The borrower's business plan consists of implementing a
$19.9 million capital improvement plan to stabilize the property.
Through June 2023, $5.2 million of advanced funds had been used to
fund the unit renovations, common hallway refurbishment, clubhouse
redevelopment, amenity, and landscaping improvements. While
occupancy decreased to 81.0% as of June 2023 from 95.0% at
issuance, the average in-place rental rate across the entire
property increased to $1,681 per unit, with the renovated units
averaging rents of $2,055 per unit. In comparison at loan closing,
the average in place rental rate was $1,486 per unit.
An additional $42.3 million of loan future funding allocated to
eight of the outstanding individual borrowers remains available.
Available funding for each respective borrower is for planned
capital expenditure improvements, with the exception of the 55
Jordan loan (Prospectus ID#3; 5.4% of the pool) as available funds
are available to finance leasing costs.
As of the October 2023 reporting, no loans are specially serviced
or on the servicer's watchlist; however, the borrowers of four
loans, totaling $79.4 million (7.6% of the pool), are categorized
as being less than 30 days delinquent on the respective debt
service payments. Overall, the borrowers of these loans have been
progressing with the respective business plans, with the largest
loan, The Slate (Prospectus ID#19; 2.7% of the pool), secured by a
garden-style multifamily property in Atlanta. According to the
collateral manager, the borrower has used all loan future funding
toward the completion of capital improvements across the property.
As of May 2023, the collateral was 87.1% occupied, with an average
in-place rent of $1,516 per unit, a $302 monthly premium over the
issuance rental rate of $1,214 per unit. The achieved premium is in
line with the borrower's expected premium, which ranged from $65
per unit to $350 per unit.
While there were no future funding dollars allocated for the
Silversmith Creek (Prospectus ID#37; 1.6% of the pool) and The Park
on 23rd (Prospectus ID#33; 1.2% of the pool) loans, the borrower of
the Silversmith Creek loan has completed a significant portion of
its planned capital improvement plan. According to the collateral
manager, approximately 46.0% of unit-interior renovations and 44.0%
of common area and exterior renovations have been completed. The
borrower for The Park on 23rd loan has completed 21.0% of the
planned capital improvements via disbursements from a renovation
reserve. The last loan that reported a late payment is The
Townhomes at Peacock Hills (Prospectus ID#44; 2.0% of the pool),
which was added to the trust in September 2023. Through July 2023,
the lender had only advanced 5.8% of future funding for planned
capital improvements as the borrower remains in the initial stages
of its business plan.
According to the latest update provided by the collateral manager,
only one loan, Sora on Rose (Prospectus ID#26; 1.9% of the pool),
has been modified, which allowed a rolling advance of approximately
$173,000 from the renovation reserve for the borrower to access
funds to finance its capital improvement plan more efficiently.
Maturity risk is concentrated in 2025 as 22 loans (57.8% of the
pool) are scheduled to mature, while 11 loans (40.2% of the pool)
are scheduled to mature in 2024. The majority of these loans have
extension options ranging between 12 and 24 months. According to
the collateral manager, one loan, representing 3.3% of the pool, is
expected to be repaid prior to its March 2025 maturity.
Notes: All figures are in U.S. dollars unless otherwise noted.
ARES LOAN IV: Fitch Assigns Final 'BB-sf' Rating on Class E Notes
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Ares Loan Funding IV, Ltd.
Entity/Debt Rating
----------- ------
Ares Loan
Funding IV, Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Ares Loan Funding IV, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Ares
CLO Management LLC. Net proceeds from the issuance of the secured
and 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/B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.25, versus a maximum covenant, in
accordance with the initial expected matrix point of 26.2. 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
95.25% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 72.17% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.23%.
Portfolio Composition (Positive): 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 (Neutral): The transaction has a 4.9-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 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, '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, 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.
AUDAX SENIOR 8: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to Audax Senior Debt CLO 8
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 Audax Management Co. (NY) 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 debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Audax Senior Debt CLO 8 LLC
Class A-1, $80.00 million: AAA (sf)
Class A-1L loans(i), $190.00 million: AAA (sf)
Class A-1L notes(i), $0.00 million: AAA (sf)
Class A-1-F, $20.00 million: AAA (sf)
Class A-2, $20.00 million: AAA (sf)
Class B, $30.00 million: AA (sf)
Class C (deferrable), $40.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $22.50 million: BB- (sf)
Subordinated notes, $72.99 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.
BANK 2020-BNK30: DBRS Confirms BB Rating on Class X-G Certs
-----------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of Commercial
Mortgage Pass-Through Certificates (the Certificates), Series
2020-BNK30 issued by BANK 2020-BNK30 (the Issuer) 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-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 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 AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class X-D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class X-G at BB (sf)
-- Class G at BB (low) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction since the last rating action. The pool's
weighted-average (WA) debt service coverage ratio (DSCR) was
reported to be 2.83 times (x) as of the October 2023 distribution,
compared with the DBRS Morningstar DSCR of 2.75x at issuance. There
are no delinquent or specially serviced loans, and while there are
three loans on the servicer's watchlist representing 16.2% of the
pool balance, none of the loans are being monitored for
performance-related reasons. As of the October 2023 remittance, all
40 original loans remain in the pool, with an aggregate principal
balance of $795.7 million, reflecting a collateral reduction of
2.3% since issuance. No loans have defeased since issuance.
The pool has a high concentration of loans secured by office and
retail properties, representing 53.4% and 33.8% 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. In its analysis for this review, DBRS
Morningstar adjusted one of the four office loans in the pool with
a stressed probability of default (POD) scenario. DBRS Morningstar
identified four office-backed loans as exhibiting increased credit
risk due to single-tenant exposure, softening submarket conditions
and declines in occupancy. In the analysis for this review, DBRS
Morningstar analyzed these four loans by applying POD and/or loss
given default stresses to increase the expected losses (ELs),
resulting in a WA expected loss for these loans that is
approximately 1.5x the pool average EL.
The office loan with the highest DBRS Morningstar EL is 80 Grand -
CA (Prospectus ID#16, 2.4% of the pool balance), which is secured
by an eight-story Class B medical office building located in
Oakland, California. According to the September 2023 rent roll, the
property was 73.1% occupied, down from 84.0% at YE2022 and 91.4% at
YE2021. The most notable tenant departures were the former tenants
Beekeeper USA Inc. (previously 11.2% of the net rental area (NRA))
and Columbia Asthma and Allergy Clinic (previously 11.2% of the
NRA), both of which vacated in 2022. While there is no rollover
risk prior to 2025, leases representing 31.9% of the NRA are
scheduled to roll by YE2027. The property's vacant space, all of
which is currently marketed online, may be challenging to backfill
given the submarket's high availability. According to Reis, the
Central Business District submarket of Oakland-East Bay reported a
Q2 2023 vacancy rate of 15.8%, compared with Q2 2022 vacancy rate
of 16.6%. Per the YE2022 financials, the loan reported a net cash
flow (NCF) of $1.7 million, compared with $1.8 million at YE2021
and the DBRS Morningstar NCF of $1.5 million at issuance. While
current performance remains above the DBRS Morningstar's issuance
expectation, the YE2023 cash flow is likely to decline further from
the prior years given continued increasing vacancy. In its
analysis, DBRS Morningstar stressed the LTV and POD for this loan,
resulting in an expected loss that is almost 3 times higher than
the pool's WA EL.
The largest loan on the servicer's watchlist is McDonald's Global
HQ, which is secured by a 575,018-square-foot, Class A, and LEED
Platinum certified office property in Chicago's Fulton Market
submarket. The trust loan is a pari passu portion of a senior loan
held in the BANK 2020-BNK29 transaction, which is also rated by
DBRS Morningstar. The loan is being monitored for a nonmonetary
default resulting from the borrower's noncompliance 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, 605 Third Avenue (Prospectus
ID#1, 10.0% of the pool) and The Grace Building (Prospectus ID#6,
7.5% 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 in line with the
investment-grade characteristics based on their strong credit
metrics and continued stable performance.
Notes: All figures are in U.S. dollars unless otherwise noted.
BARCLAYS MORTGAGE 2023-NQM3: Fitch Gives Final B Rating on B2 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates to be issued by Barclays Mortgage Loan
Trust 2023-NQM3 (BARC 2023-NQM3).
Entity/Debt Rating
----------- ------
BARC 2023-NQM3
A1 LT AAAsf New Rating
A2 LT AAsf New Rating
A3 LT Asf New Rating
M1 LT BBBsf New Rating
B1 LT BBsf New Rating
B2 LT Bsf New Rating
B3 LT NRsf New Rating
SA LT NRsf New Rating
XS LT NRsf New Rating
PT LT NRsf New Rating
R LT NRsf New Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
to be issued by Barclays Mortgage Loan Trust 2023-NQM3 (BARC
2023-NQM3) as indicated above. The certificates are supported by
509 nonprime loans with a total balance of approximately $247.9
million as of the cutoff date.
64.8% of the pool were originated by Citadel Servicing Corporation
d/b/a Acra Lending or acquired by Sutton Funding, LLC. 70.7% of the
loans are currently serviced by Acra Lending while the remaining
29.3% are servicing by Fay Servicing, LLC.
This is Barclays's fourth issuance of non-qualified mortgage
(non-QM or NQM)/nonprime collateral rated by Fitch. Fitch completed
a review of Barclays Bank PLC as an aggregator in July 2022, and
Barclays was reviewed as Average. Compared to the prior issuance
100% of the collateral was originated and is serviced by
Carrington. The collateral is considerably stronger than the prior
issuance driven primarily by the slightly lower percentage of debt
service coverage ratio (DSCR) loans and stronger WAVG FICO.
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 7.2% above a long-term sustainable level (vs. 7.6%
on a national level as of 1Q23, down 0.2% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices. Home prices have
increased 0.9% YoY nationally as of July 2023 despite modest
regional declines, but are still being supported by limited
inventory.
Non-QM Credit Quality (Negative): The collateral consists of 509
loans, totaling $248 million, and seasoned approximately 7 months
in aggregate. The borrowers have a moderate credit profile (721
Fitch model FICO and 42.1% model debt to income [DTI] ratio), which
takes into account Fitch's converted DSCR values. The borrowers
also have moderate leverage — 77.6% sustainable loan-to-value
(sLTV) ratio and 72.8% original combined LTV (cLTV). The pool
consists of 54.4% of loans where the borrower maintains a primary
residence, while 45.6% is an investor property or second home.
Additionally, 0.8% are safe-harbor qualified mortgages (SHQMs) and
58.7% are non- QMs; the QM rule does not apply to the remainder.
Fitch's expected loss in the 'AAAsf' stress is 26.75%. This is
mostly driven by the non-QM collateral and the significant investor
cash flow product concentration.
Loan Documentation (Negative): Approximately 94.8% of the pool was
underwritten to less than full documentation. 57.1% was
underwritten to a bank statement program for verifying income,
which is not consistent with 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 CFPB's Ability-to-Repay Rule (Rule),
which reduces the risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to rigor of the Rule's mandates with respect to the
underwriting and documentation of the borrower's ability to repay.
Additionally, 0.5% is an Asset Depletion product, 1.4% is a CPA or
PnL product, 0.2% is a WVOE product, 29.4% is DSCR product, 3.2%
were underwritten to alternative documentation and 0.5% were not
stated or verified.
High Percentage of DSCR Loans (Negative): There are 220 DSCR
products in the pool (43.2% by loan count). These business-purpose
loans are available to real estate investors that are qualified on
a cash flow basis, rather than DTI, and borrower income and
employment are not verified. Compared to standard investment
properties, for DSCR loans, Fitch converts the DSCR values to a
DTI, and treats them as low documentation.
Fitch's expected loss for these loans is 34.5% in the 'AAAsf'
stress, which is driving the higher pool expected losses due to the
29.4% weighted average concentration.
Modified Sequential-Payment Structure with No Advancing (Mixed):
The structure distributes principal pro rata among the senior
certificates while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event or delinquency trigger event occurs
in a given period, principal will be distributed sequentially to
class A-1, A-2 and A-3 certificates until they are reduced to
zero.
Advances of delinquent P&I will not be made on the mortgage loans.
The lack of advancing reduces loss severities, as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside to this is the additional stress
on the structure, as there is limited liquidity in the event of
large and extended delinquencies.
BARC 2023-NQM3 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 or the net weighted
average coupon (WAC) rate. Fitch expects the senior classes to be
capped by the net WAC. The unrated class B-3 interest allocation
goes toward the senior cap carryover amount for as long as the
senior classes are outstanding. This increases the P&I allocation
for the senior classes.
As additional analysis Fitch's rating stresses, Fitch took into
account a WAC deterioration that varied by rating stress. The WAC
cut was derived by assuming a 2.5% cut (based on the most common
historical modification rate) on 40% (historical Alt-A modification
percentage) of the performing loans. Although the WAC reduction
stress is based on historical modification rates, Fitch did not
include the WAC reduction stress in its testing of the delinquency
trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut,
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but will not
ultimately default due to modifications and reduced P&I.
Furthermore, this approach had the largest impact on the
back-loaded scenario.
The transaction benefits from limited excess cash flow (94bps WAVG
excess) to benefit the rated certificates before being paid out to
class X certificates. The excess is available to pay timely
interest and protect against realized losses. To the extent the
collateral WAC and corresponding excess are reduced through a rate
modification, Fitch would view the impact as credit-neutral, as the
modification would reduce the borrower's probability of default,
resulting in a lower loss expectation.
Operational Risk (Negative): Third-Party Due Diligence Review:
Third-party due diligence was performed on 100% of the loans in the
transaction. Due diligence was performed by SitusAMC (Acceptable),
Canopy Financial Technology Partners, LLC (Acceptable), Clayton
Services (Acceptable), Consolidated Analytics (Acceptable), Covius
Real Estate Services, LLC (Acceptable), Evolve Mortgage Services,
LLC (Acceptable), Infinity International Processing Services, LLC
(Infinity), Maxwell (Acceptable), Mission Global, LLC (Acceptable),
Opus Capital Markets Consultants, LLC (Acceptable), Selene
Diligence (Acceptable) and The Stonehill Group, Inc. (Acceptable).
Nearly 100% of the loans were graded A or B, with one loan graded
C, which indicates strong origination processes with no presence of
material exceptions. Exceptions on loans with B grades were
immaterial and either identified strong compensating factors or
were mostly accounted for in Fitch's loan loss model. The 1 loan
with a final grade of 'C' was due TRID compliance exceptions deemed
to be immaterial. Fitch did not give diligence credit for loans
with a final grade of C. The model credit for the high percentage
of loan-level due diligence reduced the 'AAAsf' loss expectation by
49bps.
Fitch reviewed Barclays Bank PLC (Barclays) on July 7, 2022 and
found its experienced management and staff, measured sourcing
strategy and robust risk management framework as contributing to
the aggregator assessments of Average for newly originated loans.
64.8% of the loans were originated by Citadel Servicing Corporation
d/b/a Acra Lending, rated 'Average' by Fitch in March 2022. Citadel
Servicing Corporation d/b/a Acra Lending, not rated by Fitch as a
servicer, will also perform primary servicing responsibilities for
70.7% of the pool while Fay Servicing, LLC, rated 'RSS2-' by Fitch,
will service the remaining 29.3% of the pool. The sponsor's
retention of an eligible vertical residual interest of at least 5%
helps ensure an aligned interest between the issuer and investors,
however alignment is lesser than that of a horizontal residual
interest retention.
The representations for this transaction are weaker than those
listed in Fitch's published criteria, and amongst the weaker Fitch
has seen for NQM. Fitch added approximately 252bps to the expected
loss at the 'AAAsf' rating category to reflect the weak Tier 3
framework. Three sets of R&Ws are being provided by Citadel, the
Seller and Newfi, NP and Loan Stream, all of which will sunset
after 36 months. The framework features non-investment-grade
counterparty rep providers, no automatic review by an independent
reviewer, distinction of only reviewing liquidated loans with
realized losses, and potential statute of limitation protections.
Additionally, there are material differences in the individual reps
that Fitch would look for in a full framework. The framework is
designed that the Controlling Holder or Affiliates can direct the
master servicer to not enforce the obligations of the responsible
parties to cover realized losses for breaches. Generally, NQM
transactions do not feature an automatic review, but the
representation and warranty framework mostly aligns to Fitch's reps
listed in criteria. Most NQM transactions are Tier 2, Fitch views
this framework as a weak Tier 3.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 39.7% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those assigned
'AAAsf' ratings.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC, Canopy Financial Technology Partners, LLC,
Clayton Services, Consolidated Analytics, Covius Real Estate
Services, LLC, Evolve Mortgage Services, LLC, Infinity
International Processing Services, Inc., Maxwell, Mission Global,
LLC, Opus Capital Markets Consultants, LLC, Selene Diligence and
The Stonehill Group, Inc. The third-party due diligence described
in Form 15E focused on credit, compliance, and property valuation
review. Fitch considered this information in its analysis and, as a
result, Fitch made the following adjustment(s) to its analysis: a
5% credit at the loan level for each loan where satisfactory due
diligence was completed. This adjustment resulted in 49bps
reduction in losses at the 'AAAsf' stress.
ESG CONSIDERATIONS
BARC 2023-NQM3 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to elevated operational risk, which
has a negative impact on the credit profile, and is relevant to the
rating[s] 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.
BARINGS LOAN 1: Fitch Assigns 'BB-sf' Rating on Class E Notes
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Barings
Loan Partners CLO Ltd. 1 refinancing notes.
Entity/Debt Rating
----------- ------
Barings Loan
Partners CLO
Ltd. 1
A LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Barings Loan Partners CLO Ltd. 1 (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) managed by Barings LLC
that originally closed in December 2020. The CLO's secured notes
were refinanced in whole on Nov. 21, 2023 from proceeds of new
secured notes. Net proceeds from the issuance of the secured and
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. The weighted average rating factor (WARF) of the indicative
portfolio is 24.4, versus a maximum covenant, in accordance with
the initial expected matrix point of 25.5. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.3% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.9% versus a
minimum covenant, in accordance with the initial expected matrix
point of 74.1%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 41% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A, between 'BB+sf'
and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for class C,
between less than 'B-sf' and 'BB+sf' for class D, and between less
than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A notes as these
notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'A+sf' for class C, 'A-sf' for
class D, and 'BBB+sf' for class E.
BCC MIDDLE 2023-2: S&P Assigns BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to BCC Middle Market CLO
2023-2 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by Bain Capital Credit L.P.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the portfolio manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
BCC Middle Market CLO 2023-2 LLC
Class A-1, $244.375 million: AAA (sf)
Class A-2, $19.125 million: AAA (sf)
Class B, $25.500 million: AA (sf)
Class C (deferrable), $34.000 million: A (sf)
Class D (deferrable), $25.500 million: BBB- (sf)
Class E (deferrable), $25.500 million: BB- (sf)
Subordinated notes, $49.510 million: Not rated
BENCHMARK 2019-B9: DBRS Confirms B Rating on Class X-H Certs
------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2019-B9
issued by Benchmark 2019-B9 Mortgage Trust as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-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 (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (high) (sf)
-- Class F at BB (sf)
-- Class X-G at BB (low) (sf)
-- Class G at B (high) (sf)
-- Class X-H at B (sf)
-- Class H at B (low) (sf)
In addition, DBRS Morningstar changed the trends on Classes A-S,
X-A, B, X-B, C, X-D, D, E, X-F, F, X-G, G, X-H, and H to Negative
from Stable. All other trends are Stable.
The trend changes reflect DBRS Morningstar's increased concerns for
the pool, including one specially serviced loan with an updated
appraisal value that suggests an increased probability of loss. In
addition, the pool has a high concentration of office loans,
representing nearly 37.5% of the pool, some of which are exhibiting
increased levels of risk since issuance; including the largest loan
in the pool, 3 Park Avenue (Prospectus ID#1; 10.3% of the pool). In
general, the office sector continues to face challenges, as
uncertainty surrounding end-user demand places upward pressure on
vacancy rates, challenging landlords' efforts to back-fill vacant
space, and, in certain instances, contributing to value declines.
In its analysis for this review, DBRS Morningstar applied stressed
loan-to-value ratios (LTVs) or increased probability of default
(PoD) assumptions for six loans backed by office properties that
are exhibiting declines in performance, resulting in a
weighted-average (WA) expected loss (EL) approximately 73.8%
greater than the pool average. DBRS Morningstar's resulting
expected loss for the pool is suggestive of downward ratings
pressure on the junior bonds, which may lead to downgrades should
performance not re-stabilize in the near to medium term. DBRS
Morningstar notes mitigating factors including a $25.1 million
unrated first loss piece with no losses incurred to the trust to
date. In addition, the three largest loans in the pool, which are
secured by office properties, benefit from low to moderate going-in
LTVs and/or cash management provisions, as further described
below.
As of the October 2023 reporting, 48 of the original 50 loans
remained in the pool with an aggregate principal balance of $850.3
million, representing collateral reduction of 3.8% since issuance,
as a result of loan amortization and loan repayments. Three loans,
representing 1.5% of the pool, have been fully defeased. One loan,
representing 0.9% of the pool, is in special servicing, and there
are 14 loans, representing 32.9% of the pool, on the servicer's
watchlist.
The sole loan in special servicing, 735 Bedford Avenue (Prospectus
ID#38, 0.9%), is secured by an 18,000-square-foot (sf) mixed-use
property in Brooklyn, New York. The loan transferred to the special
servicer in March 2022 for imminent monetary default and remains
delinquent as of the October 2023 reporting. According to the most
recent servicer commentary, the property's title was allegedly
transferred from the original sponsor to a subordinate lienholder;
however, neither subordinate financing nor the transfer was
approved by the lender. The special servicer has engaged counsel
and is dual tracking foreclosure with workout discussions. Updated
financial reporting has not been provided since September 2021, at
which time the property was 100.0% occupied with a debt service
coverage ratio (DSCR) slightly above break-even. Based on the June
2023 appraisal, the property was valued at $5.7 million, reflecting
a 50.4% reduction from the issuance value of $11.5 million. In its
analysis for this review, DBRS Morningstar liquidated the loan from
the trust with an implied loss severity in excess of 50.0%.
The largest loan on the servicer's watchlist, 3 Park Avenue, is
secured by a mixed-use office and retail building located on the
corner of 34th Street and Park Avenue in New York. The loan
originally became delinquent in May 2020 and has subsequently faced
multiple short-term periods of delinquency. As of the October 2023
reporting, loan payments are 60 days past due, with the servicer
noting that collections are in process. The loan is also being
monitored because of a low DSCR and occupancy rate, most recently
reported at 0.82 times (x) and 54.0%, as of June 2023,
respectively. The occupancy decline from 85.4% at issuance followed
the loss of two tenants, TransPerfect Translation (13.7% of the net
rentable area (NRA)) and Pira Energy (4.13% of the NRA). In
addition, a top-five tenant, P/Kaufmann (6.9% of the NRA; lease
expiry in December 2030) downsized its space in 2021.
Cash flow has declined significantly since issuance, with the
trailing-six (T-6) months ended June 2023 financial reporting
reflecting an annualized net cash flow (NCF) of $7.2 million.
Although higher than the YE2022 figure of $4.9 million (DSCR of
0.56x), NCF remains 55.4% below the issuance figure of $16.1
million (DSCR of 1.84x). Various online news sources have noted
that the sponsor, Charles Cohen, is behind on approximately $500
million in debt collateralized by multiple properties. While the
decline in occupancy and cash flow is noteworthy, mitigating
factors include the low-going-in LTV ratio of 36.0% (based on the
whole-loan balance of $182.0 million and the issuance appraised
value of $505.0 million) and the loan's maturity date in 2028,
allowing the sponsor a fair amount of time to backfill vacant
space and work toward stabilization. In its analysis, DBRS
Morningstar increased the LTV and the PoD assumption for this loan,
resulting in an expected loss approximately 25.0% greater than the
pool average.
Another large loan of concern is Fairbridge Office Portfolio
(Prospectus ID#7; 3.7% of the pool), secured by two suburban office
properties in Oak Brook, Illinois, and Warrenville, Illinois. The
loan was added to the servicer's watchlist in September 2021 for a
low DSCR, which has fallen to 1.0x as of June 2023. The decline is
attributable to the loss of tenants over the past few years,
pushing occupancy down to 63.0% as of June 2023 from 74.0% at
YE2020 and 84.7% at issuance. Leases representing approximately
10.0% of the NRA have already expired or are scheduled to expire
within the next 12 months. According to CBRE, the submarket
reported an average office vacancy rate of 19.4% as of Q1 2023.
There has been some degree of positive leasing momentum at the
property, with Lewis University (7.4% of NRA) extending its lease
from December 2023 to May 2029. Per the September 2023 reporting,
there was approximately $0.4 million held across two reserves.
Based on the annualized T-6 months ended June 2023 financial
reporting, the property generated NCF of $3.0 million, below the
YE2022 and issuance figures of $3.2 million and $5.0 million,
respectively. At issuance, the property was valued at $64.7
million; however, given the low occupancy rate and general
challenges for office properties in today's environment, DBRS
Morningstar expects that the collateral's as-is value has likely
declined. As such, DBRS Morningstar increased the LTV and PoD
assumption for this loan, resulting in an expected loss
approximately 2.5x greater than the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
BENEFIT STREET XXXII: S&P Assigns BB- (sf) Rating on Cl. E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its 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 Benefit Street Partners LLC, a
subsidiary of Franklin Templeton.
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
Benefit Street Partners CLO XXXII Ltd./
Benefit Street Partners CLO XXXII LLC
Class A-1, $240.0 million: AAA (sf)
Class A-2, $16.0 million: Not rated
Class B, $48.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D (deferrable), $24.0 million: BBB- (sf)
Class E (deferrable), $14.0 million: BB- (sf)
Subordinated notes, $35.4 million: Not rated
BIRCH GROVE 7: Fitch Assigns BBsf Rating on E Notes, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Birch
Grove CLO 7 Ltd.
Entity/Debt Rating
----------- ------
Birch Grove
CLO 7 Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Birch Grove CLO 7 Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by AS
Birch Grove CLO Management LP. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $460 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 of the indicative
portfolio is 24.94, versus a maximum covenant, in accordance with
the initial expected matrix point of 27. 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
96.64% first-lien senior secured loans. The weighted average
recovery rate of the indicative portfolio is 75.7% versus a minimum
covenant, in accordance with the initial expected matrix point of
75.62%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 6% of the portfolio balance
in aggregate. The level of diversity resulting from the industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBBsf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B-sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D; and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 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, '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, 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.
BLADE ENGINE 2006-1: Moody's Raises Rating on B Securities to Caa3
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three
securities issued by Blade Engine Securitization Ltd. Series
2006-1, an aircraft engine lease backed ABS ("Blade").
The complete ratings actions are as follow:
Issuer: Blade Engine Securitization Ltd. Series 2006-1
2006-1A-1, Upgraded to B2 (sf); previously on May 6, 2020
Downgraded to Caa2 (sf)
2006-1A-2, Upgraded to B2 (sf); previously on May 6, 2020
Downgraded to Caa2 (sf)
2006-1B, Upgraded to Caa3 (sf); previously on May 6, 2020
Downgraded to C (sf)
RATINGS RATIONALE
The rating actions on the notes primarily reflect the significant
paydown of the 2006-1A-1 and 2006-1A-2 notes owing to the strength
in recent engine sales, which are driven in large part by the
continuous recovery in air travel demand and aerospace supply chain
challenges, as well as the increased likelihood that a portion of
the Class 2006-1B notes will be paid depending on the liquidation
prices for the remaining engines. In addition, the maintenance
support account is available to provide additional liquidity to the
notes, if needed.
In its recent quarterly report[1], Blade disclosed that (1) letters
of intent have been signed with prospective buyers for four of the
engines in the portfolio, (2) the Forbearance agreement with the
controlling party has been extended to April 2024, and (3) the
servicer is targeting to sell all of the engines by December 2023,
and is actively remarketing the fifth engine. The quarterly report
also indicated that no assurances could be made that the planned
sales would occur.
The combined loan-to-value ratio (LTV) for the 2006-1A-1, 2006-1A-2
and 2006-1B notes is around 79% as of the November 2023 payment
date, taking into account liquidity reserves. In a review of
Blade's engine sales in 2023, most sale prices were considerably
higher than their recent appraisals. In its analysis, Moody's
focused on an adjusted LTV and recovery analysis, analyzing a range
of recovery rates given the historic volatility of this sector and
the uncertainty around the engine sales. Moody's also considered
the uncertainty around the usage of funds in the maintenance
support account for the principal payment of the notes.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Securities Backed by Aircraft and Associated
Leases" published in July 2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
A smaller decline in aircraft engine values than Moody's
expectations; higher likelihood of engines being sold at values
closer to market as well as servicer's ability to execute sales.
Down
A larger decline in aircraft engine values than Moody's
expectations; lower likelihood of engines being sold at values
closer to market as well as servicer's ability to execute sales.
BMARK 2023-V4: Fitch Assigns Final 'B-sf' Rating on Cl. J-RR Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
BMARK 2023-V4 Mortgage Trust Commercial Mortgage Pass-Through
Certificates Series 2023-V4 as follows:
- $740,000 class A-1 'AAAsf'; Outlook Stable;
- $437,880,000 class A-3 'AAAsf'; Outlook Stable;
- $81,459,000a class A-S 'AAAsf'; Outlook Stable;
- $28,197,000 class B 'AA-sf'; Outlook Stable;
- $19,738,000 class C 'A-sf'; Outlook Stable;
- $6,266,000a class D 'BBB+sf'; Outlook Stable;
- $8,459,000a,b class E-RR 'BBBsf'; Outlook Stable;
- $6,266,000a,b class F-RR 'BBB-sf'; Outlook Stable;
- $10,965,000a,b class G-RR 'BB-sf'; Outlook Stable;
- $6,266,000a,b class J-RR 'B-sf'; Outlook Stable;
- $520,079,000c class X-A 'AAAsf'; Outlook Stable.
Fitch does not rate the following class:
- $20,365,396a,b class K-RR.
Notes:
(a) Privately placed and pursuant to Rule 144A.
(b) Classes E-RR, F-RR, G-RR, J-RR and K-RR certificates comprises
the transaction's horizontal risk retention interest.
(c) Notional amount and interest only.
Since Fitch published its expected ratings on Nov. 1, 2023, a
change has occurred. The balance for class A-3 was finalized. At
the time the expected ratings were published, the initial aggregate
certificate balance of the A-3 class was expected to be in the
range of $287,880,000-$437,880,000, subject to a variance of plus
or minus 5%. The final class balance for class A-3 is
$437,880,000.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 28 loans secured by 91
commercial properties with an aggregate principal balance of
$626,601,397 as of the cut-off date. The loans were contributed to
the trust by Citi Real Estate Funding Inc., German American Capital
Corporation, Goldman Sachs Mortgage Company, JPMorgan Chase Bank,
NA, Bank of Montreal, and Barclays Capital Real Estate Inc. The
master servicer is Midland Loan Services, a Division of PNC Bank,
N.A. and the special servicer K-Star Asset Management LLC.
Since Fitch published its expected ratings on Nov. 1, 2023, class
A-2 was removed from the transaction structure by the issuer. At
the time the expected ratings were published, class A-2 had a
balance of $150,000,000. Fitch has withdrawn the expected rating of
'AAA(EXP)sf' from class A-2 because the class was removed from the
final deal structure by the issuer. The classes above reflect the
final ratings and deal structure.
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 87.9% is lower
than both the YTD2023 and 2022 averages of 94.9% and 106.4%,
respectively. The pool's Fitch NCF debt yield (DY) of 11.1% is
higher than the YTD 2023 and 2022 averages of 10.8% and 9.9%,
respectively. Excluding credit opinion loans (COLs), the pool's
Fitch LTV and DY are 93.1% and 10.6%, respectively, compared to the
equivalent conduit YTD2023 LTV and DY averages of 95.2% and 10.5%,
respectively.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans make up 68.3%
of the pool, higher than the 2023 YTD and 2022 levels of 62.8% and
55.2%, respectively. Fitch measures loan concentration risk with an
effective loan count, which accounts for both the number and size
of loans in the pool. The pool's effective loan count is 20.8.
Investment-Grade Credit Opinion Loans: Four loans representing
23.3% of the pool received an investment-grade credit opinion.
Warwick New York (9.7%) received a standalone credit opinion of
'BBB-sf*', Prime Storage Portfolio#3 (8.8%) received a standalone
credit opinion of 'A-sf*', Harborside 2-3 (2.8%) received a
standalone credit opinion of 'BBBsf*', and Gilardian NYC Portfolio
II (2.1%) received a standalone credit opinion of 'Asf*'. The
pool's total credit opinion percentage of 23.9% is above the 2023
YTD and 2022 averages of 19.6% and 14.4%, respectively.
Property Type Concentration: Loans secured by hotel properties
represent 25.1% of the pool by balance, well above the YTD 2023 and
2022 averages of 9.7% and 7.4%, respectively. Two loans (17.6% of
pool) are secured by hotels in the top five loans by cutoff balance
- Warwick New York (9.7%) and Philadelphia Marriott Downtown
(8.0%). Loans secured by office properties represent 22.0% of the
pool, lower than the YTD 2023 and 2022 averages of28.5% and 36.2%,
respectively. Loans secured by retail properties represent 20.0%,
lower than the YTD 2023 and2022 averages of 31.0% and 23.3%,
respectively. Loans secured by self-storage properties represent
17.3% of the pool by balance, well above the YTD 2023 and 2022
averages of 1.0% and 6.8%, respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB+sf'
/ 'BBBsf' / 'BBB-sf' / 'BB-sf'
- 10% NCF Decline: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf'
/ 'BB+sf' / 'BBsf' /'Bsf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB+sf'
/ 'BBBsf' / 'BBB-sf' / 'BB-sf'
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'Asf' /
'A-sf' / 'BBBsf' / 'BBsf'
BRIDGECREST LENDING 2023-1: DBRS Finalizes BB Rating on E Notes
---------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by Bridgecrest Lending Auto Securitization
Trust 2023-1 (the Issuer) as follows:
-- $66,000,000 Class A-1 Notes at R-1 (high) (sf)
-- $126,300,000 Class A-2 Notes at AAA (sf)
-- $126,200,000 Class A-3 Notes at AAA (sf)
-- $60,550,000 Class B Notes at AA (sf)
-- $81,550,000 Class C Notes at A (sf)
-- $94,500,000 Class D Notes at BBB (sf)
-- $43,400,000 Class E Notes at BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The credit ratings are based on DBRS Morningstar's review of the
following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization,
subordination, a fully funded reserve fund, and excess spread.
Credit enhancement levels are sufficient to support the DBRS
Morningstar-projected cumulative net loss (CNL) assumption under
various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(2) BLAST 2023-1 provides for the Notes' coverage multiples that
are slightly below the DBRS Morningstar range of multiples set
forth in the criteria for this asset class. DBRS Morningstar
believes that this is warranted, given the magnitude of expected
loss, company history, and structural features of the transaction.
(3) The DBRS Morningstar CNL assumption is 24.10% based on the pool
composition.
(4) The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios for
Rated Sovereigns: September 2023 Update," published on September
28, 2023. These baseline macroeconomic scenarios replace DBRS
Morningstar's moderate and adverse Coronavirus Disease (COVID-19)
pandemic scenarios, which were first published in April 2020.
(5) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
-- DriveTime has an experienced and stable management team and has
had relatively stable performance in carrying economic environments
because of its expertise in the subprime auto market.
-- DBRS Morningstar has performed an operational review of
DriveTime and Bridgecrest and considers the entities acceptable
originators and servicers of subprime auto loans.
-- DBRS Morningstar did not perform an operational review of GoFi
given their relatively small contribution to the pool.
-- The Company has made substantial investments in technology and
infrastructure to continue to improve its ability to predict
borrower behavior, manage risk, and mitigate loss.
-- DriveTime has centrally developed and maintained underwriting
and loan servicing platforms. Underwriting is performed in the
DriveTime dealerships by specially trained DriveTime employees.
-- Computershare, an experienced auto-loan servicer, is the
standby servicer for the portfolio in this transaction.
(6) The quality and consistency of historical static pool data for
DriveTime originations and performance of the DriveTime auto loan
portfolio.
(7) The legal structure and presence of legal opinions that address
the true sale of the assets to the Issuer, the nonconsolidation of
the special-purpose vehicle with DriveTime, that the trust has a
valid first-priority security interest in the assets, and the
consistency with the DBRS Morningstar "Legal Criteria for U.S.
Structured Finance."
The transaction represents a securitization of a portfolio of motor
vehicle retail installment sales contracts originated by DriveTime
Car Sales Company, LLC and GoFi, LLC. DriveTime Car Sales Company,
LLC is a wholly owned subsidiary of DriveTime, a leading
used-vehicle retailer in the United States that focuses primarily
on the sale and financing of vehicles to the subprime market. GoFi
is an AI-enabled, digital-first lending platform primarily focused
on franchise dealers.
The rating on the Class A Notes reflects 56.00% of initial hard
credit enhancement provided by the subordinated notes in the pool
(40.00%), the reserve account (1.50%), and OC (14.50%). The ratings
on the Class B, C, D, and E Notes reflect 47.35%, 35.70%, 22.20%,
and 16.00% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
DBRS Morningstar's credit rating on the securities referenced
herein addresses the credit risk associated with the identified
financial obligations in accordance with the relevant transaction
documents. The associated financial obligations for each of the
rated notes are the related Noteholders' Monthly Accrued Interest
and the related Note Balance.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. The associated contractual payment obligations that
are not financial obligations are the related interest on unpaid
Noteholders' Interest Carryover Shortfall for each of the rated
notes.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued. The DBRS Morningstar short-term debt
rating scale provides an opinion on the risk that an issuer will
not meet its short-term financial obligations in a timely manner.
Notes: All figures are in U.S. dollars unless otherwise noted.
BSPRT 2022-FL9: DBRS Confirms B(low) Rating on Class H Notes
------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by BSPRT 2022-FL9 Issuer, LLC (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class A-S 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 (high) (sf)
-- Class G Notes at BB (low) (sf)
-- Class H Notes at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which has generally remained in
line with DBRS Morningstar's expectations since issuance as the
trust continues to be primarily secured by 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 24 floating-rate mortgage loans
and participation interests in mortgage loans secured by 48 mostly
transitional properties with a cut-off balance totaling $803.2
million. Most loans were in a period of transition with plans to
stabilize performance and improve values of the underlying assets.
As of the October 2023 remittance, the pool comprised 48 loans and
participation interests in mortgage loans secured by 76 properties
with a cumulative trust balance of $797.2 million. There are 21
loans, representing 76.1% of the current trust balance, that remain
in the transaction from closing.
Since issuance, 10 loans with a prior cumulative trust balance of
$118.9 million have successfully repaid in full from the pool. An
additional two loans with a former cumulative trust balance of
$106.2 million were also purchased out of the trust by the Issuer
at par. The transaction is managed with a two-year Reinvestment
Period, whereby the Issuer can purchase new loans and funded loan
participations into the trust. Since the previous DBRS Morningstar
rating action in November 2022, 17 loans and participation
interests in mortgage loans, representing 14.7% of the current
trust balance, have been added to the transaction. The Reinvestment
Period is scheduled to end with the June 2024 Payment Date. As of
October 2023, the Reinvestment Account had a balance of $6.0
million.
The transaction is concentrated by property type as 35 loans,
representing 63.7% of the current trust balance, are secured by
multifamily properties; six loans, representing 13.7% of the
current trust balance, are secured by hotel properties; and one
loan, representing 7.1% of the current trust balance, is secured by
a student housing property. The pool is primarily secured by
properties in suburban markets, with 32 loans, representing 72.6%
of the pool, with a DBRS Morningstar Market Rank of 3, 4, or 5. An
additional eight loans, representing 20.6% of the pool, are secured
by properties in urban markets, with a DBRS Morningstar Market Rank
of 6, 7, or 8, while eight loans, representing 6.8% of the pool,
are secured by a property with a DBRS Morningstar Market Rank of 2,
denoting a tertiary market.
Leverage across the pool decreased slightly as of the October 2023
reporting when compared with issuance metrics. The current
weighted-average (WA) as-is appraised loan-to-value ratio (LTV) is
67.3%, with a current WA stabilized LTV of 59.5%. In comparison,
these figures were 69.4% and 62.6%, 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 environment. In the analysis
for this review, DBRS Morningstar applied upward LTV adjustments
across 16 loans, representing 55.0% of the current trust balance.
Through June 2023, the lender had advanced cumulative loan future
funding of $109.7 million to 38 of the 48 outstanding individual
borrowers to aid in property stabilization efforts. The largest
advance has been made to the borrower of the Cedar Grove Portfolio
($16.4 million) loan, which is secured by a portfolio of 15
multifamily properties across North Carolina, South Carolina, and
Oklahoma totaling 1,690 units. The borrower's business plan is to
complete a significant capital expenditure (capex) project totaling
$26.2 million across the portfolio. The borrower appears to be
progressing with its capex plan as the Q2 2023 Quarterly Asset
Review report provided by the collateral manager noted individual
property capex work was at least 50.0% completed with all work
across the portfolio expected to be completed by the beginning of
Q3 2024.
An additional $68.0 million allocated to 32 individual borrowers
remains available. The largest portion, $9.7 million, is allocated
to the borrower of the Cedar Grove Portfolio. The second largest
portion, $7.5 million, is allocated to the borrower of The American
Hotel loan, which is secured by a full-service hotel in the Atlanta
Central Business District. Loan future funding is available to the
borrower to complete a property renovation and conversion to Hilton
Hotel's (Hilton) Tapestry Collection. According to the Q2 2023
update from the collateral manager, the construction start date has
been delayed to October 2023; however, the borrower has received
plan approval from Hilton with construction expected to be
completed in Q2 2024. The renovation costs are expected to be $3.2
million greater than originally expected, and those costs will be
funded from additional borrower cash equity. As a result of the
delay, the loan was modified in April 2023, which will allow the
borrower to use outstanding interest reserves to pay down the loan
balance once the renovation is completed if funds remain
outstanding. The property continues to generate positive cash flow
with a trailing 12-months (T-12) ended June 30, 2023, net cash flow
of $4.6 million, equating to a debt service coverage ratio of 1.40
times. The loan matures in April 2024 with three additional
one-year extension options remaining.
As of October 2023 reporting, there are 15 loans on the servicer's
watchlist, representing 42.4% of the current trust balance. The
loans have primarily been flagged for below-breakeven debt service
coverage ratios, low occupancy rates, and deferred maintenance
issues. All loans on the servicer's watchlist remain current, with
performance declines expected to be temporary as the majority of
borrowers are in the midst of completing planned capex programs as
part of the respective business plans. There are also 26 loans,
representing 42.9% of the current trust balance, that have been
modified. The majority of loan modifications are the result of the
transition of loans' floating rate benchmark to the Secured
Overnight Financing Rate (SOFR) from LIBOR, which DBRS Morningstar
views as credit neutral.
There is concentrated upcoming maturity risk in the transaction as
22 loans, representing 54.0% of the current trust balance, have
loan maturity dates in the next six months through April 2024. All
loans are structured with existing extension options available.
According to an update from the collateral manager, the majority of
borrowers are likely to exercise loan extensions. In the event
individual property performance does not meet required performance
tests, DBRS Morningstar expects borrowers and the lender to agree
to mutually beneficial loan amendments. One loan, 211 West Fort
Street (0.4% of the trust balance), is currently categorized as a
matured nonperforming loan. The loan is secured by an office
property in Detroit, which matured in October 2023. According to
the collateral manager, the lender and borrower are working to
agree to a short-term extension to provide the borrower additional
time to execute its exit strategy.
Notes: All figures are in U.S. dollars unless otherwise noted.
CD 2017-CD4: DBRS Confirms BB Rating on Class E Certs
-----------------------------------------------------
DBRS Limited confirmed the credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2017-CD4
issued by CD 2017-CD4 Mortgage Trust as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class V-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class V-BC at A (high) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class V-D at BBB (low) (sf)
-- Class X-E at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-F at BB (low) (sf)
-- Class F at B (high) (sf)
In addition, DBRS Morningstar changed the trends on Classes X-B, C,
V-BC, X-D, D, V-D, X-E, E, X-F, and F to Negative from Stable. All
other trends are Stable.
The trend changes reflect DBRS Morningstar's increased concerns for
the pool, primarily related to the high concentration of loans
secured by office properties, two of which are specially serviced.
While select office loans in the transaction continue to perform as
expected, several others are exhibiting increased credit risk with
recent, or upcoming tenant roll-over, exposure to softening office
submarket fundamentals, and/or sustained performance declines.
During the prior credit rating action in November 2022, DBRS
Morningstar downgraded the three lowest-rated classes most exposed
to loss, along with the applicable notional and exchangeable
classes as a result of those increased risks, which contributed to
an elevated expected loss (EL) for the pool as whole. Since that
time, those risks have solidified and, in some cases, increased
further. With this review, DBRS Morningstar's Commercial
Mortgage-Backed Securities (CMBS) Insight Model results suggest
downward ratings pressure on the four lowest-rated classes most
exposed to loss, and as such, the Negative trends are warranted.
Excluding collateral that has been defeased, the pool is
concentrated by property type, with loans secured by office
properties representing 35.8% of the pool balance. The pool's
office concentration is primarily represented by collateral located
in suburban markets. Loans with those characteristics often
contribute to larger expected losses in the CMBS Insight Model,
and, as a result, the subject transaction generally carries a
higher pool-level EL. This concentration has become more pivotal as
office sector performance has deteriorated following the onset of
the Coronavirus Disease (COVID-19) pandemic; with shifts in
workplace dynamics and end-user demand contributing to elevated
vacancy rates in many submarkets. While three of the office loans
in the subject transaction continue to exhibit healthy performance
metrics, DBRS Morningstar identified nine loans secured by office
collateral, representing 27.3% of the pool, that have demonstrated
performance declines, or are otherwise exhibiting increased risks
from issuance. In its analysis for this review, those loans were
analyzed with stressed scenarios to increase the probability of
default (POD) and/or increase the loan-to-value (LTV) ratios, as
applicable, resulting in a weighted-average (WA) EL that was
approximately 2.0 times (x) the pool average.
The largest of those loans, The Los Angeles Corporate Centre
(Prospectus ID#4, 7.5% of the pool), is secured by four individual
office properties located approximately five miles southeast of the
Los Angeles central business district (CBD). Prior to March 2023,
the portfolio was performing well with a YE2022 occupancy rate and
NCF of 85.0% and $6.7 million (a DSCR of 1.82x), respectively;
higher than the figures reported over the previous two years.
However, the largest tenant, State Compensation Insurance Fund
(21.0% of the net rentable area (NRA)), vacated after its lease
expired in March 2023, pushing the occupancy rate down to 63.0%.
The loan is currently being monitored on the servicer's watchlist
for an active lockbox.
The loan was structured with a cash flow sweep, that began trapping
excess cash 12 months prior to the expiration of State Compensation
Insurance Fund, capped at $20.00 per square foot (psf). As of the
October 2023 reporting, there was $1.7 million being held across
three reserve accounts. In addition, two large tenant leases
totaling approximately 13.1% of NRA are set to expire within the
next 12 months, including Department of Social Sciences (8.7% of
NRA; lease expiration in September 2024) and Southwest Regional
Council of Carpenters (4.4% of NRA; lease expiration in December
2023), which could bring occupancy to less than 50.0%. According to
Reis, office properties located in the West San Gabriel Valley
submarket reported a Q2 2023 average vacancy rate of 16.6% with an
average asking rental rate of $29.30 psf, compared with the
subject's average rental rate of $35.70 psf. Given the drastic
decline in occupancy and upcoming tenant roll-over, DBRS
Morningstar expects cash flow to contract with the subsequent
reporting periods. As a result, DBRS Morningstar analyzed this loan
with a stressed LTV ratio and POD assumption, resulting in an EL
that was roughly double the pool WA figure.
As of the October 2023 reporting, 45 of the original 47 loans
remained in the pool with an aggregate principal balance of $736.8
million, representing collateral reduction of 18.2% since issuance,
as a result of scheduled loan amortization, loan repayment, and the
liquidation of one loan. Six loans, representing 7.8% of the pool,
have been fully defeased. There are three loans, representing 7.2%
of the pool, in special servicing, and 13 loans, representing 35.2%
of the pool, on the servicer's watchlist. To date, one loan has
been liquidated from the trust with realized loss totaling $6.3
million, which was contained to the nonrated Class G certificate.
The largest specially serviced loan, Key Center Cleveland
(Prospectus ID#7, 3.7% of the pool) is secured by a 2.1 million
square foot (sf), mixed-use property in Cleveland. The property
consists of a 400-key hotel, two Class A office buildings, and an
underground parking garage. The loan transferred to special
servicing at the borrower's request in November 2020 because of
imminent default as a result of the pandemic. The loan has remained
current as of the October 2023 remittance; although, the borrower
has requested a payment deferral to help fund capital expenditures,
which is likely tied to a franchise agreement that was signed with
Marriott and aimed at aligning the hotel with brand standards. The
servicer noted that negotiations remain ongoing between the
borrower and mezzanine lender.
While financial performance experienced volatility through the
pandemic, the loans DSCR has historically remained above breakeven,
most recently reported at 1.04x and 1.34x as of March 2023 and
YE2022, respectively. As of July 2023, the hotel portion of the
subject reported a trailing-12-month revenue per available room
figure of $123.0, exhibiting a healthy recovery from the lows of
the pandemic and exceeding the issuance figure of $108.0. In
addition, the office portion of the collateral reported an
occupancy rate of 90.1%, a notable improvement from the May 2023
figure of 79.8%. The increase in occupancy was primarily driven by
a new 164,828 sf long-term lease (representing 7.8% of the NRA)
with Benesch, Friedlander, Coplan & Aronoff LLP (Benesch). Benesch
took occupancy in August 2023 and is currently within a 12-month
rent free period that ends in August 2024, at which time the tenant
will pay a starting base rental rate of $30.75 psf. While tenant
rollover is moderate during the next 12 months, KeyBank (31.8% of
the NRA, lease expiring in June 2030), retains two options to
further downsize their footprint by 103,000 sf (4.9% of the NRA),
following their 44,000 sf (3.2% of NRA) in July 2020. According to
Reis, office properties located in the Downtown submarket reported
a Q2 2023 average vacancy rate of 20.1%, average asking rental rate
of $20.40 psf and average effective rental rate of $15.80 psf,
compared with the subject's average rental rate of $30.40 psf.
Although there has been positive leasing momentum at the property,
submarket fundamentals remain soft and the loan has spent an
extended period of time with the special servicer. As such, DBRS
Morningstar analyzed this loan with a stressed LTV ratio, resulting
in an EL that was double the pool average.
The second largest loan in special servicing, Hamilton Crossing
(Prospectus ID#12, 2.4% of the pool), is secured by a six-building,
Class A office complex in Carmel, Indiana, approximately 15 miles
north of the Indianapolis CBD. The loan was placed on the
servicer's watchlist in February 2019 after the largest former
tenant, ADESA (30.1% of NRA; lease expiration in July 2019) did not
exercise its lease renewal 12 months prior to expiration and
subsequently vacated. As a result, cash management and a cash sweep
were initiated and the loan subsequently transferred to the special
servicer in June 2019 for imminent monetary default. Loan payments
have been made late but generally less than 30 days late since the
loan's transfer and, as of the October 2023 remittance, the loan
remains current.
Per the July 2023 rent roll, the portfolio was 69.2% occupied, with
leases totaling approximately 17.0% of NRA set to roll within the
next 12 months. According to the YE2022 financial reporting, the
property generated NCF of $4.2 million (a DSCR of 1.21x), an
increase from the YE2021 figure of $3.4 million (a DSCR of 0.97x),
but well below the issuance figure of $5.9 million. Based on Reis
data, the North/Carmel submarket reported a Q2 2023 vacancy rate of
18.7% with an average asking rental rate of $21.90 psf, compared
with the subject's in-place rate of $20.40 psf. Given the
submarket's soft fundamentals and the elevated vacancy rate at the
property, DBRS Morningstar derived a stressed value based on the
property's in-place cash flow, using the high end of DBRS
Morningstar's capitalization rate range for office properties,
resulting in an LTV ratio assumption of more than 100.0%, resulting
in an EL that was more than double the pool average.
One loan, Hilton Hawaiian Village Waikiki Beach Resort (Prospectus
ID#5; 7.7% of the pool), is shadow-rated investment grade by DBRS
Morningstar. Considering the loan's strong credit metrics, strong
sponsorship strength, and historically stable performance of the
underlying collateral, DBRS Morningstar confirms that the
characteristics of the loan remain consistent with the
investment-grade shadow rating.
Notes: All figures are in U.S. dollars unless otherwise noted.
CD 2019-CD8: DBRS Confirms BB(high) Rating on Class F Certs
-----------------------------------------------------------
DBRS Limited downgraded two classes of Commercial Mortgage
Pass-Through Certificates, Series 2019-CD8 issued by CD 2019-CD8
Mortgage Trust as follows:
-- Class G-RR to B (high) (sf) from BB (sf)
-- Class H-RR to CCC (sf) from B (low) (sf)
DBRS Morningstar also confirmed the ratings on the following
classes:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AAA (sf)
-- Class X-B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class X-D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
DBRS Morningstar changed the trends on Classes E, F, GRR, X-D, and
X-F to Negative from Stable. All other trends are Stable, with the
exception of Class H-RR, which has a rating that does not typically
carry a trend in commercial mortgage backed securities (CMBS)
ratings.
The rating downgrades and Negative trend are reflective of DBRS
Morningstar's loss projections for the loan in the special
servicing, 63 Spring Street (Prospectus ID#17, 2.3% of the pool
balance), based on the value decline since issuance as of the March
2023 appraisal obtained by the special servicer. At DBRS
Morningstar's review of this transaction in November 2022, all
credit ratings were confirmed with Stable trends, noting
contributing factors in the transfer back to the master servicer
for the pool's third largest loan, Hilton Penn's Landing
(Prospectus ID#3, 8.7% of the pool balance), as well as the lack of
significant concerns for the other loans in the pool at that time.
However, in the last year, there have been developments which have
signaled increased risks from issuance, including the value decline
from the previous appraisal obtained by the special servicer for
the 63 Spring Street loan collateral and performance declines for
other office loans in the pool. The office concentration in this
pool is relatively high, at 29.3% of the current pool balance. For
seven loans exhibiting increased risks, DBRS Morningstar applied
probability of default (POD) and/or loss given default (LGD)
stresses, to increase the expected losses (ELs). Four
underperforming loans backed by office properties were adjusted,
resulting in ELs that averaged nearly three times the pool's
weighted average EL.
As of the October 2023 remittance, all 33 of the original loans
remain in the pool, with an aggregate trust balance of $802.8
million, representing a minimal collateral reduction of 1.0% since
issuance. Two loans, representing 1.9% of the pool balance, are
fully defeased. Fourteen loans, representing 42.6% of the pool
balance, are on servicer's watchlist for various reasons, including
servicing trigger events, delinquent payment in servicing advances,
low debt service coverage ratios (DSCRs) and deferred maintenance
issues. One loan, representing 2.3% of the pool balance, is in
special servicing with the loan payments delinquent since May
2020.
The 63 Spring Street loan is secured by a 5,540-square-foot (sf)
mixed-use building consisting of four high-end residential units
(4,400 sf) and 1,100 sf of ground-floor retail space in New York's
Soho neighborhood. The loan transferred to special servicing in
June 2020 as a result of payment default and the special servicer
initiated foreclosure proceedings, and after a Court process to
address the borrower's objections, a receiver was appointed in
June. The borrower continues to contest the foreclosure, and
litigation remains ongoing. According to the July 2023 rent roll,
the subject is now 100% occupied with all four residential units
and all three retail spaces leased and occupied. The building was
re-appraised in March 2023 for $12.0 million, down from the May
2022 appraised value of $13.2 million and the $29.8 million
appraised value at issuance. Based on this significant value
decline, DBRS Morningstar analyzed the loan with a liquidation
scenario that results in a loss severity in excess of 60.0%.
The 171 N Aberdeen loan (Prospectus ID#5, 5.1% of the pool
balance), is secured by the borrower's fee-simple interest in a
120,020-sf mixed-use property (53% residential, 35% office, and 12%
retail) in the Fulton Market district in Chicago. The loan was
added to the servicer's watchlist in March 2021 when a decline in
the DSCR triggered cash management. In October 2022, a conversion
plan was initiated to repurpose the property's co-living units to
standard apartment units, and the servicer confirmed as of April
2023 that the project had been largely completed. According to the
June 2023 rent roll, the occupancy rate has rebounded to 97.3%, up
from a low of 41.0% at YE2022, and in line with the issuance
occupancy rate of 100%. The largest tenant, Medici Living Group
(Medici; 53.2% of the net rentable area (NRA), August 2028), a
co-living service company, master leased the entire residential
component. The second-largest tenant, Industrious (34.7% of the
NRA, lease expiry in December 2027), is a provider of coworking
office space. That tenant leases the entirety of the property's
office component and has a termination option available in April
2026 that requires a termination fee of $1.2 million. According to
LoopNet, the entirety of the coworking space is available for
lease, suggesting the company is either looking to sublease its
space or is not currently hosting any clients using the space. The
YE2022 DSCR was reported at 1.43 times (x), improving from the
YE2021 DSCR of 0.88x, but still below the DBRS Morningstar DSCR of
1.64x. While the conversion plan to traditional multifamily and
full occupancy of the residential component is encouraging, the
availability of the coworking space is indicative of increased
risks from issuance for this loan, supporting the POD adjustment in
DBRS Morningstar's analysis for this review.
At issuance, DBRS Morningstar assigned investment-grade shadow
ratings to three loans, representing a combined 16.3% of the pool,
including Woodlands Mall (Prospectus ID#2, 8.7% of the pool),
Moffett Towers II Buildings 3 & 4 (Prospectus ID#10, 4.3% of the
pool), and Crescent Club (Prospectus ID#12, 3.4% of the pool). With
this review, DBRS Morningstar maintains that the performance of
these loans remain consistent with investment-grade loan
characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
CITIGROUP 2018-C6: Fitch Affirms B- Rating on Class J-RR Certs
--------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Citigroup Commercial
Mortgage Trust 2018-C6 Commercial Mortgage Pass-Through
Certificates series 2018-C6 (CGCMT 2018-C6). Fitch has revised the
Rating Outlooks for three classes to Negative from Stable. The
Under Criteria Observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2018-C6
A-1 17327GAV6 LT PIFsf Paid In Full AAAsf
A-2 17327GAW4 LT AAAsf Affirmed AAAsf
A-3 17327GAX2 LT AAAsf Affirmed AAAsf
A-4 17327GAY0 LT AAAsf Affirmed AAAsf
A-AB 17327GAZ7 LT AAAsf Affirmed AAAsf
A-S 17327GBA1 LT AAAsf Affirmed AAAsf
B 17327GBB9 LT AA-sf Affirmed AA-sf
C 17327GBC7 LT A-sf Affirmed A-sf
D 17327GAA2 LT BBB-sf Affirmed BBB-sf
E-RR 17327GAC8 LT BBB-sf Affirmed BBB-sf
F-RR 17327GAE4 LT BBsf Affirmed BBsf
G-RR 17327GAG9 LT BB-sf Affirmed BB-sf
J-RR 17327GAJ3 LT B-sf Affirmed B-sf
X-A 17327GAU8 LT AAAsf Affirmed AAAsf
X-B 17327GAQ7 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
generally stable collateral performance for the majority of the
pool. There are 11 (41.2% of the pool) Fitch Loans of Concern
(FLOCs) including four loans (18.9%) in special servicing. Fitch's
current ratings incorporate a base case loss of 4.7%.
The Negative Outlooks on the classes F-RR, G-RR and J-RR reflect
performance concerns with the FLOCs, uncertainty of the workouts of
the specially serviced loans and overall exposure to office loans
(42.2% of the pool). FLOCs include the DUMBO Heights Portfolio
(9.9% of the pool), Liberty Portfolio (7.5%), the specially
serviced Shelbourne Global Portfolio I (4.3%) and Holiday Inn FiDi
(3.8%) loans.
FLOCs and Specially Serviced Loans: The largest loan in the pool,
DUMBO Heights Portfolio, recently transferred to special serving
ahead of its September 2023 maturity date. The subject is located
in the DUMBO neighborhood of Brooklyn, NY. Two WeWork leases
represent 21% of the four-building portfolio's collateral at
issuance. WeWork, which filed for bankruptcy in November 2023, has
already vacated its 81 Prospect Street location.
Etsy (30% of the NRA) remains the largest portfolio tenant with a
lease expiration in July 2026. The sponsors, affiliates of RFR and
Kushner Companies, invested in extensive improvements at the
portfolio since 2013. At issuance, the total debt stack included a
$145 million B-note and $155 million in mezzanine financing.
Fitch's 'Bsf' rating case loss of approximately 9% is based on a
discount to the October 2023 servicer reported appraisal value.
Another FLOC and large contributor to loss expectations is Liberty
Portfolio (7.5% of the pool), which is secured by an 805,746-sf
portfolio comprised of two office properties located in Tempe, AZ
and Scottsdale, AZ. Occupancy across the portfolio was reported at
91% as of June 2023. The property's largest tenants include;
Centene Management (43.8% of NRA; lease expiry in January 2028),
The Vanguard Group (15.3%; July 2026), and DHL Express (14.6%; May
2028). Centene has a portion of its space available for sublease.
Additionally, Carvana (8.7% of the NRA) has a lease expiration in
2024 and is expected to vacate. Fitch's 'Bsf' rating case loss of
approximately 6% (prior to concentration adjustments) is based on
an 10% cap rate and a 10% stress to YE 2022 NOI due to upcoming
rollover.
The specially serviced Holiday Inn FiDi loan (3.8%) is secured by
492 key full-service Holiday Inn Express in the financial district
of New York City that was built in 2014. The loan transferred to
special servicing in May 2020 at the borrower's request due to
imminent monetary default. The hotel re-opened for business in
April 2021 and the loan remains 90+ days delinquent. The borrower
filed for Chapter 11 bankruptcy protection in November 2022 and
soon after entered into an agreement with the City of New York to
operate the hotel as a migrant shelter through April 2024. Fitch's
'Bsf' rating case loss of 5% (prior to concentration adjustments)
is based on a conservative haircut to a prior appraised value and
implies a stressed value per key of $175k/key.
Minimal Increase in Credit Enhancement: As of the October 2023
distribution date, the pool's aggregate principal balance has paid
down by 4.3% to $705.1 million from $736.4 million at issuance.
Fourteen loans (54.8% of the pool) are interest only. The remaining
loans (excluding the specially serviced DUMBO Heights Portfolio
loan) are scheduled to mature in 2028. There is minimal defeasance,
with two loans defeased (2.3%). The pool has not experienced any
realized losses since issuance.
Investment Grade Opinion Loans: At issuance, Fitch assigned Moffett
Towers - Buildings E, F and G (3.5% of the pool), a stand-alone
investment-grade opinion of 'BBB-sf*'. The loan remains a credit
opinion loan.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the senior classes (A-2 through A-S) and X-A are
unlikely due to increasing CE and expected continued amortization,
but 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 the classes B, X-B, C, D and E-RR could occur if a
high proportion of the pool defaults and/or transfers to special
servicing and expected losses increase on FLOCs, including the
specially serviced loans, increase significantly.
Downgrades to the F-RR, G-RR and J-RR could occur should loss
expectations increase on FLOCs or additional loans become FLOCs or
transfer to special servicing.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the classes B, X-B and C could occur with significant
improvement in CE and/or defeasance; however, adverse selection,
increased concentrations and/or further underperformance of the
FLOCs could cause this trend to reverse. Classes would not be
upgraded above 'Asf' if there were likelihood for interest
shortfalls. Upgrades to the classes D, E-RR, F-RR, G-RR and J-RR
are not likely until the later years of the transaction and only if
the performance of the remaining pool is stable and/or improves,
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 2014-UBS5: DBRS Cuts Class F Certs Rating to D
---------------------------------------------------
DBRS Limited downgraded the credit rating on one class of
Commercial Mortgage Pass-Through Certificates, Series 2014-UBS5
issued by COMM 2014-UBS5 Mortgage Trust as follows:
-- Class F to D (sf) from C (sf)
In addition, the credit rating on Class F was simultaneously
discontinued and withdrawn.
The credit rating downgrade and discontinuation of Class F is a
result of a loss to the trust that was reflected in the September
2023 remittance. The Campus at Greenhill (Prospectus ID#19;
formerly 2.1% of the pool) was liquidated from the trust at a loss
of approximately $21.9 million, which took out the remaining
non-rated Class G balance and $3.1 million of the Class F balance,
which currently stands at $19.2 million. For more information on
this transaction, please see the press release dated March 17,
2023.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2018-HCLV: S&P Affirms CCC- (sf) Rating on Class F Certs
-------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from COMM 2018-HCLV
Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P
affirmed its 'CCC (sf)' and 'CCC- (sf)' ratings on the class E and
F certificates, respectively, 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 and leasehold interests in 10 class A
suburban office buildings (1.4 million sq. ft.) and 10 unanchored
retail buildings (110,690 sq. ft.) that are a part of Hughes
Center, a 68-acre, mixed-use campus in Las Vegas.
Rating Actions
The downgrades on classes A, B, C, and D, and the affirmations on
classes E and F reflect:
-- S&P's revised valuation, which is lower than the valuation it
derived in its last review in May 2023, primarily due to the
borrower's inability to materially improve the property's occupancy
and the continued reported increases in expenses at the
properties;
-- S&P's belief that, due to weakened office submarket
fundamentals, the borrower will face challenges re-tenanting vacant
spaces in a timely manner; and
-- S&P's view that loan exposure will continue to increase due to
a potentially extended resolution timeframe or the master servicer
needing to start advancing debt service payments. This, in turn,
will likely reduce liquidity and recovery to the bondholders since
servicer advances are paid senior in the transaction documents. As
of the November 2023 payment period, the servicer advanced $5.9
million in operating and capital expenses. In S&P's last review,
the master servicer had made only $3,610 in advances.
S&P said, "In our May 2023 review, we noted that the loan had
transferred to the special servicer on March 2, 2023, due to
imminent monetary default. The borrower had requested that the
servicer advance operating and capital expense shortfalls for the
properties. We maintained a long-term sustainable net cash flow
(NCF) of $20.2 million and value of $253.6 million ($169 per sq.
ft.) because the borrower was able to maintain a relatively stable
occupancy, compared to our prior review in October 2022, and we
believed the sponsor might have been able to normalize operating
expenses at an approximately 50.0% ratio. At that time, the special
servicer was still evaluating its resolution options."
Since then, the loan matured in September 2023, and the borrower
did not exercise its option to extend the loan's maturity date nor
obtain a replacement interest rate protection agreement.
Furthermore, the master servicer, KeyBank Real Estate Capital, has
advanced $5.9 million in operating and capital expenses as of the
November 2023 payment period. The special servicer, also KeyBank,
is currently marketing the properties for sale. Operating expenses
continue to increase year over year and were reported to be $25.6
million as of the trailing-12-months (TTM) ended March 31, 2023--up
from $25.0 million as of year-end 2022, $23.5 million in 2021,
$22.9 million in 2020, and $20.8 million in 2019.
According to the March 2023 rent roll, the properties had an
aggregated 30.2% vacancy rate. However, CoStar noted that, as of
year-to-date November 2023, the properties had a combined 52.0%
availability rate. As a result, assuming a 69.8% occupancy rate, a
$39.99-per-sq.-ft. gross rent, as calculated by S&P Global Ratings,
a 54.0% operating expense ratio, and higher tenant improvement
costs, we arrived at a long-term sustainable $16.8 million NCF,
which is 16.9% lower than the NCF derived in our last review and
1.7% higher than the borrower's reported $16.5 million NCF as of
the TTM ended March 31, 2023. Using an S&P Global Ratings' 8.00%
capitalization rate (which is unchanged from S&P's last review)
yielded an S&P Global Ratings' expected-case value of $211.0
million, or $140 per sq. ft., which is 16.8% lower than our last
review value and 57.5% below the July 2018 appraisal value of
$496.5 million. This yielded an S&P Global Ratings' loan-to-value
ratio of 154.1% on the trust balance.
S&P said, "Our affirmation of the 'CCC (sf)' and 'CCC- (sf)'
ratings on classes E and F, respectively, also reflect our view
that, due to current market conditions and the classes' positions
in the payment waterfall, they remain at heightened risk of default
and loss and are susceptible to liquidity interruption. In
addition, although the model-indicated ratings were lower than the
revised ratings on classes A, B, C, and D, we tempered our
downgrades on these classes because we weighed certain qualitative
considerations." These included:
-- The relatively low to moderate debt per sq. ft. ($110.36 per
sq. ft., through class B, inclusive of advances to date);
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The potential that the special servicer sells these properties
sooner and at a higher liquidation value than our revised
expected-case value;
-- The temporary liquidity support provided in the form of
servicer advancing; and
-- The relative position of the classes in the payment waterfall.
As S&P previously discussed, the loan transferred to the special
servicer on March 2, 2023, due to imminent monetary default. While
the borrower has continued to make debt service payments, the
master servicer has advanced $5.9 million in operating and capital
expenses as of the Nov. 15, 2023, trustee remittance report.
According to the November 2023 CREFC IRP reserve report, there is
approximately $3,000 in reserve accounts. KeyBank stated that all
cash flow at the properties is currently being trapped and that,
while it is still determining the best course of action, the
properties are being marketed for sale with the borrower's
cooperation.
S&P said, "We will continue to monitor the performance of the
properties and loan, including the borrower's ability to continue
making timely debt service payments. We noted that because there is
no interest rate protection agreement currently in place, the
floating-rate debt service obligation is fully exposed to changes
in one-month SOFR during this period of elevated interest rates.
The elevated interest rate environment exacerbates the risk of the
borrower defaulting and servicer advances building up, in our view.
If we receive information that differs materially from our
expectations, such as an updated value from the special servicer
that is substantially below our revised expected-case value,
property performance that is below our expectations, or a workout
strategy that negatively impacts the transaction's liquidity and
recovery, we may revisit our analysis and take additional rating
actions as we deem appropriate."
Property-Level Analysis
The loan collateral consists of 10 suburban class A office
buildings totaling 1.4 million sq. ft. and 10 unanchored retail
buildings totaling 110,690 sq. ft. within Hughes Center, a 68-acre,
mixed-use campus located in the Central East Las Vegas office
submarket of Las Vegas. The properties were built in stages from
1986 to 2017 and are located near the Sands Expo Center, the Las
Vegas Convention Center, and the Harry Reid Airport.
Eight of the 10 retail buildings (totaling 92,690 sq. ft.) are
subject to or partially subject to a ground lease with FC Income
Properties LLC, as ground lessor, and the borrower, as ground
lessee. The ground lease commenced on July 1, 1999, and expires on
June 30, 2059, with three five-year extension options for a fully
extended expiration date in June 2074. The current annual ground
rent expense, based on the transaction documents, is $744,997, and
it increases every five years based on a schedule. The next
increase will occur in July 2024 to $838,122. Certain signage at
the property is also subject to a ground lease with the same ground
lessor and ground lessee that commenced on Nov. 13, 2017, and
expires on June 30, 2059, with three five-year extension options.
The ground rent increases every five years based on a schedule. The
current annual ground rent expense is $7,853, and, starting in July
2024, will increase to $8,834 for the next five years. S&P said,
"At issuance, we assumed a ground rent expense of $1.1 million,
which is the scheduled amount 10 years beyond the fully extended
loan term, and added the net present value of the difference
between our assumed ground rent expense and the actual ground rent
expense over a 17-year period to our value. In our current
analysis, the add-to-value was $1.5 million, which is the same as
at our last review but reduced from $2.5 million at issuance."
KeyBank reported a NCF of $16.5 million for the TTM ended March 31,
2023, up slightly from $15.4 million in 2022, $15.2 million in
2021, and $16.3 million in 2020 but still well-below the $18.6
million reported in 2019.
As of the March 2023 rent roll, the property was 69.8% leased and
the five largest tenants comprised 18.2% of the net rentable area
(NRA) and included:
-- Pinnacle Entertainment (5.8% of NRA; 8.5% of in place gross
rent, as calculated by S&P Global Ratings; July 2024 lease
expiration).
-- NYU Grossman School of Medicine (3.9%; 5.4%; April 2032).
-- Consumer Portfolio Services (3.0%; 4.8%; February 2024).
-- Cosmopolitan of Las Vegas (2.8%; 4.5%; June 2027).
-- Wells Fargo (2.8%; 4.0%; December 2027).
-- The property faces staggered tenant rollover except in 2024
(18.0% of NRA; 27.4% of in place gross rent, as calculated by S&P
Global Ratings) and 2027 (11.3%; 17.1%).
According to CoStar, the Central East Las Vegas office submarket
continues to experience elevated vacancy levels and negative
absorption due partly to changing office work preference that
caused tenants to exit or downsize leases. As of year-to-date
November 2023, three-star office properties in the Central East Las
Vegas submarket have a 23.7% vacancy rate, 27.0% availability rate,
and $25.41 per sq. ft. asking rent, compared with a 21.5% vacancy
rate and $23.14 per sq. ft. asking rent in 2019. CoStar projects
vacancy to increase to 24.9% in 2024 and 25.7% in 2025, and asking
rent to decrease to $25.02 per sq. ft. and $24.86 per sq. ft. for
the same period. This compares with an in place 30.2% vacancy and
$39.99-per-sq.-ft. gross rent, as calculated by S&P Global Ratings
(using the March 31, 2023, rent roll).
Transaction Summary
The IO mortgage loan had an initial and current balance of $325.0
million (according to the Nov. 15, 2023, trustee remittance
report), pays an annual floating interest rate indexed to one-month
LIBOR (prior to June 2023) plus a weighted average component spread
of 2.415% (up from 2.165% at issuance). According to KeyBank, after
June 2023, the benchmark interest rate transitioned to one-month
term SOFR plus a 0.04601% benchmark adjustment. The loan initially
matured on Sept. 9, 2020, with five one-year extension options
(fully extended maturity is Sept. 9, 2025) exercisable upon
satisfying certain terms and conditions, including the borrower
obtaining a replacement interest rate protection agreement. In
addition, the spread increased by 10 basis points, commencing
September 2022, and by another 15 basis points, starting September
2023. The loan matured on Sept. 9, 2023, and has two one-year
extension options remaining, which the borrower did not exercise.
There is no additional debt.
The loan was transferred to the special servicer in March 2023 due
to imminent monetary default. However, the borrower is current on
its debt service payment through the November 2023 pay date. The
trust has not incurred any principal losses to date, but the
servicer has advanced $5.9 million in operating and capital
expenses.
Ratings Lowered
COMM 2018-HCLV Mortgage Trust
Class A to 'AA- (sf)' from 'AAA (sf)'
Class B to 'BBB+ (sf)' from 'A+ (sf)'
Class C to 'B+ (sf)' from 'BBB+ (sf)'
Class D to 'B- (sf)' from 'BB+ (sf)'
Ratings Affirmed
COMM 2018-HCLV Mortgage Trust
Class E: CCC (sf)
Class F: CCC- (sf)
CPS AUTO 2023-D: DBRS Finalizes BB Rating on Class E Notes
----------------------------------------------------------
DBRS, Inc. finalized its provisional ratings to the classes of
notes to be issued by CPS Auto Receivables Trust 2023-D (the
Issuer) as follows:
-- $131,113,000 Class A Notes at AAA (sf)
-- $38,490,000 Class B Notes at AA (sf)
-- $49,686,000 Class C Notes at A (sf)
-- $33,737,000 Class D Notes at BBB (sf)
-- $33,123,000 Class E Notes at BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The ratings are based on DBRS Morningstar's review of the following
analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve fund, and excess
spread. Credit enhancement levels are sufficient to support the
DBRS Morningstar-projected cumulative net loss (CNL) assumption
under various stress scenarios.
-- The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios for
Rated Sovereigns: September 2023 Update," published on September
28, 2023. These baseline macroeconomic scenarios replace DBRS
Morningstar's moderate and adverse Coronavirus Disease (COVID-19)
pandemic scenarios, which were first published in April 2020.
-- The increase in CNL from the CPS 2023-C transaction is
attributed to observed credit deterioration, loss and recovery
performance of some of the more recent vintages.
-- The DBRS Morningstar CNL assumption is 17.00% based on the
expected pool composition.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the ratings address the
timely payment of interest on a monthly basis and the payment of
principal by the legal final maturity date.
(3) The consistent operational history of Consumer Portfolio
Services, Inc. (CPS or the Company) and the strength of the overall
Company and its management team.
-- The CPS senior management team has considerable experience and
a successful track record within the auto finance industry.
(4) The capabilities of CPS with regard to originations,
underwriting, and servicing.
-- DBRS Morningstar performed an operational review of CPS and
considers the Company to be an acceptable originator and servicer
of subprime automobile loan contracts with an acceptable backup
servicer.
(5) DBRS Morningstar exclusively used the static pool approach
because CPS has enough data to generate a sufficient amount of
static pool projected losses.
-- DBRS Morningstar was conservative in the loss forecast analysis
that it performed on the static pool data.
(6) The Company indicated that there is no material pending or
threatened litigation.
(7) The legal structure and presence of legal opinions that address
the true sale of the assets to the Issuer, the nonconsolidation of
the special-purpose vehicle with CPS, that the trust has a valid
first-priority security interest in the assets, and the consistency
with DBRS Morningstar's "Legal Criteria for U.S. Structured
Finance."
CPS is an independent full-service automotive financing and
servicing company that provides (1) financing to borrowers who do
not typically have access to prime credit-lending terms for the
purchase of late-model vehicles and (2) refinancing of existing
automotive financing.
The rating on the Class A Notes reflects 58.25% of initial hard
credit enhancement provided by the subordinated notes in the pool
(50.55%), the reserve account (1.00%), and OC (6.70%). The ratings
on the Class B, C, D, and E Notes reflect 45.70%, 29.50%, 18.50%,
and 7.70% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
DBRS Morningstar's credit rating on the securities referenced
herein addresses the credit risk associated with the identified
financial obligations in accordance with the relevant transaction
documents. The associated financial obligations for each of the
rated notes are the related Noteholders' Monthly Interest
Distributable Amount and the related Note Balance.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. The associated contractual payment obligation that is
not a financial obligation is interest on unpaid interest for each
of the rated notes.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued. The DBRS Morningstar short-term debt
rating scale provides an opinion on the risk that an issuer will
not meet its short-term financial obligations in a timely manner.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSAIL 2018-CX11: DBRS Cuts Class G-RR Certs Rating to B(low)
------------------------------------------------------------
DBRS, Inc. downgraded the credit ratings on two classes of
Commercial Mortgage Pass-Through Certificates, Series 2018-CX11
issued by CSAIL 2018-CX11 Commercial Mortgage Trust as follows:
-- Class F-RR to B (high) (sf) from BB (low) (sf)
-- Class G-RR to B (low) (sf) from B (high) (sf)
In addition, DBRS Morningstar confirmed the following credit
ratings:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB 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-RR at BBB (low) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class X-D at BBB (high) (sf)
The trends on Classes E-RR, F-RR, and G-RR were changed to Negative
from Stable. The trends on all remaining classes are Stable.
The credit rating downgrades and Negative trends reflect the
increased risks to the pool since DBRS Morningstar's last review in
November 2022, with a total of five loans transferred to special
servicing since that time, three of which were liquidated in the
analysis for this review. In addition, several performing office
loans are exhibiting increased risks that resulted in a stressed
analysis and increased expected losses that were generally above
the pool average, as further described below. Although there are
select loans showing increased risks from issuance, the transaction
does benefit from several large loans shadow-rated investment grade
by DBRS Morningstar and the overall stable performance since
issuance of most of the loans in the pool.
As of the October 2023 remittance, 49 of the original 56 loans
remain in the pool. The initial pool balance of $952.87 million has
been reduced by 13.4% to $824.83 million, which includes $8.23
million of losses from loan liquidations. In addition, 5.2% of the
pool is defeased. The pool is concentrated by property type, with
loans backed fully or partly by office properties or mixed-use
properties with an office component representing just under 40% of
the transaction balance. Loans representing 15.5% of the pool
balance are on the servicer's watchlist, and five loans,
representing 7.1% of the pool, are in special servicing. In the
analysis for this review, DBRS Morningstar assumed a liquidation
scenario for three of the five loans in special servicing,
resulting in a loss forecast of $14.1 million that would further
erode the unrated first-loss Class N-RRR certificate balance and
reduce the cushion against liquidated losses for the classes
downgraded with this review.
The credit rating confirmations reflect the overall stable
performance of the non-defeased loans in the pool, which reported a
weighted-average debt service coverage ratio (DSCR) of 2.53 times
(x) as of the most recent year-end reporting for each. Although the
pool's office concentration is significant, it is worth noting that
two of those loans—GNL Portfolio (Prospectus ID #1; 6.7% of the
pool) and The SoCal Portfolio (Prospectus ID #2; 5.6% of the
pool)—are among the top five loans in the pool and are secured by
portfolios that also contain other property types, diversifying the
risk. The second-largest office loan, One State Street (Prospectus
ID #3; 6.0% of the pool), is part of a pari passu loan secured by
an office property in the Financial District of New York City and
has shown some performance declines from issuance, but the low
trust exposure and significant subordinate debt component are
noteworthy mitigating factors. Two large hotel loans in Hilton
Clearwater Beach Resort & Spa (Prospectus ID #2; 6.6% of the pool)
and Melbourne Hotel Portfolio (Prospectus ID #8; 3.8% of the pool)
have both reported consistently higher cash flows compared with the
respective issuance figures in recent years, supporting probability
of default adjustments in the analysis for this review to slightly
lower the expected losses for each.
All three loans liquidated in the analysis are secured by office
properties, the largest of which is Penn Center West (Prospectus ID
#14; 2.5% of the pool). That loan is secured by a three-building
office complex located outside of Pittsburg and was transferred to
special servicing in November 2022 for imminent default. The loan
had a five-year term that was scheduled to mature in February 2023.
The borrower's difficulty in securing a refinance was generally a
product of performance declines from issuance over the last few
years, with the YE2022 DSCR of 0.88x) and an occupancy rate
reported at 72.0%, down from 97.0% at issuance. An updated
appraisal as of March 2023 shows an as-is value of $20.1 million,
down from the issuance valuation of $29.5 million. A receiver was
installed after discussions with the borrower regarding a loan
modification fell apart, and the special servicer appears to be
pursuing foreclosure as part of the resolution strategy. Given the
location within a secondary market, as well as the low in-place
occupancy rate and the soft submarket (Reis projects the subject's
Southwest submarket will reach an overall vacancy rate of
approximately 20% by 2028, up from the Q2 2023 figure of 13.8%), a
stressed haircut was applied to the March 2023 value in the
liquidation scenario, resulting in a loss severity of 31.0%.
The second-largest specially serviced loan is 600 Vine (Prospectus
ID #19; 1.9% of the pool), secured by an office tower in the
Cincinnati central business district. The trust loan is a pari
passu portion of the $52.8 million whole loan contributed to the
subject and the CSAIL 2017-CX10 Commercial Mortgage Trust
transaction (DBRS Morningstar rates loan-specific rake bonds in
that transaction only). There is also mezzanine debt in place with
a balance of $5.9 million. The subject loan transferred to special
servicing in June 2023 for delinquency and the special servicer has
been negotiating with the mezzanine lender since the transfer. The
occupancy rate at issuance was 80%, but that has since declined to
71% as of Q1 2023, with a DSCR of 1.06x. DBRS Morningstar located a
JLL listing for the property showing an availability rate of
approximately 42.0% as of October 2023. The servicer has confirmed
the largest tenant, First American Bank (10.6% of the net rentable
area (NRA)) is vacating at lease expiry in March 2024. An updated
appraisal has not been obtained yet, but DBRS Morningstar expects
the as-is value has declined significantly since issuance given the
location and high availability rate. In the liquidation scenario
for this review, a 50% haircut to the issuance value of $71.0
million was applied, with a loss severity of 40.2%.
The Northrup Grumman loan (Prospectus ID #11; 2.7% of the pool) was
shadow-rated investment grade by DBRS Morningstar at issuance given
the low leverage and overall desirability of the collateral
properties: two data centers leased to single tenants at issuance
and located in Chester and Lebanon, Virginia. Chester is relatively
close to Richmond and Lebanon is in the far western portion of the
state; both locations are considered rural. Both single tenant
leases expired in the last 18 months, both tenants vacated, and
both the properties have both been vacant since June and October
2022. The Lebanon property is a 102,842-square foot (sf), one-story
structure with a 19,525-sf Tier III data center and 71,175 sf of
traditional office space. The Chester facility consists of a
127,795-sf office and a 49,500 sf Tier III data center. The
borrower has been marketing both properties for lease, with a
listing located online by DBRS Morningstar suggesting the Chester
property is also being marketed for sale. The loan remains current,
with $5.2 million in reserve as a result of a cash trap that was
initiated when the leases weren't renewed.
Although DBRS Morningstar maintains the desirability of the data
center property type, the extended vacancy and lack of traction on
the borrower's efforts to re-lease the space are concerns, and for
those reasons, the shadow rating was removed with this review. The
loan-to-value (LTV) ratio, based on the issuance appraisals
totaling $77.0 million and current loan balance of $22.4 million,
is quite low at 29.0% with additional collateral in the collected
reserves bringing that figure even lower. However, given the
increased risks noted above, the analysis for this review
considered a more conservative approach with an LTV ratio of 75.0%
on the issuance balance and an exit LTV ratio of 61%, with the
resulting expected loss slightly higher than the deal average.
DBRS Morningstar also assigned investment-grade shadow ratings at
issuance to three additional loans—One State Street, Moffett
Towers II Building 2 (Prospectus ID #9; 3.6% of the pool), and
Lehigh Valley Mall (Prospectus ID #12; 3.0% of the pool)—all of
which were maintained with this review. As noted, the performance
of the One State Street collateral property has declined slightly
since issuance, but the overall credit profile remains stable given
the low LTV ratio on the senior debt of 21.8%, based on the
appraised value of $560 million and the senior debt balance of
$122.0 million. When accounting for the full debt stack, the LTV
ratio remains healthy at 64.3%. In addition, at issuance, the DBRS
Morningstar value of $270.7 million considered a cap rate of 7.5%,
which would likely be closer to market cap rates today rather than
the appraiser's issuance cap rate of 5.0%. The Moffett Towers and
Lehigh Valley Mall metrics remain in line with issuance
expectations.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSAIL 2019-C15: DBRS Cuts Class F-RR Certs Rating to B
------------------------------------------------------
DBRS Limited downgraded the credit ratings on the following classes
of Commercial Mortgage Pass-Through Certificates, Series 2019-C15
issued by CSAIL 2019-C15 Commercial Mortgage Trust:
-- Class F-RR to B (sf) from BB (low) (sf)
-- Class G-RR to CCC (sf) from B (low) (sf)
In addition, DBRS Morningstar confirmed the credit ratings on the
following classes:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E-RR at BBB (low) (sf)
DBRS Morningstar changed the trends on Classes A-S, B, C, D, E-RR,
F-RR, X-A, X-B, and X-D to Negative from Stable. Class G-RR has a
credit rating that does not typically carry trends in commercial
mortgage-backed securities (CMBS) credit ratings. All remaining
trends are Stable.
At the November 2022 review, DBRS Morningstar downgraded Classes B,
D, E-RR, F-RR, G-RR, X-B, and X-D because of value declines for the
collateral properties backing the loans in special servicing, as
well as concerns surrounding the servicer's watchlist loans,
specifically Continental Towers (Prospectus ID#13, 3.1% of the
pool), which is secured by a suburban office property located in
the Chicago area. Since that time, the performance has deteriorated
and the loan transferred to the special servicer in April 2023 for
imminent monetary default. DBRS Morningstar also notes the pool has
a moderate amount of exposure to loans backed by office properties,
representing more than 20.0% of the pool balance. The office sector
is currently challenged with rising vacancy rates in many
submarkets and decreased investor appetite for this property type
considering the shift in workplace dynamics. The One Lincoln Center
loan (Prospectus ID#17, 2.7% of the pool), which is secured by an
office property in Syracuse, New York, is on the servicer's
watchlist for a low debt service coverage ratio (DSCR), which has
been below breakeven for the last few years. The credit ratings
downgrades and Negative trends assigned with this review are
reflective of continued performance declines for Continental Towers
and ongoing concerns with the under-performing office loans, as
further outlined below.
As of the October 2023 remittance, 34 loans remain in the pool,
representing a collateral reduction of 2.8% since issuance. There
are two loans in special servicing and 11 loans on the servicer's
watchlist, representing 6.0% and 38.8% of the pool balance,
respectively. A majority of the loans on the servicer's watchlist
are being monitored for performance-related declines including low
DSCRs and cash flow sweeps. Loans that have exhibited increased
risk from issuance were analyzed with an elevated loan-to-value
ratio (LTV) and/or probability of default penalty in the analysis
for this review, as applicable.
The largest specially serviced loan, Continental Towers, is secured
by a Class A office property in the Chicago suburb of Rolling
Meadows, Illinois. The loan has consistently shown performance
declines from issuance in recent years, with significant occupancy
and DSCR declines reported. In April 2023, the loan was transferred
to special servicing for imminent monetary default. Several large
tenants have left the property, including Komatsu America
Corporation (11.6% of the net rentable area (NRA)), which vacated
at its July 2021 lease expiration. This tenant's planned departure
was known at origination and was accounted for in DBRS
Morningstar's analysis at issuance with an elevated vacancy loss
applied, resulting in a DBRS Morningstar net cash flow (NCF) that
was about 25% lower than the issuer's NCF. Two additional tenants,
Ceannate Corporation (Ceannate; 8.2% of NRA) and Panasonic (5.8% of
NRA), both likely exercised early termination options with Ceannate
vacating in September 2020 and Panasonic leaving in December 2022.
Details surrounding these departures, including any termination
fees collected, were requested from the servicer and a response is
pending. Based on the issuance documents, Ceannate was required to
pay a $2.9 million termination fee ($39.54 per square foot (psf)
for its space).
At YE2022, the occupancy rate was reported at 67.0% with a DSCR of
0.52 times (x). The largest remaining tenant, Verizon (17.5% of
NRA, lease expiry in April 2028), can terminate its lease in April
2026 and must provide written notice by January 2025, as well as
pay a termination fee of $2.9 million ($15.00 psf). In the event
Verizon terminates its lease, does not renew its lease, or goes
dark in more than 50% of its space, a cash flow sweep would be
initiated, subject to a cap of $55 psf (approximately $8.8 million
based on the size of Verizon's space), but this mechanism is
generally useless given the low in-place cash flow. According to
Reis, office properties in the subject's Northwest Suburbs
submarket reported a Q2 2023 vacancy rate of 29.3%, where Reis
expects it to hover through the next five years.
The borrower is requesting a loan modification and the servicer is
evaluating the request while also preparing for a potential
placement of a receiver and/or the initiation of a foreclosure
action if those negotiations fall through. The decline in
performance and soft office submarket suggests the value of the
property has significantly deteriorated since the issuance value of
$121.7 million. It is also noteworthy that the sponsor, a joint
venture between Rubenstein Properties Fund III, L.P. and Glenstar,
injected approximately $50.0 million of equity at issuance and
recently completed $20.0 million in renovations in 2020. Given the
increased risks in the low in-place cash flows, lack of leasing
activity and poor outlook for prospects for the high availability
at the property over the near to moderate term, DBRS Morningstar
analyzed the loan with a liquidation scenario based on a stressed
value, resulting in a loss severity in excess of 45.0%.
The One Lincoln Center loan is secured by an office building in
Syracuse, New York, and is currently on the servicer's watchlist
for a low DSCR, with the trailing six months (T-6) ended June 30,
2023, financials reporting a figure of 0.77x. Occupancy has been at
the 70.0% range in the last few years and tenants representing more
than half of the NRA have leases scheduled to roll during the term
of the loan. This includes the largest tenant, Bond Schoeneck &
King PLLC (31.3% of NRA, lease expires in October 2027). Again,
this loan is structured with a cash flow sweep that will be
initiated 18 months prior to the tenant's lease expiration, but the
structure's effectiveness is eliminated by the low in-place cash
flows that mean there are no excess funds to collect. According to
Reis, office properties located in the subject's Downtown submarket
reported a Q2 2023 vacancy rate of 16.4% but vacancy is expected to
decrease by 2028 to 12.3%. Considering the depressed performance
and significant tenant rollover risk, DBRS Morningstar analyzed
this loan with an elevated LTV, resulting in an expected loss that
was more than double the pool average.
The second loan in special servicing is Nebraska Crossing
(Prospectus ID#15, 2.9% of the pool), which is secured by an
anchored retail property in Gretna, Nebraska. The loan transferred
to special servicing because of defaults on special-purpose entity
covenants. Although the details of the defaults were not provided,
the servicer noted that the borrower has provided a settlement
agreement and the special servicer will continue to monitor this
loan before returning to the master servicer. The Brooklyn
Multifamily Portfolio loan (Prospectus ID#23, 1.7% of the pool) was
previously in special servicing but a loan modification was
executed, where the borrower provided a $500,000 principal
curtailment and brought the loan current, with the loan returned to
the master servicer in June 2023.
At issuance, DBRS Morningstar shadow rated 787 Eleventh Avenue
(Prospectus ID#4, 5.6% of the pool balance) investment grade. This
loan is secured by a Class A mixed-use property in the Midtown West
neighborhood of Manhattan. The first five floors consist of
automotive showroom space for luxury car brands, with the remaining
space configured for office use. The loan has been on the
servicer's watchlist for low DSCR since 2020, primarily a factor of
rent abatements that were provided to several tenants. Mitigating
these risks is a free rent reserve of approximately $15.5 million
funded at issuance. The former third-largest tenant, Spaces
International Workplace (19.3% of NRA), a subsidiary of Regus PLC,
vacated the subject ahead of its October 2031 lease expiration.
However, the space was backfilled by Mount Sinai's Icahn School of
Medicine (Mount Sinai), which already occupied a unit at the
subject, bringing the tenant's total footprint to approximately
30.0% of NRA. According to news articles, the tenant's location at
the subject will serve as an outpatient and research center, and
build-outs appear to be near completed. Mount Sinai received rental
abatements but is expected to start paying rent in March 2024. The
servicer noted that the property is fully leased and once Mount
Sinai starts paying its rent, NCF is expected to continue to trend
upwards. As of YE2022, the DSCR was 1.35x, compared with YE2020 of
1.08x. Given the high occupancy rate and expectation that cash
flows will soon return to levels expected at issuance, DBRS
Morningstar confirms with this review that the loan performance
trends remain consistent with investment-grade loan
characteristics.
Two other loans, SITE JV Portfolio (Prospectus ID#3, 6.2% of the
pool balance) and 2 North 6th Place (Prospectus ID#8, 4.2% of the
pool balance), were shadow rated investment grade at issuance. With
this review, DBRS Morningstar confirms that the loan performance
trends for these loans also remain consistent with investment-grade
loan characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSMC TRUST 2017-CALI: S&P Affirms CCC-(sf) Rating on Class F Notes
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on seven classes of
commercial mortgage pass-through certificates from CSMC Trust
2017-CALI, a U.S. CMBS transaction. At the same time, S&P affirmed
its 'CCC- (sf)' rating on the class F certificates from the
transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a portion of a fixed-rate, interest-only (IO) mortgage whole
loan secured by the borrower's fee simple interest in One
California Plaza, a 42-story, 1.05 million-sq.-ft. class A office
building in the Downtown Los Angeles office submarket.
Rating Actions
The downgrades on classes A, B, C, D, and E, and affirmation on
class F reflect:
-- The borrower's inability to materially increase the property's
occupancy and net cash flow (NCF) since S&P's last review in March
2023.
-- S&P's expected-case valuation, which, while unchanged from its
last review, is 19.7% lower than the valuation it derived at
issuance due primarily to reported decreases in occupancy and NCF
at the property.
-- S&P's belief that, due to weakened office submarket
fundamentals, 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 and refinance the loan at its November 2024
maturity date if the property's NCF does not improve. The loan is
on the master servicer's watchlist due to declining NCF and low
reported occupancy and debt service coverage (DSC), which were
74.0% and 1.03x, respectively, as of the six months ended June 30,
2023.
S&P said, "In our last review in March 2023, we noted that the
servicer reported declining occupancy and NCF at the property
following the COVID-19 pandemic. While the property has had some
leasing activity, the borrower was not able to increase the
property's occupancy rate to historical or market occupancy levels.
As a result, at that time, we revised and lowered our sustainable
NCF to $14.4 million assuming a 71.1% occupancy rate, an S&P Global
Ratings $48.77 per sq. ft. gross rent, and a 51.1% operating
expense ratio. Using an S&P Global Ratings capitalization rate of
7.00%, we arrived at an expected-case value of $205.4 million or
$196 per sq. ft.
"As of the June 30, 2023, rent roll, the property's occupancy rate
was 74.0%, compared with the reported 72.0% rate as of year-end
2022. The servicer reported an NCF of $5.9 million for the six
months ended June 30, 2023, and $12.6 million for year-end 2022,
down from $14.5 million for year-end 2021. According to the master
servicer, KeyBank Real Estate Capital, the sponsor indicated that
it is in discussions with four new or renewing tenants that may be
interested in signing leases or expanding their footprints
(comprising approximately 8.3% of the property's NRA); however,
these leasing activities may entail substantial tenant improvement
allowances and approximately 12 months of rent concessions. CoStar
noted that two tenants (comprising 6.9% of NRA) marketed a portion
of their spaces (totaling 17,391 sq. ft.; 1.7% of NRA) for
sublease. In addition, various media reports confirmed that the
second-largest tenant, Skadden, Arps, Slate, Meagher & Flom LLP
(10.3% of NRA), plans to relocate to the Century City office
submarket upon its November 2024 lease expiration. Resultingly, due
partly to the provisions for a cash sweep event and Skadden trigger
event, as defined in the transaction documents, there is
approximately $15.9 million held in various lender-controlled
reserve accounts earmarked for replacement, tenant, and other
expense costs.
"In our current analysis, assuming a 72.8% occupancy rate
(excluding the sponsor-related management tenant and an expired
tenant), an S&P Global Ratings $28.33 per sq. ft. base rent and
$46.99 per sq. ft. gross rent, a 52.4% operating expense ratio, and
higher tenant improvement costs, we derived a sustainable NCF of
$14.4 million, the same as in our last review, and 14.2% higher
than the NCF as of year-end 2022. Using an S&P Global Ratings
capitalization rate of 7.00%, unchanged from the last review, we
arrived at an S&P Global Ratings expected case value that is the
same as in our last review of $205.4 million, or $196 per sq. ft.,
55.3% lower than the issuance appraisal value of $459.0 million.
This yielded an S&P Global Ratings loan-to-value ratio of 146.0% on
the whole loan balance.
"Specifically, we lowered our rating on class E to 'CCC (sf)' and
affirmed our rating on class F at 'CCC- (sf)' to reflect our view
that, due to current market conditions and their positions in the
payment waterfall, these classes are or remain at heightened risks
of default and loss and are susceptible to liquidity
interruption."
Although the model-indicated ratings were lower than our revised
ratings on classes A and B, S&P tempered its downgrades on these
classes because of certain qualitative considerations. These
include:
-- The property's desirable location in the heart of the downtown
Bunker Hill district of Los Angeles directly adjacent to the Civic
Center and other major downtown demand drivers such as the Walt
Disney Concert Hall, a 12-acre Grand Park, and the Museum of
Contemporary Art.
-- The potential that the property's operating performance could
improve above our revised expectations. According to the June 30,
2023, rent roll, the sponsor signed new or renewing leases that
commence in 2023 or 2024 for eight unique tenants, representing
approximately 6.3% of NRA. While two tenants had marketed a portion
of their spaces for sublease and the second-largest tenant plans to
move to another office building upon lease expiration, the sponsor
is in active negotiations with several potential new tenants. In
addition, there is currently $15.9 million in lender-controlled
reserve accounts, a majority of which are to fund tenant-related
costs.
-- The relatively low to moderate debt per sq. ft. ($134 per sq.
ft. through class B).
-- The significant market value decline that would need to occur
before these classes experience principal losses.
-- The temporary liquidity support provided in the form of
servicer advancing.
-- The relative senior 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 borrower's ability to
refinance the loan by November 2024. If we receive information that
differs materially from our expectations, such as reported negative
changes in the performance beyond what we already considered or the
loan is transferred to special servicing, we may revisit our
analysis and take further rating actions as we deem necessary."
Property-Level Analysis
The loan collateral consists of One California Plaza, a 42-story,
1.05 million-sq.-ft. class A LEED Platinum-certified office
building located at 300 South Grand Avenue in the Downtown Los
Angeles office submarket. It was built in 1985 and last renovated
in 2016. The subject property has a blue-tinted glass façade with
curved corners, ground-floor retail space, a five-level underground
parking garage with over 1,300 parking spaces, an average 25,000
sq. ft. column-free floor plates, a common conference center, and
training rooms. From 2012 to 2016, the prior owner invested
approximately $15.0 million in the property to renovate and upgrade
the lobby, elevators, and other amenities, which include a rooftop
helipad, rooftop terrace, and retail pavilion.
It is part of the mixed-use California Plaza development, which
includes an adjacent 52-story, 1.4 million-sq.-ft. Two California
Plaza office tower; a 17-story, 453-room Omni hotel; and a 1.5-acre
water court and amphitheater situated between the buildings with
multilevel open-air seating (none of which are part of the whole
loan collateral). The California Plaza development occupies an
entire city block in the Bunker Hill district and is governed by a
reciprocal easement agreement, of which the subject property pays
35.9% of common expenses. The sponsor, Colony Capital Operating
Company LLC, a subsidiary of Colony NorthStar, acquired the subject
property in June 2017 for $459.0 million or $438 per sq. ft. from
Beacon Capital Partners.
The property's occupancy rate was 74.0% as of the June 30, 2023,
rent roll, compared with 72.0% in 2022, 76.4% in 2021, 82.4% as of
June 2020, 87.4% in 2019, and 89.1% in 2018. The five largest
tenants at the property comprised 40.5% of NRA and included:
-- AECOM (11.9% of NRA, 14.8% of gross rent as calculated by S&P
Global Ratings, February 2032 lease expiration).
-- Skadden, Arps, Slate, Meagher & Flom LLP (10.3%, 13.4%,
November 2024). As we previously discussed, the tenant is expected
to vacate upon its November 2024 lease expiry.
-- Morgan Lewis & Bockius LLP (9.8%, 13.8%, September 2027).
-- Nixon Peabody LLP (4.5%; 6.4%, April 2028).
-- Locke Lord LLP (4.0%, 5.2%, September 2025). According to
CoStar, a portion of the tenant's space (0.6% of NRA) is being
marketed for sublease.
-- The property's notable rollover risk is in 2024 (14.8% of NRA,
20.1% of S&P Global Ratings' in-place gross rent), 2025 (9.9%,
14.1%), 2027 (10.0%, 14.2%), and 2032 (13.0%, 16.2%). The rollover
in 2024 is primarily attributable to Skadden, Arps, Slate, Meagher
& Flom LLP and Financial Industry Regulatory Authority (3.7% of
NRA, June 2024 lease expiration).
According to CoStar, the Downtown Los Angeles office submarket
experienced negative net absorption in the past 12 months because
many tenants continued to downsize or vacate their spaces. CoStar
expects vacancy and availability rates to remain elevated and rents
to decline through at least next year as companies continue to
embrace remote and hybrid work arrangements. The submarket attracts
diverse tenants due to its proximity to clients and courts,
transportation infrastructure, labor base, and value proposition
option compared to other submarkets such as Santa Monica and
Century City. As of year-to-date November 2023, the four- and
five-star office properties in the submarket had a 21.6% vacancy
rate, 23.1% availability rate, and $42.27 per sq. ft. asking rent
versus a 14.2% vacancy rate and $39.99 per sq. ft. asking rent at
issuance in 2017. CoStar projects vacancy to rise to 24.7% in 2024
and 25.6% in 2025 and asking rent to contract to $40.74 per sq. ft.
and $39.61 per sq. ft. for the same periods. CoStar noted that the
peer properties in the submarket had a $37.72 per sq. ft. asking
rent, 21.2% vacancy rate, and 24.8% availability rate. This
compares with the property's in-place 26.0% vacancy rate (we
assumed 27.2% vacancy rate in our analysis) and $46.99 per sq. ft.
gross rent, as calculated by S&P Global Ratings.
Transaction Summary
The IO mortgage whole loan had an initial and current balance of
$300.0 million, pays an annual fixed interest rate of 3.8%, and
matures on Nov. 6, 2024. The whole loan is split into two senior A
notes and a subordinate B note. The $250.0 million trust balance
(as of the Nov. 10, 2023, trustee remittance report) comprises the
$86.0 million senior note A-1 and $164.0 million subordinate note
B. The $50.0 million senior note A-2 is in CSAIL 2017-CX10
Commercial Mortgage Trust, a U.S. CMBS transaction. The senior A
notes are pari passu to each other and senior to the B note.
The whole loan was transferred to the special servicer on Feb. 17,
2021, due to the borrower's failure to return $3.9 million in funds
that were mistakenly sent to the borrower after cash management was
triggered by the servicer in October 2020. As part of the
settlement, the borrower executed the cash management documents and
remitted the funds back to the servicer. The loan was returned to
the master servicer, KeyBank Real Estate Capital, on Sept. 24,
2021. The loan is currently on the master servicer's watchlist
because the loan is being cash managed due to a low reported DSC
and Skadden trigger event, as defined in the transaction documents.
The borrower has been current on its debt service payments through
the November 2023 payment period. The servicer reported a DSC of
1.03x as of the six months ended June 30, 2023, down from 1.09x in
2022 and 1.26x in 2021. To date, the trust has not incurred any
principal losses.
Ratings Lowered
CSMC Trust 2017-CALI
Class A to 'AA (sf)' from 'AAA (sf)'
Class B to 'A- (sf)' from 'AA- (sf)'
Class C to 'BB (sf)' from 'BBB+ (sf)'
Class D to 'B (sf)' from 'BB (sf)'
Class E to 'CCC (sf)' from 'B- (sf)'
Class X-A to 'AA (sf)' from 'AAA (sf)'
Class X-B to 'BB (sf)' from 'BBB+ (sf)'
Rating Affirmed
CSMC Trust 2017-CALI
Class F: CCC- (sf)
CSMC TRUST 2017-PFHP: S&P Affirms CCC- (sf) Rating on Cl. F Notes
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings on six classes of commercial
mortgage pass-through certificates from CSMC Trust 2017-PFHP, a
U.S. CMBS transaction. At the same time, S&P affirmed its rating on
one other class from the same transaction.
This U.S. stand-alone (single borrower) CMBS transaction was backed
by an unhedged floating-rate, interest-only (IO) mortgage loan
secured by a portfolio of 20 limited-service, full-service, and
extended-stay hotels totaling 2,464 guestrooms in six U.S. states.
The trust has since taken title to the property portfolio via a
deed-in-lieu of foreclosure that closed on Sept. 13, 2023.
Rating Actions
The downgrades on classes A, B, C, D, and E reflect concerns around
the following:
-- Continued increase in total exposure, including servicer
advancing and interest thereon, since S&P's last review on May 19,
2023. In its view, the additional advancing further reduces the
liquidity and ultimate recovery to the bondholders, as it will be
paid ahead of the rated certificates per the transaction
waterfall;
-- Lack of an interest rate cap agreement, which exposes the
floating-rate debt service obligation fully to changes in one-month
SOFR during this period of elevated interest rates. In S&P's view,
the elevated interest rate environment exacerbates the risk of
future build-up in advancing; and
-- Extended resolution timing for the specially serviced asset, as
the current high interest rate environment could impede financing
necessary for any property sales, heightening the aforementioned
concerns.
S&P said, "The downgrade on class E to 'CCC (sf)' from 'B- (sf)'
and the affirmation of class F at 'CCC- (sf)' reflect our view that
the susceptibility to liquidity interruption and risk of default
and loss are elevated based on additional exposure buildup.
"Our downgrade on the class X-EXT IO certificates reflects our
criteria for rating IO securities, in which the ratings on the IO
securities would not be higher than that of the lowest-rated
reference class. The class X-EXT notional amount references the A-2
portion of the class A certificates.
"We will continue to monitor the portfolio's operating performance,
the asset's resolution situation (including the timing thereof and
the outcome of any property sales), and the trajectory of interest
rates. Where future developments dictate, we will revisit our
analysis and adjust our ratings as necessary.
"At the time of our last review, servicer advances for debt service
and other expenses (and interest thereon) totaled $8.6 million.
This grew to $16.9 million through the September 2023 remittance
report date, before declining to $10.7 million in October 2023.
According to the special servicer, Trimont LLC (Trimont), cash flow
from operations, collected at the closing of the deed-in-lieu of
foreclosure, was used to repay portions of prior advances and
interest thereon. Trimont also confirmed that there are currently
no funds in reserve that can be used to further repay prior
advances; the November 2023 CRE Financial Council loan-level
reserve report shows only $8.00 in reserve. The November 2023
performance report shows servicer advances (and interest thereon)
increased again to $13.7 million. Given the asset's sub-1.00x debt
service coverage (detailed more below), total exposure could
continue to build (particularly if interest rates remain elevated).
This risk is magnified by the extended resolution timing.
"Since our May 2023 review, we received borrower-reported portfolio
performance for the trailing 12-month (TTM) period ended March 31,
2023. These financials show portfolio occupancy of 67.8%, an
average daily rate (ADR) of $122.17, and revenue per available room
(RevPAR) of $82.83, an increase from the servicer-reported
prior-year figures of 65.5%, $108.30, and $70.96, respectively. The
borrower-reported net cash flow (NCF) for the TTM period ended
March 31, 2023, was $21.8 million, up from the servicer-reported
prior-year figure of $18.3 million. Servicer-reported NCF for 2019
was $20.7 million.
"We also received June 2023 STR reports for all 20 collateral
properties. The STR reports indicate that 15 properties (76.5% of
total allocated loan amount [ALA]) experienced positive
year-over-year RevPAR growth for the TTM period ended June 30,
2023. The reports also show that nine properties (51.6% of total
ALA) each have a RevPAR penetration rate (which measures the RevPAR
of the hotel relative to its competitors, with 100% indicating
parity with competitors) of over 100%. Nine other hotels (41.7%)
each have a RevPAR penetration rate between 85.4% and 99.6%, while
two (6.7%) each have a RevPAR penetration rate of 72.3% and 78.0%,
respectively.
"Given the updated information, which indicates the portfolio's
continued performance recovery (to levels now
flat-to-slightly-higher versus 2019), our current NCF of $19.1
million and expected-case value of $145.3 million ($58,957 per
guestroom) are unchanged from our May 2023 review."
Transaction Summary
Prior to the deed-in-lieu of foreclosure, the trust asset was
secured by an IO mortgage loan with an initial balance of $240.0
million (unchanged as of the Nov. 15, 2023, trustee remittance
report), and paid an annual floating interest rate indexed to
one-month SOFR plus a spread of 3.747%. The loan had an initial
term of two years, with three one-year extension options. It
matured on Dec. 9, 2022, with no extension options remaining. The
servicer confirmed there is no interest rate cap agreement
currently in place. Based on borrower-reported portfolio
performance as of the TTM period ended March 2023, current
one-month SOFR, and the spread, the asset has a 0.98x NCF-based
debt service coverage.
To date, the trust has not incurred any principal losses.
The loan was initially transferred to special servicing on June 12,
2020, due to payment default. The borrower was delinquent on their
May, June, and July 2020 debt service payments and requested
COVID-19 forbearance relief. The special servicer, Trimont,
approved the borrower's request for forbearance of the May 2020
through October 2020 debt service payments. Among other things, the
forbearance agreement required the borrower to make an initial $1.0
million reserve deposit and ongoing deposits into the tax and
insurance escrows. However, furniture, fixtures, and equipment
deposits were waived through December 2020, and unpaid interest was
to be due at loan maturity. The loan was returned to the master
servicer, Wells Fargo Bank N.A., on Oct. 8, 2021.
The loan was transferred back to special servicing on July 21,
2022, due to imminent maturity default ahead of its fully extended
Dec. 9, 2022, maturity date. The servicer has been advancing debt
service payments since January 2023. Following failed loan
modification negotiations, the sponsor relinquished the property
portfolio via a deed-in-lieu of foreclosure that closed on Sept.
13, 2023.
Ratings Lowered
CSMC Trust 2017-PFHP
Class A to 'AA- (sf)' from 'AAA (sf)'
Class B to 'BBB (sf)' from 'A+ (sf)'
Class C to 'BB+ (sf)' from 'BBB+ (sf)'
Class D to 'B+ (sf)' from 'BB+ (sf)'
Class E to 'CCC (sf)' from 'B- (sf)'
Class X-EXT to 'AA- (sf)' from 'AAA (sf)'
Rating Affirmed
CSMC Trust 2017-PFHP
Class F: CCC- (sf)
DRYDEN 112: S&P Assigns BB-(sf) Rating on $15.8MM Class E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes from Dryden 112 CLO Ltd./Dryden 112
CLO LLC, a CLO originally issued in August 2022 that S&P Global
Ratings did not previously rate and that is managed by PGIM Inc.
There are no replacement class F notes in the refinanced
transaction.
On the Nov. 15, 2023, refinancing date, the proceeds from the
replacement notes were used to redeem the original notes. As a
result, S&P assigned ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which outlined the terms of the replacement notes. According to the
supplemental indenture:
-- The transaction is collateralized by at least 92.50% senior
secured loans, cash, and eligible investments, with a minimum of
80.00% of the loan borrowers based in the U.S.
-- Of the identified underlying collateral obligations, 99.87%
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, 92.32%
have recovery ratings (which may include confidential and private
ratings) assigned by S&P Global Ratings.
-- The replacement class A-R, B-R, C-R, D-R, and E-R notes were
issued at a lower spread over three-month CME term SOFR than the
original notes.
-- There are no replacement class F notes in the refinanced
transaction.
-- The non-call date and stated maturity were extended by
approximately 2.25 years.
-- The subordinated notes' par balance was increased by $5.1
million, to $35.1 million from $30.0 million, to purchase
additional collateral to achieve a target par threshold of $400.0
million.
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
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.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Dryden 112 CLO Ltd./Dryden 112 CLO LLC
Class A-R, $248.0 million: AAA (sf)
Class B-R, $56.0 million: AA (sf)
Class C-R (deferrable), $24.0 million: A (sf)
Class D-R (deferrable), $24.0 million: BBB- (sf)
Class E-R (deferrable), $15.8 million: BB- (sf)
Subordinated notes, $35.1 million: Not rated
ELEVATION CLO 2023-17: S&P Assigns BB- (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Elevation CLO 2023-17
Ltd./Elevation CLO 2013-17 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 ArrowMark Colorado Holdings 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
Elevation CLO 2023-17 Ltd./Elevation CLO 2013-17 LLC
Class X, $1.50 million: AAA (sf)
Class A-1, $210.00 million: AAA (sf)
Class A-2, $14.00 million: AAA (sf)
Class B, $42.00 million: AA (sf)
Class C (deferrable), $21.00 million: A (sf)
Class D (deferrable), $19.25 million: BBB- (sf)
Class E (deferrable), $11.38 million: BB- (sf)
Subordinated notes, $30.10 million: Not rated
FANNIE MAE 2023-R08: S&P Assigns 'BB' Rating on Class 1B-1Xl Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Fannie Mae Connecticut
Avenue Securities Trust 2023-R08's notes.
The note issuance is an RMBS securitization backed by fully
amortizing, first-lien, fixed-rate residential mortgage loans
secured by one- to four-family residences, planned-unit
developments, condominiums, manufactured housing, and cooperatives
to primarily prime borrowers.
After S&P assigned its preliminary ratings on Nov. 14, 2023, the
principal balance of the class 1B-1 notes was increased to
$125,000,000 from $89,000,000, with a proportionate increase to the
principal balances of the class 1B-1A, 1B-1B, and 1B-1Y notes and
the notional amounts of the class 1B-1A and 1B-1B reference
tranches and the class 1B-1X notes. At the same time, the notional
balances of the class 1B-AH and 1B-BH reference tranches were
proportionately decreased by the same amount. The underlying credit
enhancement provided by the class 1B-2H and 1B-3H subordinate
reference tranches for the notes mentioned above did not change.
The ratings reflect S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches and the associated structural deal mechanics.
-- The real estate mortgage investment conduit structure, which
reduces the counterparty exposure to Fannie Mae for periodic
principal and interest payments but also pledges the support of
Fannie Mae (as a highly rated counterparty) to cover any shortfalls
on interest payments and make up for any investment losses.
-- The issuer's aggregation experience and the alignment of
interests between the issuer and the noteholders in the
transaction's performance, which we believe enhance the notes'
strength.
-- The enhanced credit risk management and quality control
processes Fannie Mae uses in conjunction with the underlying
representations and warranties framework.
S&P said, "The potential impact that current and near-term
macroeconomic conditions may have on the performance of the
mortgage borrowers in the pool. On Sept. 25, 2023, we updated our
market outlook as it relates to the 'B' projected archetypal loss
level, and therefore revised and lowered our 'B' foreclosure
frequency to 2.50% from 3.25%, which reflects the level prior to
April 2020, preceding the COVID-19 pandemic. The update reflects
our benign view of the mortgage and housing market as demonstrated
through general national-level home price behavior, unemployment
rates, mortgage performance, and underwriting."
Ratings Assigned
Fannie Mae Connecticut Avenue Securities Trust 2023-R08
Class 1A-H(i), $17,879,540,420: NR
Class 1M-1, $278,010,000: A- (sf)
Class 1M-1H(i), $14,632,953: NR
Class 1M-2A(ii), $68,755,000: BBB+ (sf)
Class 1M-AH(i), $3,619,064: NR
Class 1M-2B(ii), $68,755,000: BBB+ (sf)
Class 1M-BH(i), $3,619,064: NR
Class 1M-2C(ii), $68,755,000: BBB (sf)
Class 1M-CH(i), $3,619,064: NR
Class 1M-2(ii), $206,265,000: BBB (sf)
Class 1B-1A(ii), $62,500,000: BB+ (sf)
Class 1B-AH(i), $36,621,000: NR
Class 1B-1B(ii), $62,500,000: BB (sf)
Class 1B-BH(i), $36,621,000: NR
Class 1B-1(ii), $125,000,000: BB (sf)
Class 1B-2H(i), $103,841,048: NR
Class 1B-3H(i), $188,801,905: NR
Related combinable and recombinable notes exchangeable
classes(iii)
Class 1E-A1, $68,755,000: BBB+ (sf)
Class 1A-I1, $68,755,000(iv): BBB+ (sf)
Class 1E-A2, $68,755,000: BBB+ (sf)
Class 1A-I2, $68,755,000(iv): BBB+ (sf)
Class 1E-A3, $68,755,000: BBB+ (sf)
Class 1A-I3, $68,755,000(iv): BBB+ (sf)
Class 1E-A4, $68,755,000: BBB+ (sf)
Class 1A-I4, $68,755,000(iv): BBB+ (sf)
Class 1E-B1, $68,755,000: BBB+ (sf)
Class 1B-I1, $68,755,000(iv): BBB+ (sf)
Class 1E-B2, $68,755,000: BBB+ (sf)
Class 1B-I2, $68,755,000(iv): BBB+ (sf)
Class 1E-B3, $68,755,000: BBB+ (sf)
Class 1B-I3, $68,755,000(iv): BBB+ (sf)
Class 1E-B4, $68,755,000: BBB+ (sf)
Class 1B-I4, $68,755,000(iv): BBB+ (sf)
Class 1E-C1, $68,755,000: BBB (sf)
Class 1C-I1, $68,755,000(iv): BBB (sf)
Class 1E-C2, $68,755,000: BBB (sf)
Class 1C-I2, $68,755,000(iv): BBB (sf)
Class 1E-C3, $68,755,000: BBB (sf)
Class 1C-I3, $68,755,000(iv): BBB (sf)
Class 1E-C4, $68,755,000: BBB (sf)
Class 1C-I4, $68,755,000(iv): BBB (sf)
Class 1E-D1, $137,510,000: BBB+ (sf)
Class 1E-D2, $137,510,000: BBB+ (sf)
Class 1E-D3, $137,510,000: BBB+ (sf)
Class 1E-D4, $137,510,000: BBB+ (sf)
Class 1E-D5, $137,510,000: BBB+ (sf)
Class 1E-F1, $137,510,000: BBB (sf)
Class 1E-F2, $137,510,000: BBB (sf)
Class 1E-F3, $137,510,000: BBB (sf)
Class 1E-F4, $137,510,000: BBB (sf)
Class 1E-F5, $137,510,000: BBB (sf)
Class 1-X1, $137,510,000(iv): BBB+ (sf)
Class 1-X2, $137,510,000(iv): BBB+ (sf)
Class 1-X3, $137,510,000(iv): BBB+ (sf)
Class 1-X4, $137,510,000(iv): BBB+ (sf)
Class 1-Y1, $137,510,000(iv): BBB (sf)
Class 1-Y2, $137,510,000(iv): BBB (sf)
Class 1-Y3, $137,510,000(iv): BBB (sf)
Class 1-Y4, $137,510,000(iv): BBB (sf)
Class 1-J1, $68,755,000: BBB (sf)
Class 1-J2, $68,755,000: BBB (sf)
Class 1-J3, $68,755,000: BBB (sf)
Class 1-J4, $68,755,000: BBB (sf)
Class 1-K1, $137,510,000: BBB (sf)
Class 1-K2, $137,510,000: BBB (sf)
Class 1-K3, $137,510,000: BBB (sf)
Class 1-K4, $137,510,000: BBB (sf)
Class 1M-2Y, $206,265,000: BBB (sf)
Class 1M-2X, $206,265,000(iv): BBB (sf)
Class 1B-1Y, $125,000,000: BB (sf)
Class 1B-1X, $125,000,000(iv): BB (sf)
(i)Reference tranche only and will not have corresponding notes.
Fannie Mae retains the risk of these tranches.
(ii)The class 1M-2 noteholders may exchange all or part of that
class for proportionate interests in the class 1M-2A, 1M-2B, and
1M-2C notes and vice versa. The class 1B-1 noteholders may exchange
all or part of that class for proportionate interests in the class
1B-1A and 1B-1B notes and vice versa. The class 1M-2A, 1M-2B,
1M-2C, 1B-1A, and 1B-1B noteholders may exchange all or part of
those classes for proportionate interests in the classes of related
combinable and recombinable notes as specified in the offering
documents.
(iii)See the offering documents for more detail on possible
combinations.
(iv)Notional amount.
NR--Not rated.
FORTRESS CREDIT XX: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Fortress
Credit BSL XX Ltd./Fortress Credit BSL XX LLC's fixed- and
floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by FC BSL CLO Manager III LLC, an
affiliate of Fortress Investment Group LLC.
The preliminary ratings are based on information as of Nov. 16,
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
Fortress Credit BSL XX Ltd./Fortress Credit BSL XX LLC
Class A, $250.0 million: AAA (sf)
Class B-1, $38.0 million: AA (sf)
Class B-2, $10.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D (deferrable), $24.0 million: BBB- (sf)
Class E (deferrable), $14.0 million: BB- (sf)
Subordinated notes, $43.4 million: Not rated
FS RIALTO 2022-FL5: DBRS Confirms B(low) Rating on Class G Notes
----------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by FS Rialto 2022-FL5 Issuer, LLC (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class A-S 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 primarily secured by multifamily collateral. In
conjunction with this press release, DBRS Morningstar has also
published a Surveillance Performance Update report with in-depth
analysis and credit metrics for the transaction, and business plan
updates on select loans.
The initial collateral consisted of 23 floating-rate mortgage loans
and participation interests in mortgage loans secured by 52 mostly
transitional properties with a cut-off balance totaling $600
million. Most loans were in a period of transition with plans to
stabilize performance and improve values of the underlying assets.
As of the October 2023 remittance, the pool comprised 25 loans
secured by 54 properties with a cumulative trust balance of $690
million. Since issuance, two loans with a prior cumulative trust
balance of $35.5 million have been successfully repaid in full from
the pool. In addition, three loans, totaling $8.1 million have been
added into the pool since issuance.
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 June 2024 Payment Date. As of October 2023, the
Reinvestment Account has no available reinvestment funds.
The transaction is concentrated by property type as 14 loans,
representing 56.5% of the current trust balance, are secured by
multifamily properties; five loans, representing 18.8% of the
current trust balance, are secured by office properties; and four
loans, representing 18.0% of the current trust balance, are secured
by hospitality properties. The pool is primarily secured by
properties in suburban markets, with 19 loans, representing 70.2%
of the pool, with a DBRS Morningstar Market Rank of 3, 4, or 5. The
remaining six loans, representing 29.8% of the pool, are secured by
properties in urban markets, with a DBRS Morningstar Market Rank of
6 or 8. The pool composition is relatively unchanged since
issuance.
Leverage across the pool was generally stable as of the October
2023 reporting when compared with issuance metrics. The current
weighted-average (WA) as-is appraised loan-to-value ratio (LTV) is
68.1%, with a current WA stabilized LTV of 61.5%. In comparison,
these figures were 68.4% and 61.7%, 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 environment. In the analysis
for this review, DBRS Morningstar applied upward LTV adjustments
across five loans, representing 23.9% of the current trust
balance.
Through September 2023, the collateral manager had advanced
cumulative loan future funding of $82.8 million to 18 of the
outstanding individual borrowers. The two loans with the largest
future funding advances to date are the NYC Multifamily Portfolio
loan ($17.2 million) and Nob Hill Apartments loan ($17.7 million).
These loans are secured by multifamily properties in New York and
Houston, respectively. Both borrowers have used future funding
advances to renovate unit interiors and tenant amenities as well as
complete upgrades across the property exteriors.
An additional $129.5 million of future loan funding allocated to 19
of the outstanding individual borrowers remains available. The
largest portion of available funds ($35.2 million) is allocated to
the borrower of the Spectrum Center loan, which is secured by an
office property in Addison, Texas. The sponsor's business plan is
to complete a $31.0 million capital expenditure (capex) plan to
improve the property's quality and convert the building into Class
A office product. The future funding component also includes $18.2
million budgeted toward leasing costs. As of September 2023, the
lender had advanced $4.1 million of future funding to the borrower
for the completion of upgrades to amenity improvements and
speculative suite build out.
As of the October 2023 reporting, there are no delinquent or
specially serviced loans; however, seven loans, representing 37.6%
of the current pool balance, are on the servicer's watchlist. The
loans have primarily been flagged for below-breakeven debt service
coverage ratios, low occupancy rates, and deferred maintenance
issues. While not on the servicer's watchlist, DBRS Morningstar has
highlighted the Lawrence Station loan, which is secured by a
recently built, Class A office building in Santa Clara, California.
The property has remained fully vacant nearly two years since
construction was completed despite the borrower having $19.6
million available in future funding to finance leasing costs. The
sponsor continues to contend with sluggish market conditions, as
according to the Reis Q2 2023 market report, the San Jose office
submarket reported an elevated vacancy rate of 24.9%. As such, DBRS
Morningstar analyzed the loan with a stressed scenario, which
resulted in an expected loss in excess of the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
GENERATE CLO 13: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Generate CLO
13 Ltd./Generate CLO 13 LLC's fixed- and floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Generate Advisors LLC.
The preliminary ratings are based on information as of Nov. 17,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The 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
Generate CLO 13 Ltd./Generate CLO 13 LLC
Class A-1, $194.50 million: Not rated
Class A-1L loans, $50.00 million: Not rated
Class A-2, $11.50 million: Not rated
Class B-1, $37.00 million: AA (sf)
Class B-2, $11.00 million: AA (sf)
Class C-1 (deferrable), $11.00 million: A (sf)
Class C-2 (deferrable), $13.00 million: A (sf)
Class D-1 (deferrable), $17.50 million: BBB- (sf)
Class D-2 (deferrable), $4.50 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $42.00 million: Not rated
GOLDENTREE LOAN 18: Fitch Assigns Final B-sf Rating on Cl. F Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
GoldenTree Loan Management US CLO 18, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
GoldenTree Loan
Management US
CLO 18, Ltd.
X LT NRsf New Rating NR(EXP)sf
A LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
F LT B-sf New Rating B-(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
GoldenTree Loan Management US CLO 18, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that will
be managed by GLM II, LP. Net proceeds from the issuance of the
secured and 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. The weighted average rating factor (WARF) of the indicative
portfolio is 24.0, 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 appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.8% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.7% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 44.5% 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 5.2-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 '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, between less than 'B-sf' and 'B+sf' for class E, and
between less than 'B-sf' and 'Bsf' for class F.
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, 'BBB+sf' for class E, and 'BBB-SF' for class F.
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.
GOLUB CAPITAL 70: Fitch Assigns 'BBsf' Rating on Class E Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Golub
Capital Partners CLO 70(B), Ltd.
Entity/Debt Rating
----------- ------
Golub Capital
Partners CLO
70(B), Ltd
A LT NRsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BBsf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Golub Capital Partners CLO 70(B), Ltd. (the issuer) is an arbitrage
cash flow collateralized loan obligation (CLO) that will be managed
by OPAL BSL LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.2, versus a maximum covenant, in
accordance with the initial expected matrix point of 26.5. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.6% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 77.3% versus a
minimum covenant, in accordance with the initial expected matrix
point of 76.7%.
Portfolio Composition (Negative): The largest three industries may
constitute up to 57.0% 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 resulting from the
obligor and geographic concentrations is in line with that of other
recent CLOs. The transaction documents permit a higher industry
concentration than that of other recent U.S. CLOs, in line with
other recent CLOs from the same collateral manager, and this was
taken into account in Fitch's stress scenarios.
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
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 is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B, between 'Bsf' and
'BBB+sf' for class C, between less than 'B-sf' and 'BB+sf' for
class D; and between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'A+sf' for class C, 'Asf' for
class D; and 'BBB+sf' for class E.
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.
GS MORTGAGE 2013-GCJ16: DBRS Confirms B Rating on Class X-C Certs
-----------------------------------------------------------------
DBRS, Inc. upgraded its credit ratings on three classes of
Commercial Mortgage Pass-Through Certificates Series 2013-GCJ16
issued by GS Mortgage Securities Trust 2013-GCJ16 as follows:
-- Class C to AAA (sf) from A (high) (sf)
-- Class PEZ to AAA (sf) from A (high) (sf)
-- Class D to A (low) (sf) from BBB (high) (sf)
DBRS Morningstar also confirmed its credit ratings on three classes
as follows:
-- Class F at BB (low) (sf)
-- Class X-C at B (sf)
-- Class G at B (low) (sf)
The credit ratings for Classes B and X-B were discontinued in
conjunction with this rating action, as they were repaid in full as
of the October 2023 remittance. All remaining classes maintain
Stable trends.
The credit rating upgrades reflect the continued deleveraging of
the trust, as 52 loans have repaid since the last rating action in
November 2022. There are currently 10 loans remaining, representing
a collateral reduction of 86.7% since issuance. Credit support to
the outstanding bonds has improved as Class C is now the
senior-most certificate with an outstanding principal balance that
is fully covered by defeased collateral, representing 23.3% of the
pool. There is only one loan in special servicing as of the October
2023 remittance, representing 10.6% of the pool, and it is the only
loan backed by an office property. All other loans are scheduled to
mature by the end of 2023. The weighted-average debt service
coverage ratio (DSCR) and debt yield for these loans are 1.50 times
(x) and 11.6%, respectively.
Given the concentration of the pool, DBRS Morningstar's credit
ratings are based on a recoverability analysis of the remaining
assets. The only specially serviced loan is McAllister Plaza
(Prospectus ID#16, 10.6% of the pool), which is secured by a
suburban office property in San Antonio, Texas. The loan
transferred to special servicing in July 2023 and subsequently
missed its scheduled October 2023 maturity date. According to the
servicer commentary, the borrower has requested an extension of the
maturity date. The property was 91% occupied as of June 2023 and
reported an annualized DSCR of 1.79x. Reis indicated that Northwest
San Antonio was experiencing an average vacancy rate of 17.1% for
office space as of Q2 2023, and the submarket vacancy is expected
to increase over the next five years. DBRS Morningstar's projected
loss severity is under 20%; however, even a full loss on this loan
would be contained to the unrated Class H certificate.
DBRS Morningstar identified three loans representing 39.0% of the
pool balance as being at increased risk of maturity default based
on current performance or payment status. All three of these loans
are current as of the October 2023 remittance, although one loan
representing 2.9% of the pool did not make its October 2023 debt
service payment. The loan is still in its grace period and is
backed by a self-storage property exhibiting strong historical
performance. The largest loan is The Gates at Manhasset (Prospecuts
ID#4, 33.7% of the pool), which is secured by a retail property in
Manhasset, New York. Tenants include Crate & Barrel, Nike, Athleta,
and Sephora. The subject's historical occupancy has suffered,
primarily because of below-grade spaces that are difficult to lease
up. The property was 66% occupied as of June 2023, with a
corresponding DSCR and debt yield of 1.21x and 8.9%, respectively.
Another retail-backed loan representing 2.4% of the pool is secured
by a ground floor retail space in New York City. The space has been
vacant since the sole tenant, a gym, vacated in 2019. The loan has
stayed current, despite the dark tenant's lease expiration in
February 2023.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2018-GS10: S&P Lowers WLS-D Certs Rating to 'CCC (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on four raked classes and
affirmed its ratings on seven other pooled classes of commercial
mortgage pass-through certificates from GS Mortgage Securities
Trust 2018-GS10, a U.S. CMBS transaction.
The pooled classes are secured by 34 loans totaling $795.8 million,
down from $810.7 million at issuance. The raked classes, which are
downgraded, are secured by a $63.1 million subordinate nonpooled
trust component of a $128.4 million fixed-rate, interest-only (IO)
mortgage whole loan secured by the borrower's fee simple interest
in 1000 Wilshire, a 477,000-sq.-ft. office property located in
downtown Los Angeles.
Rating Actions
The downgrades on classes WLS-A, WLS-B, WLS-C, and WLS-D primarily
reflect the decline in occupancy and reported financial performance
at the property securing the 1000 Wilshire loan. Furthermore,
office fundamentals in the downtown Los Angeles submarket, where
the property is located, continue to weaken. S&P said, "As a
result, we lowered our sustainable net cash flow (NCF) on the
property. The downgrade of class WLS-D to 'CCC (sf)' reflects our
view, based on our lower revised value, the continued weak office
fundamentals, and the class's position in the payment waterfall,
that this class is at a heightened risk of default and loss and
liquidity interruption."
S&P said, "Although the model-indicated rating was lower on class
WLS-A, we considered the potential that the property's operating
performance could improve above our revised expectations, as well
as the position of this class within the payment waterfall.
"The affirmations of the pooled classes reflect our review of the
credit characteristics of the properties securing the loans in the
pool. While we negatively revised our credit view on the two
largest loans in the pool, GSK North America HQ ($75.2 million,
9.4% of pool balance) and 1000 Wilshire ($65.3 million, 8.2%), and
derived a higher expected loss on the specially serviced loan,
Capital Complex ($8.9 million, 1.1%), the pooled classes benefited
from the de-leveraging of the pool balances since issuance. While
the model-indicated rating is lower on class A-S, the class's
credit enhancement level is closer to the required credit
enhancement level at its current rating.
"We affirmed our rating on the class X-A IO certificates based on
our criteria for rating IO securities, in which the ratings on the
IO securities would not be higher than that of the lowest-rated
reference class. Class X-A's notional amount references the
aggregate certificate balance of the class A-2, A-3, A-4, A-5,
A-AB, and A-S certificates.
"We will continue to monitor the transaction's performance and the
collateral loans, specifically any developments around the
performance of the GSK North America HQ and 1000 Wilshire loans and
the resolution of the Capital Complex specially serviced loan. To
the extent future developments differ meaningfully from our
underlying assumptions, we may take further rating actions as we
determine necessary."
Transaction Summary
As of the November 2023 trustee remittance report, the collateral
pool balance was $795.8 million, which is 98.2% of the pool balance
at issuance. The pool currently includes 34 loans, up from 33 loans
at issuance. The increase of one loan is due to the partial
defeasance that occurred in August 2022 for the U.S. Industrial
Portfolio loan, when one of the properties securing the loan, AAP
Metals, was defeased. The loan was originally secured by the
borrowers' fee simple interests in 11 single-tenant industrial
properties.
Of the 34 loans in the pool, two ($84.1 million, 9.8%) are with the
special servicer, one ($1.8 million, 0.2%) is defeased, and six
($116.6 million, 13.6%) are on the master servicer's watchlist.
S&P said, "After adjusting servicer-reported numbers, we calculated
a 2.04x S&P Global Ratings weighted average debt service coverage
(DSC) and an 85.3% S&P Global Ratings weighted average
loan-to-value (LTV) ratio using a 7.81% S&P Global Ratings weighted
average capitalization rate. The DSC, LTV, and capitalization rate
calculations exclude the Capital Complex specially serviced loan
and the defeased loan.
"To date, the transaction has not experienced any principal losses.
We expect losses to reach approximately 0.5% of the original pool
trust balance in the near term, based on losses we expect upon the
eventual resolution of the Capital Complex specially serviced
loan."
Loan Details
S&P said, "Details on the larger loans that we revised our credit
views on, as well as our views on the specially serviced loans in
the pool are discussed below. Additionally, as part of our
analysis, we revised our baseline capitalization rate assumptions
higher by 100 basis points for three office properties of class B
quality (in our opinion) that are securing loans totaling $39.3
million (4.9%): Dolwick Business Center, 20151 Nordhoff Street, and
Roundhouse Campus."
GSK North American HQ ($75.2 million; 9.4% of the pooled balance)
The GSK North American HQ loan is the largest loan in the pool and
is with the special servicer. The loan is secured by a
207,000-sq.-ft., class A, LEED platinum office property in
Philadelphia. The IO whole loan pays a fixed interest rate of
4.11%, matured in June 2023, and has a balance of $85.2 million,
with $75.2 million in trust and another $10.0 million pari passu
note securitized in DBGS 2018-C1 Mortgage Trust. The trust loan has
a total exposure of $75.4 million due to $265,645 in interest
advances and $26,389 in other expense advances. S&P believes the
interest advances will be repaid in the near-term as the property
is fully leased and generates sufficient cash flow to service debt
payments.
At loan origination, the property was leased to a sole tenant,
GlaxoSmithKline (GSK), under a lease that expires in September 2028
with no termination options. While the lease remains in place and
GSK continues to perform under its lease, GSK vacated the property
in March 2022. The loan transferred to special servicing in
November 2022 due to the borrower's expected inability to refinance
the loan at its maturity date, which occurred in June 2023.
Initial discussions between the borrower and special servicer had
been for a loan extension as well as the ability for GSK to
terminate its lease subject to lease termination payments. However,
that did not occur, and the borrower is currently working with the
special servicer on a stipulated foreclosure. A receiver is now in
place, and the special servicer has initiated foreclosure.
Furthermore, a cash sweep event has occurred with excess cash flow
being held by the servicer. As of the November 2023 reserve report,
there are $8.4 million in reserves.
S&P said, "Given the property is physically vacant, we revised our
credit view on the property. While the property is fully leased to
GSK, we are concerned with the continued weakening of the office
fundamentals and the lack of subleasing at the property since GSK
vacated in March 2022. Therefore, based on a $42.00-per-sq.-ft.
base rent assumptions and 25.0% vacancy, which generally reflects
the office fundamentals in the Navy Yard submarket per Costar,
along with other income and expense line items that are reflective
of historical reported figures, we derived a sustainable NCF of
$5.4 million. Using an S&P Global Ratings' capitalization rate of
7.25% and deducting $7.2 million for tenant improvement and leasing
cost to re-tenant the property back to a 75.0% occupancy rate, as
well as $2.1 million of downtime expense (offset by $8.4 million of
reserves), we arrived at a S&P Global Ratings value of $74.1
million on the property, which is 14.8% lower than the $89.3
million appraisal value as of August 2023 released by the special
servicer. Given the recent placement of the receiver and all the
strategies that are being considered by the special servicer, we
will monitor the workout of the loan and consider it in our
analysis as it materializes."
1000 Wilshire ($65.3 million; 7.6% of the pooled balance and $63.1
million; 100.0% of the WLS- raked balance)
The 1000 Wilshire loan is the second-largest loan in the pool and
is secured by a 477,000-sq.-ft., class A office property in
downtown Los Angeles. In addition to ground-floor retail space, the
property features a six-level subterranean parking garage. The IO
loan matures in March 2025 and consists of a $65.3 million A-note
that supports the pooled certificates and a $63.1 million
subordinate note that supports the raked certificates.
Additionally, there is a $19.6 million mezzanine loan.
Servicer-reported performance had been stable until 2022 when the
DSC ratio (DSCR) dropped to 1.23x from 4.65x in 2021. At the same
time, reported occupancy declined to 71.0% in 2022 from 85.0% in
2021. The servicer-reported trailing-12-months financials as of
March 2023 show just marginal improvement from 2022. As of March
2023, reported occupancy and DSCR were 79.0% and 1.74x,
respectively.
As of the August 2023 rent roll, the property was 78.0% occupied.
CoStar, along with several media reports, also noted that Wedbush
(100,397 sq. ft., 21.0% of net rentable area), which is the largest
tenant at the property with a lease expiration in December 2025, is
looking to sublet its space. Additionally, the office fundamentals
within the downtown Los Angeles submarket remain weak. As of
November 2023, CoStar reported a vacancy rate of 18.8% and an
availability rate of 20.6% in the submarket, and the vacancy rate
is expected to increase to 22.9% by 2025, the loan's maturity year.
However, the property did see positive developments, such as the
renewal of the leases for Buchalter Nemer (87,217 sq. ft., 18.3%)
to 2034 and Open Bank (30,187 sq. ft., 6.3%) to 2030. A cash sweep
event has occurred with excess cash flow being held by the
servicer. As of the November 2023 reserve report, there is $2.9
million in reserves.
S&P said, "Due to the declining occupancy rate at the property and
the weakening office fundamentals in downtown Los Angeles, we
revised our credit view on the property and lowered our sustainable
NCF to $7.5 million (down from $8.2 million at issuance) based on a
75.0% occupancy rate, an S&P Global Ratings' $28.83-per-sq.-ft.
base rent and $39.95-per-sq.-ft. gross rent, and a 51.2% operating
expense ratio. Using an S&P Global Ratings' capitalization rate of
7.0% (unchanged from issuance), we arrived at an S&P Global Ratings
value of $107.4 million on the property, which is 8.8% lower than
our $117.9 million value from issuance and 45.6% lower than the
$197.5 million appraisal value at issuance."
Capital Complex ($8.9 million; 1.1% of the pooled balance)
This is the second loan with the special servicer and is secured by
a 178,000-sq.-ft. office complex located in Frankfort, Ky. The loan
has a current balance of $8.9 million and a total exposure of $9.1
million, primarily due to principal and interest advances made by
the master servicer. The loan transferred to special servicing in
January 2023 due to imminent monetary default and is currently
60-plus-days delinquent.
Reported property performance has declined year over year since
2019, when occupancy was 82.0% and reported NCF was $1.2 million.
Since 2020, the reported occupancy has trended lower, to just 52.0%
as of June 2023, and the reported NCF was $535,538 as of year-end
2022. According to the special servicer's comments, a receiver is
in place, and the special servicer is in the process of foreclosing
on the property. Given the continued performance decline, we
revised the S&P Global Ratings value to $5.9 million, based on the
year-end 2022 reported NCF and a capitalization rate of 9.0%. Based
on the revised S&P Global Ratings value, we estimate a loss
expectation of 41.9% upon the loan's eventual resolution.
Ratings Lowered
GS Mortgage Securities Trust 2018-GS10
Class WLS-A to 'BBB (sf)' from 'A- (sf)'
Class WLS-B to 'BB (sf)' from 'BBB- (sf)'
Class WLS-C to 'B (sf)' from 'BB- (sf)'
Class WLS-D to 'CCC (sf)' from 'B- (sf)'
Ratings Affirmed
GS Mortgage Securities Trust 2018-GS10
Class A-2: AAA (sf)
Class A-3: AAA (sf)
Class A-4: AAA (sf)
Class A-5: AAA (sf)
Class A-AB: AAA (sf)
Class A-S: AA+ (sf)
Class X-A: AA+ (sf)
GS MORTGAGE 2018-TWR S&P Lowers Class E Notes Rating to 'CCC (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on six classes of commercial
mortgage pass-through certificates from GS Mortgage Securities
Corp. Trust 2018-TWR, a U.S. CMBS transaction. At the same time,
S&P affirmed its 'CCC- (sf)' rating on class F 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
Development Authority of Fulton County's fee interest and the
borrower's leasehold interest in Tower Place, an office tower and
adjacent retail/office plaza totaling 789,742 sq. ft. in the
Buckhead neighborhood of Atlanta.
Rating Actions
The downgrades on classes A, B, C, D, and E and affirmation on
class F reflect:
-- S&P said, "Our revised valuation, which is lower than the
valuation we derived in our last review in April 2023, primarily
due to declines in occupancy and net cash flow (NCF) at the
property. The largest tenant, WeWork Inc. ('D'; 10.6% of the net
rentable area [NRA]), has filed for Chapter 11 bankruptcy and
rejected its lease at the property in early November 2023. Further,
eight tenants totaling 3.7% of NRA recently vacated or are expected
to vacate by year-end 2023. As a result, we calculated that
occupancy at the property would fall to 57.9% from our assumed
70.3% rate in our last review."
-- S&P's belief that, due to weakened office submarket
fundamentals, the borrower will continue to face challenges
re-tenanting vacant spaces in a timely manner.
-- S&P said, "That since our last review in April 2023, the loan,
which currently has a reported nonperforming matured balloon
payment status, transferred to the special servicer on June 23,
2023, due to imminent monetary default. The loan matured on July 9,
2023, and the borrower was unable to pay it off at maturity. The
borrower is currently delinquent on its November 2023 debt service
payment and property obligations. The master servicer advanced $4
million in debt service, operating costs, and other expenses as of
the November 2023 payment period. In our last review, the loan,
which had a reported debt service coverage of 1.42x as of year-end
2022, had a reported current payment status, and the master
servicer had not made any advances."
-- S&P's view that loan exposure will continue to increase due to
a potentially extended resolution timeframe. This, in turn, will
likely reduce liquidity and recovery to the bondholders since
servicer advances are paid senior in the transaction documents.
S&P said, "In our April 2023 review, we noted that, despite some
leasing activities, the property's performance continued to lag
behind historical levels, and we had concerns with the property's
exposure to a financially weak tenant, WeWork. At that time, we
assumed a 70.3% occupancy rate (after including four new tenants
comprising 6.2% of NRA that had lease start dates in February 2023
or June 2023), a $35.54-per-sq.-ft. gross rent as calculated by S&P
Global Ratings, and a 42.0% operating expense ratio to arrive at an
S&P Global Ratings' long-term sustainable NCF of $11.6 million,
compared with a servicer-reported NCF of $14.3 million as of
year-end 2021 and $8.4 million for the nine months ended Sept. 30,
2022. Using an S&P Global Ratings' 7.55% capitalization rate, we
derived an S&P Global Ratings expected-case value of $155.0
million, or $196 per sq. ft."
The loan then transferred to special servicing in June 2023 due to
imminent monetary default. It also matured in July 2023, and the
sponsors, SOF-X U.S. Holdings L.P. and Starwood Capital Group
Global II L.P., were not able to pay the loan off at maturity. The
borrower has not made its November 2023 debt service payment or
disburse certain property-level operating expenses. As a result,
the master servicer, Wells Fargo Bank N.A., advanced $4.0 million
in debt service, operating costs (which were mainly real estate
taxes), and other expenses as of the November 2023 payment period.
The special servicer, Trimont LLC, said that counsel has been
engaged, a receiver was recently appointed, and it is currently
evaluating various resolution options. S&P said, "Trimont also
informed us that because the updated appraisal report was ordered
through counsel, it is privileged and cannot be shared at this
time. We noted that, according to the servicer's comments in the
November 2023 CREFC Investor Reporting Package delinquent loan
status report, various broker opinions of value obtained by the
special servicer, which were not disclosed to us, indicated a
significant decline in market value."
The servicer reported an NCF of $10.6 million for year-end 2022 and
according to the borrower's operating statements, the net operating
income was $11.2 million for the trailing 12 months ended June 30,
2023. As of the June 30, 2023, rent roll, the property's occupancy
rate was 72.1%. S&P said, "However, after excluding WeWork and
eight tenants that have since vacated or are expected to vacate by
year-end 2023, we calculated the property's occupancy rate would
drop to 57.9%. In our current analysis, assuming the lower 57.9%
occupancy rate, $33.95-per-sq.-ft. base rent and $35.84-per-sq.-ft.
gross rent, as calculated by S&P Global Ratings, and 38.0%
operating expense ratio, we arrived at a long-term sustainable NCF
of $10.3 million, which is 9.7% and 2.8% below the NCF that we
derived in our last review and as of year-end 2022, respectively.
Using an S&P Global Ratings' 7.55% capitalization rate (which is
unchanged from our last review), yielded an S&P Global Ratings
expected-case value of $140.0 million, or $177 per sq. ft., which
is 9.7% below our last review value and 49.5% lower than the
issuance appraisal value of $277.0 million. This yielded an S&P
Global Ratings loan-to-value ratio of 151.8% on the trust
balance."
S&P said, "The downgrades on classes D and E to 'CCC (sf)' and
affirmation on class F at 'CCC- (sf)' also reflect our view that,
due to current market conditions and the classes' positions in the
payment waterfall, they are at heightened risk of default and loss
and are susceptible to liquidity interruption.
"We lowered our rating on the class X-NCP IO certificates based on
our criteria for rating IO securities, which states that the
ratings on the IO securities would not be higher than that of the
lowest-rated reference class. The notional amount of class X-NCP
references classes A, B, C, and D.
"We will continue to monitor the performance of the property and
loan, including the resolution of the special servicing transfer.
We noted that because there is no interest rate cap agreement
currently in place, the floating-rate debt service obligation is
fully exposed to changes in one-month SOFR during this period of
elevated interest rates. The elevated interest rate environment
exacerbates the risk of servicer advances building up, in our view.
If we receive information that differs materially from our
expectations, such as an updated value from the special servicer
that is substantially below our revised expected-case value,
property performance that is below our expectations, or a workout
strategy that negatively impacts the transaction's liquidity and
recovery, we may revisit our analysis and take additional rating
actions as we deem appropriate."
Property-Level Analysis
The loan collateral consists of a 29-story, approximately
615,000-sq.-ft., class A office tower, approximately 53,000 sq. ft.
of retail space fronting Piedmont Road, an approximately
19,000-sq.-ft. vacant movie theater space formerly leased to AMC,
and an adjacent two-story, approximately 103,000-sq.-ft. creative
office building in Atlanta's Upper Buckhead office submarket. The
creative office space, which was until recently predominantly
leased to WeWork, was repurposed by the sponsors upon their
acquisition of the property in July 2015 from vacant non-frontage
retail space. The property was built in 1977 and is connected to
the Buckhead MARTA station via a pedestrian bridge that opened in
2014. Buckhead is an infill and affluent area surrounded by a mix
of retail, lodging, residential, restaurants, and office
properties.
As part of a tax incentive program, the fee simple interest in the
subject property was transferred to the Development Authority of
Fulton County and simultaneously leased back to the borrower. The
10-year program ends in 2030, at which point the borrower can
repurchase the fee simple interest in the property for a de minimis
amount. Our property level analysis reflects the projected unabated
real estate tax amount of $3.5 million (derived at issuance) versus
the reported $2.1 million taxes for year-end 2022. In S&P's current
analysis, it added the present value of tax savings, totaling $2.9
million, to its expected-case value.
The property's occupancy rate was 72.1% as of the June 30, 2023,
rent roll and, after excluding the aforementioned tenant movements,
decreased to 57.9%, as calculated by S&P Global Ratings, compared
with 61.9% in 2022, 72.1% in 2021, 82.7% in 2020, and 88.0% in
2019. The five largest tenants at the property currently comprise
16.7% of NRA and include:
-- Terminus Software Inc. (5.1% of NRA; 7.5% of gross rent, as
calculated by S&P Global Ratings; April 2024 lease expiration).
-- Barnes & Thornburg LLC (4.4%; 7.1%; January 2035). The tenant
signed a 12-year lease starting February 2023, with rent commencing
in September 2024.
-- RGN-Atlanta X LLC (2.5%; 3.0%; December 2025).
-- Goodman, McGuffey (2.3%; 3.9%; March 2025).
-- PB Americas Inc. (2.3%; 2.6%; February 2025).
-- The property's notable rollover risk is in 2024 (10.3% of NRA,
15.1% of S&P Global Ratings' in-place gross rent) and 2025 (13.6%,
19.1%).
According to CoStar, the Upper Buckhead office submarket
experienced negative net absorption over the past three years
because of low leasing activity and competition from neighboring
submarkets, such as Midtown, offering newer build properties.
CoStar noted that due to its easy access to transit and local
amenities, Buckhead remains a viable option for companies seeking
quality space. Newer office buildings can realize high rents and
low vacancies; however, two-thirds of the office space in the
submarket is older vintage (built before 2000). Coupled with
companies downsizing and/or moving out of the submarket, these
properties had experienced downward rent pressure and higher
vacancy and availability rates. As of year-to-date November 2023,
the four- and five-star office properties in the submarket had a
28.2% vacancy rate, 34.3% availability rate, and $40.06-per-sq.-ft.
asking rent versus a 15.7% vacancy rate and $38.20-per-sq.-ft.
asking rent at issuance in 2018. This compares with the property's
expected in-place 42.1% vacancy rate and $35.84-per-sq.-ft. gross
rent, as calculated by S&P Global Ratings. CoStar projects vacancy
for the four- and five-star office properties to rise to 29.6% in
2024 and 30.9% in 2025 and asking rent to contract to $37.88 per
sq. ft. and $36.75 per sq. ft. for the same periods.
Transaction Summary
The IO mortgage loan had an initial and current balance of $212.5
million (as of the Nov. 15, 2023, trustee remittance report) and
pays an annual floating interest rate indexed to one-month LIBOR
(prior to June 2023) plus a weighted average component spread of
2.12% (up 25 basis points after July 2022 from the initial 1.87%
spread). According to Wells Fargo, since LIBOR ceased to be
published after June 30, 2023, commencing July 2023, the alternate
index is one-month term SOFR plus a 0.047% benchmark adjustment.
The loan initially matured on July 9, 2021, with two one-year
extension options. The fully extended maturity date is on July 9,
2023. There is no additional debt, and the trust has not incurred
any principal losses to date.
Ratings Lowered
GS Mortgage Securities Corp. Trust 2018-TWR
Class A to 'A (sf)' from 'AAA (sf)'
Class B to 'BB+ (sf)' from 'A- (sf)'
Class C to 'BB- (sf)' from 'BBB- (sf)'
Class D to 'CCC (sf)' from 'B+ (sf)'
Class E to 'CCC (sf)' from 'B- (sf)'
Class X-NCP to 'CCC (sf)' from 'B+ (sf)'
Rating Affirmed
GS Mortgage Securities Corp. Trust 2018-TWR
Class F: CCC- (sf)
GSF 2022-1: DBRS Confirms BB(low) Rating on Class E Notes
---------------------------------------------------------
DBRS Limited confirmed its credit ratings on the following classes
of notes issued by GSF 2022-1 Issuer LLC (the Issuer):
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
All trends are Stable.
The transaction closed in May 2022 and, as part of the issuance
analysis, DBRS Morningstar used a combination of its "North
American CMBS Multi-Borrower Rating Methodology" and "North
American Single-Asset/Single-Borrower Ratings Methodology" to
construct a worst-case pool based on concentration limits and
eligibility requirements as defined in the Indenture: Schedule 3.
The Indenture: Schedule 4 defines the minimum subordination
requirements for each Rating Confirmation Event. DBRS Morningstar
expected the $500.0 million trust to be fully funded within 12
months of the first loan funding date.
The pool currently consists of four performing loans, secured by
traditional commercial real estate properties with a combined
balance of $97.0 million. DBRS Morningstar is required to analyze
newly funded loans when the pool reaches 25%, 50%, and 75% of
funding to ensure the underlying collateral meets target credit
enhancement criteria. As of the October 2023 remittance, the pool
is 19.4% funded. For this review, DBRS Morningstar considered a
pool funded to the $500 million future trust balance, maintaining
the issuance approach in constructing a worst-case scenario as
allowed by the eligibility requirements for loans to be funded
while also considering the credit quality of loans contributed
since issuance. The Issuer has not met the initial expectation of
funding the trust to the maximum balance of $500.0 million within
the first year of transaction closing. Given the
slower-than-expected pace of loan contributions, DBRS Morningstar
is unable to project if or when the transaction will be fully
funded.
Two of the four contributed loans are backed by multifamily
properties, comprising 61.9% of the funded balance, with the other
two loans backed by retail properties, comprising 38.1% of the
funded balance. The contributed loans reported a weighted-average
(WA) issuance loan-to-value ratio (LTV) of 56.3% and a WA balloon
LTV of 55.3%. Three of the four loans, representing 84.3% of the
funded balance, have full-term interest-only (IO) payment
structures, while the fourth loan pays IO for the first two years
of the loan term, amortizing over a 30-year schedule thereafter.
The loans are also concentrated by market rank, as all of the
contributed loans are in markets designated with a DBRS Morningstar
Market Rank 3 or 4, denoting suburban markets.
The largest loan funded into the trust to date, Embarcadero Club
Apartments (representing 7.0% of the maximum allowable trust
balance), is secured by a 404-unit, garden-style, multifamily
complex in College Park, Georgia, 11 miles south of downtown
Atlanta. The sponsor purchased the property in 2006 and has
invested an additional $3.8 million ($9,464 per unit) since 2014 on
interior and exterior upgrades. At loan origination in June 2022,
the property had 97 renovated units, achieving rental rate premiums
between $100 per unit to $175 per unit. The sponsor budgeted an
additional $1.1 million ($2,682 per unit), to be funded out of
pocket, for additional capital improvement works and plans to
continue renovating units monthly going forward. As of the June
2023 rent roll, the property was 91.1% occupied with an average
rental rate of $1,251 per month, compared with the June 2022
figures of 93.1% and $1,161 per unit, respectively. Since June
2022, the sponsor has completed $2.0 million of capital
improvements to the property, primarily for roofing and gutter
upgrades ($1.4 million) and additional unit-interior upgrades
($600,000).
Notes: All figures are in U.S. dollars unless otherwise noted.
HOME RE 2023-1: DBRS Finalizes B Rating on Class B-1 Notes
----------------------------------------------------------
DBRS, Inc. finalized the following provisional credit ratings on
the Mortgage Insurance-Linked Notes, Series 2023-1 (the Notes)
issued by Home Re 2023-1 Ltd. (HMIR 2023-1 or the Issuer):
-- $59.1 million Class M-1A at BBB (low) (sf)
-- $150.1 million Class M-1B at BB (sf)
-- $98.3 million Class M-2 at B (high) (sf)
-- $22.7 million Class B-1 at B (sf)
The BBB (low) (sf) credit rating reflects 6.10% of credit
enhancement, provided by subordinated notes in the transaction. The
BB (sf), B (high) (sf), and B (sf) credit ratings reflect 4.45%,
3.25%, and 3.00% of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
HMIR 2023-1 is Mortgage Guaranty Insurance Corporation's (MGIC or
the Ceding Insurer) seventh rated mortgage insurance (MI)-linked
note (MILN) 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 202,154 fully amortizing first-lien fixed- and
variable-rate mortgages. They all have been underwritten to a full
documentation standard and have never been reported to the Ceding
Insurer as 60 or more days delinquent. None of the loans are
reported to be in an active payment forbearance plan. The mortgage
loans have MI policies activated on or after June 2022 and on or
before August 2023.
On March 1, 2020, a new master policy was introduced to conform to
government-sponsored enterprises' (GSEs) revised rescission relief
principles under the Private Mortgage Insurer Eligibility
Requirements (PMIERs) guidelines (see the Representations and
Warranties section for more detail). Approximately 99.98% 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. 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 at least Aaa-mf by Moody's or AAAm by S&P rated U.S.
Treasury money-market funds and securities. Unlike other
residential mortgage-backed security (RMBS) transactions, cash flow
from the underlying loans will not be used to make any payments;
rather, in MILN 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 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 7.25% from 6.75%. The
delinquency test will be satisfied if the three-month average of
60+ days delinquency percentage is below 75% of the subordinate
percentage. Additionally, if these performance tests are met and
the subordinate percentage is greater than 7.25%, then the
subordinate Notes will be entitled to accelerated principal
payments equal to 2 times (x) the subordinate principal reduction
amount, until the subordinate percentage comes down to the target
credit enhancement of 7.25%. See the Cash Flow Structure and
Features section of the related report for more details.
The coupon rates for the Notes issued by HMIR 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 HMIR 2023-1 transaction will be issued with a10-year term. The
Notes are scheduled to mature on October 25, 2033, but will be
subject to early redemption at the option of the Ceding Insurer (1)
for a 10% cleanup call or (2) on or following the payment date in
October 2028, among others. 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.
MGIC 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.
JP MORGAN 2018-AON: S&P Affirms 'CCC (sf)' Rating on HRR Certs
--------------------------------------------------------------
S&P Global Ratings lowered its ratings on eight classes of
commercial mortgage pass-through certificates from J.P. Morgan
Chase Commercial Mortgage Securities Trust 2018-AON, a U.S. CMBS
transaction. At the same time, S&P affirmed its 'CCC (sf)' rating
on the class HRR certificates from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a portion of a fixed-rate interest-only (IO) mortgage whole loan
secured by the borrower's fee simple interest in AON Center, a 2.8
million-sq.-ft., class A office property located at 200 East
Randolph St. in Chicago's East Loop office submarket.
Rating Actions
The downgrades on classes A, B, C, D, E, and F and the affirmation
on class HRR reflect:
-- S&P's revised valuation, which is lower than the valuation it
derived in its last review in March 2023 due primarily to the
borrower's inability to materially increase the property's
occupancy and net cash flow (NCF) as well as a higher perceived
market risk premium (per the updated appraisal report) for the
underlying collateral asset.
-- S&P's belief that, due to the continued weakness in the office
submarket fundamentals, the borrower will continue to face
challenges re-tenanting vacant spaces in a timely manner.
-- S&P's concerns, despite the recent loan modification and
extension, about the potential for reduced recovery of the $536
million whole loan following the special servicer's recent
reporting of a revised 2023 appraisal value for the office property
of $414 million. The updated appraisal value is 49.8% lower than
the hypothetical appraised value at issuance of $824 million, which
assumed the full capitalization of leasing costs for recently
signed leases at the time, the completion of a tenant amenity
floor, and the demolition of the space previously occupied by DDB
Needham. The as-is appraised value at issuance was $780 million.
S&P said, "In our last review in March 2023, we noted that the
property's occupancy rate fell to 76.0% from 88.1% at issuance
partly due to weakened office submarket fundamentals from lower
demand and longer re-leasing timeframes as companies continue to
embrace hybrid or remote work arrangements. As a result, we lowered
our sustainable NCF to $33.4 million, assuming an 80.0% occupancy
rate (reflecting known tenant movements at the time), an S&P Global
Ratings' $40.08 per sq. ft. gross rent, and a 56.8% operating
expense ratio. Using an S&P Global Ratings' capitalization rate of
7.00% and adding $9.2 million for the present value of future rent
steps for investment-grade tenants, we arrived at an S&P Global
Ratings' expected-case value of $486.6 million, or $175 per sq.
ft.
"The property's reported occupancy dropped slightly to 75.7% as of
the Sept. 25, 2023, rent roll. According to the servicer, there is
currently limited new leasing activity at the property. However, as
part of the recent loan modification and extension transaction,
there is currently $39.7 million in various lender-controlled
reserve accounts, a majority of which are earmarked for tenant and
leasing costs. As a result, in our current analysis, we maintained
our long-term sustainable NCF of $33.4 million that we derived in
our last review. However, we increased our capitalization rate to
7.5% from 7.0% in our last review (which reflects the observed
higher market risk premium for the office asset as per the updated
appraisal report), arriving at an S&P Global Ratings expected-case
value of $453.4 million, or $163 per sq. ft. The revised S&P Global
Ratings value, which also includes $7.8 million for the present
value of future rent steps for investment-grade tenants, is 6.8%
lower than the $486.6 million value that we derived in our last
review and 9.5% above the appraisal value dated as of May 31, 2023,
of $414.0 million. This yielded an S&P Global Ratings loan-to-value
ratio of 118.2% on the whole loan balance, up from 110.2% in the
last review.
"Specifically, we lowered our rating on class F to 'CCC (sf)' and
affirmed our 'CCC (sf)' rating on class HRR to reflect our view
that, due to current market conditions and their positions in the
payment waterfall, these classes are or remain at heightened risks
of default and loss and susceptible to liquidity interruption."
Although the model-indicated ratings were lower than the classes'
revised ratings, S&P tempered its downgrades on classes A, B, C, D,
and E because S&P weighed qualitative considerations, including:
-- The potential that the property's operating performance could
improve above its expectations. There is currently $39.7 million in
various lender-controlled reserve accounts to fund leasing, tenant,
and other costs.
-- The additional market value decline that would be needed, based
on the revised May 2023 appraisal value of $414.0 million, before
classes A, B, C, and D experience principal losses.
-- The temporary liquidity support provided in the form of
servicer advancing.
-- The relative position of the classes in the payment waterfall.
The whole loan, which has a reported current payment status, was
transferred to the special servicer on Feb. 10, 2023, due to an
event of default and the pending July 1, 2023, maturity date.
According to the servicer's comments, the borrower recently signed
a new lease with Blue Cross Blue Shield for 95,070 sq. ft. (3.4% of
net rentable area [NRA]) without satisfying all the lender's
conditions for approval. According to the special servicer, Situs
Holdings LLC, the loan was modified and extended as of Aug. 7,
2023, and was returned to the master servicer on Nov. 8, 2023. The
modification terms included:
-- Extending the loan's maturity date by three years from July 1,
2023, to July 1, 2026;
-- Maintaining the in place cash sweep mechanism, with excess cash
flow deposited into lender-controlled tenant improvement and
leasing cost (TI/LC) reserve accounts;
-- The sponsor depositing $25.0 million into a "new lease reserve"
account to cover new (Blue Cross Blue Shield), renewing (Aon
Corp.), and future TI/LC at the property; and
-- The sponsor guaranteeing to deposit an additional $5.0 million
into the new lease reserve account by January 2025 and another $7.5
million by January 2026.
S&P said, "We will continue to monitor the property's performance,
and if there are reported negative changes beyond what we have
already considered and/or we receive new information that differs
from our expectations, we may revisit our analysis and take
additional rating actions as we deem appropriate.
"The downgrades on the class X-A and X-B IO certificates reflect
our criteria for rating IO securities, in which the ratings on the
IO securities would not be higher than that of the lowest-rated
reference class. The notional amount of the class X-A certificates
references class A, while class X-B references classes B and C."
Property-Level Analysis
The loan collateral, AON Center, is an 83-story, 2.78
million-sq.-ft. class A office building built in 1974. The property
consists of approximately 2.5 million sq. ft. of office space and
270,000 sq. ft. of retail, storage, telecom, and amenity space. It
is located along East Randolph Street within Chicago's East Loop
office submarket and is adjacent to Millennium Park with views of
the Chicago skyline and access to multiple transportation hubs. The
property was purchased by the current sponsor, 601W Companies LLC,
in 2015 for $712.0 million, or $256 per sq. ft.
The prior owner spent approximately $187.8 million (approximately
$16.2 million annually, on average, from 2004 through 2014) in
capital expenditures. Since acquiring the property through 2018,
the current sponsor invested an additional $62.2 million in the
property. In 2019, the sponsor renovated the building's lobbies and
the 70th floor, creating a tenant amenity space, which features a
15,000-sq.-ft. gym, 14,000-sq.-ft. tenant lounge, and 7,000-sq.-ft.
conference facility for approximately $24.7 million. The sponsor
also renovated the building's southern plaza to improve access to
the building from East Randolph Street for $6.5 million in 2021.
Furthermore, the sponsor planned a $185.0 million construction
project, which includes building an observation deck and thrill
ride on the 82nd floor and an exterior elevator to provide access
to the top of the building from the ground. The observation deck
would include an event space, restaurant, and bar. Originally
planned in 2018, the project was delayed because of the COVID-19
pandemic in 2020 and was delayed again in 2021. According to the
master servicer, KeyBank Real Estate Capital, the project has been
put on hold; however, the sponsor is still committed to it.
The property's reported NCF dropped in 2022 to $38.8 million from
$51.1 million in 2021 and $52.9 million in 2020 due primarily to
higher vacancy and operating expenses: in particular, real estate
taxes and other expenses. The servicer reported a $19.3 million NCF
for the six months ended June 30, 2023. The property's occupancy
rate was 75.7% as of the Sept. 1, 2023, rent roll, down from a
reported 76.0% in 2022, 85.4% in 2021, and 89.6% in 2020.
The five largest tenants at the property comprised 43.3% of NRA and
included:
-- AON Corporation (14.1% of NRA; 14.0% of base rent, as
calculated by S&P Global Ratings; December 2030 lease expiration).
The tenant recently signed a letter of intent to extend its lease
term for two years from 2028 to 2030.
-- KPMG LLP (9.7%; 11.9%; August 2029). The tenant also extended
its lease term by two years from 2027 to 2029.
-- Jones Lang LaSalle (7.2%; 8.7%; May 2032). According to the
servicer, the tenant is dark on 56,942 sq. ft. of its NRA and has a
termination option effective May 2029.
-- WEC Business Services (6.2%; 7.5%; April 2029). According to
CoStar, the tenant is marketing 62,331 sq. ft. of its NRA for
sublease and has a termination option effective April 2026.
-- Kraft Heinz Foods Co (6.1%; 8.7%; July 2033). The tenant has a
termination option effective December 2024, though they had
previously signed a four-year lease extension in April 2022.
The property has manageable tenant rollover until 2029 (21.8% of
NRA, (27.2% of in place gross rent, as calculated by S&P Global
Ratings) and 2030 (14.9%, 18.0%). The concentrated rollover in 2029
and 2030 are mainly attributable to three of the five largest
tenants, discussed above.
According to CoStar, the East Loop office submarket, while easily
accessible, has continued to deteriorate with negative net
absorption levels since 2017 and one of the highest vacancy rates
in Chicago. CoStar reports that, as of year-to-date November 2023,
four- and five-star office properties had a $39.63-per-sq.-ft.
market rent, 21.3% vacancy rate, and 29.3% availability rate. S&P
noted a $39.80-per-sq.-ft. market rent, 20.5% vacancy rate, and
27.7% availability rate in its last review in March 2023. CoStar
expects net absorption to continue to be negative despite no new
four- and five-star office construction. CoStar forecasts market
rent to decline to $38.08 per sq. ft. in 2024 and $37.23 per sq.
ft. in 2025 and vacancy rate to increase to 23.6% and 24.4%,
respectively, for the same periods. This compares with an in-place
24.3% vacancy rate and $42.25-per-sq.-ft. gross rent, as calculated
by S&P Global Ratings, for the property.
Transaction Overview
The IO mortgage whole loan had an initial and current balance of
$536 million, pays a per annum fixed interest rate of 4.63%, and
originally matured on July 1, 2023. The whole loan consists of four
senior A notes totaling $350 million and a subordinate B note
totaling $186 million. The trust loan balance totaling $400 million
(as of the Nov. 7, 2023, trustee remittance report) comprises the
$214 million senior note A-4 and $186 million subordinate B note.
The senior class A-1, A-2, and A-3 notes are in Benchmark 2018-B4
Mortgage Trust ($50 million), Benchmark 2018-B5 Mortgage Trust ($43
million), and Benchmark 2018-B7 Mortgage Trust ($43 million), all
of which are U.S. CMBS transactions. The senior class A notes are
pro rata and pari passu to each other and senior in rights of
payments to the subordinate B note. In addition to the first
mortgage whole loan, there are two mezzanine notes totaling $141.5
million with a weighted average interest rate of 6.95%. As
previously discussed, the whole loan, including the mezzanine
loans, was modified and extended to July 1, 2026, from the original
July 1, 2023, maturity date.
KeyBank reported a debt service coverage ratio for the whole loan
of 1.54x for the six months ended June 30, 2023, and year-end 2022,
down from 1.87x in 2021. To date, the trust has not incurred any
principal losses.
Ratings Lowered
Class A to 'AA (sf)' from 'AAA (sf)'
Class B to 'A- (sf)' from 'AA- (sf)'
Class C to 'BBB- (sf)' from 'A- (sf)'
Class D to 'BB- (sf)' from 'BBB- (sf)'
Class E to 'B- (sf)' from 'B+ (sf)'
Class F to 'CCC (sf)' from 'B- (sf)'
Class X-A to 'AA (sf) from 'AAA (sf)'
Class X-B to 'BBB- (sf)' from 'A- (sf)'
Ratings Affirmed
Class HRR: CCC (sf)
JP MORGAN 2020-MKST: Moody's Lowers Rating on Cl. F Certs to Caa3
-----------------------------------------------------------------
Moody's Investors Service has downgraded seven classes in J.P.
Morgan Chase Commercial Mortgage Securities Trust 2020-MKST,
Commercial Mortgage Pass-Through Certificates, Series 2020-MKST as
follows:
Cl. A, Downgraded to A1 (sf); previously on Feb 6, 2023 Downgraded
to Aa2 (sf)
Cl. B, Downgraded to A3 (sf); previously on Feb 6, 2023 Downgraded
to A1 (sf)
Cl. C, Downgraded to Baa2 (sf); previously on Feb 6, 2023
Downgraded to A3 (sf)
Cl. D, Downgraded to Ba2 (sf); previously on Feb 6, 2023 Downgraded
to Baa3 (sf)
Cl. E, Downgraded to B2 (sf); previously on Feb 6, 2023 Downgraded
to Ba3 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Feb 6, 2023
Downgraded to Caa1 (sf)
Cl. X-CP*, Downgraded to Baa2 (sf); previously on Feb 6, 2023
Downgraded to A2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on six P&I classes were downgraded due to the continued
delinquency and resulting increase in total loan exposure from the
outstanding advances as well as the uncertainty around timing and
outcome of the property's cash flow recovery and loan resolution.
The floating rate loan transferred to special servicing in August
2022 and failed to payoff or extend at its initial maturity date in
December 2022. As of the November 2023 distribution date, the loan
remains last paid through its January 2023 payment date and the
special servicer filed a motion for foreclosure with a receiver
being appointed in May 2023.
The property's net cash flow (NCF) and occupancy has declined since
securitization and the property does not generate enough NCF to
service the interest only debt service amount. As a result,
Moody's expect the advances to remain outstanding and may continue
to increase if the property's cash flow does not improve. Servicing
advances are senior in the transaction waterfall and are paid back
prior to any principal recoveries which may result in lower
recovery to the total trust balance.
In this credit rating action Moody's considered qualitative and
quantitative factors in relation to the senior-sequential structure
and quality of the asset, and Moody's analyzed multiple scenarios
to reflect various levels of stress in property values could impact
loan proceeds at each rating level.
The rating on the interest only (IO) class, Cl. X-CP, was
downgraded due to decline in the credit quality of its referenced
classes.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or a
significant improvement in the loan's performance.
Factors that could lead to a downgrade of the ratings include a
further decline in actual or expected performance of the loan or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
DEAL PERFORMANCE
As of the November 15, 2023 distribution date, the transaction's
certificate balance was $368 million, the same as at
securitization. The interest only, floating rate loan transferred
to special servicing in August 2022 due to imminent maturity
default and is last paid through its January 2023 payment date. The
special servicer subsequently filed a motion for foreclosure and a
receiver was appointed in May 2023. Interest shortfalls currently
impact Cl. H based due to a $16.6 million appraisal reduction
reflecting the most recent reported appraised value of $401.2
million. The updated appraisal value dated October 2022 represented
a 21% decline from the value at securitization but remained higher
than the total loan balance.
The mortgage loan (approximately $376 million) consists of the
trust loan of $368 million and approximately $7.6 million of
non-trust note for pari passu future funding commitment that was
funded. The future advance loan is not an asset of the trust. At
securitization, non-trust pari passu future funding up to $22
million was to be advanced in connection with lender-approved
capital spending and leasing expenses, however, the future funding
period has since expired. Moody's has taken the additional funded
leverage of $7.6 million in Moody's analysis.
The loan is secured by a fee simple interest in 1500 Market Street,
a 1.8 million SF office building in downtown Philadelphia. The
collateral for the loan was built in 1974 and primarily comprises
two towers — the East Tower and the West Tower. The towers are
connected by a three-story atrium. 1500 Market Street occupies an
entire city block at 15th and Market Streets in Philadelphia's CBD,
directly adjacent to City Hall. The subject is the only office
complex in Philadelphia's CBD that features its own on-site
subterranean parking garage with access to Philadelphia's SEPTA and
New Jersey Transit's transportation networks.
At securitization, approximately 15% of the property's NRA was
scheduled to expire and vacate in 2020, and the borrower originally
planned to lease up the space with higher rents. The Philadelphia
CBD submarket fundamentals were strong at securitization and
according to CBRE, the Class A, office vacancy rate in
Philadelphia's Downtown submarket was 6.6% in 2019. However, the
Philadelphia CBD market fundamentals have weakened in recent years
and according to CBRE the Class A direct vacancy rate was 18.5% in
downtown Philadelphia as of Q3 2023.
The property's NCF for the trailing twelve-month period ending
March 2023 was $18.4 million compared to $20.6 million, $23.6
million, $17.3 million, and $18.4 million achieved in full years
2019, 2020, 2021, and 2022, respectively. The total occupancy is
68% based on the August 2023 rent roll, similar to that of
September 2022 but lower than 93% in October 2019.
Moody's LTV ratio for the first mortgage balance is 204% based on
Moody's Value. Adjusted Moody's LTV ratio for the first mortgage
balance is 181% based on Moody's Value using a cap rate adjusted
for the current interest rate environment. Moody's stressed debt
service coverage ratio (DSCR) is 0.50x. There are outstanding
advances totaling approximately $18 million and interest shortfalls
totaling $1.5 million affecting Cl. H and Cl. RR as of the current
distribution date.
JPMBB COMMERCIAL 2014-C22: DBRS Cuts Class G Certs Rating to D
--------------------------------------------------------------
DBRS Limited downgraded the credit rating on one class of
Commercial Mortgage Pass-Through Certificates, Series 2014-C22
issued by JPMBB Commercial Mortgage Securities Trust 2014-C22 as
follows:
-- Class G to D (sf) from C (sf)
In addition, the credit rating on Class G was simultaneously
discontinued and withdrawn.
The credit rating downgrade and discontinuation of Class G is a
result of a loss to the trust that was reflected in the September
2023 remittance. Two loans, Las Catalinas Mall (Prospectus ID#3;
formerly 8.5% of the pool) and Junction Plaza (Prospectus ID#73;
formerly 0.3% of the pool) were liquidated from the trust with
losses of $32.1 million and $1.8 million, respectively. Those
losses took out the remaining non-rated class balance and the
majority of the Class G balance, which currently stands at $2.2
million. For more information on this transaction, please see the
press release dated May 8, 2023.
Notes: All figures are in U.S. dollars unless otherwise noted.
KKR CLO 48: Fitch Assigns 'BB+sf' Rating on E Notes, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to KKR CLO
48, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
KKR CLO 48 Ltd.
A-1 LT NRsf New Rating NR(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D-1 LT BBB+sf New Rating BBB+(EXP)sf
D-2 LT BBB-sf New Rating BBB-(EXP)sf
E LT BB+sf New Rating BB+(EXP)sf
F LT NRsf New Rating NR(EXP)sf
Subordinated
Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
KKR CLO 48, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by KKR
Financial Advisors II, LLC. Net proceeds from the issuance of the
secured and 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'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
98.6% first-lien senior secured loans and has a weighted average
recovery assumption of 75.54%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 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 required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
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 is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BBB-sf' for class D-1,
between less than 'B-sf' and 'BB+sf' for class D-2; and between
less than 'B-sf' and 'BB-sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 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, 'A+sf' for class C, 'A+sf' for
class D-1, 'A+sf' for class D-2; 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.
LENDMARK FUNDING 2021-2: S&P Raises Cl. D Notes Rating to 'BB(sf)'
------------------------------------------------------------------
S&P Global Ratings raised its ratings on 18 classes and affirmed
its ratings on three classes from Lendmark Funding Trust (LFT)
2020-2, 2021-1, 2021-2, 2022-1, and 2023-1.
S&P said, "The rating actions reflect our view of the collateral
pools' performance to date and the pools' future expected
performance, as well as each transaction's structure and credit
enhancement. Our analysis also incorporated secondary credit
factors, including credit stability, payment priorities under
various scenarios, and sector- and issuer-specific analyses. The
upgrades and affirmations reflect our view that the total credit
support as a percentage of the pool balances, compared with our
expected defaults, is commensurate with each raised and affirmed
rating. Note that we previously removed our ratings caps on the
notes for the three LFT series issued prior to LFT 2022-1.
"We also reviewed each transaction's operational, legal, and
counterparty risks. Considering all these factors, we believe that
the creditworthiness of the notes is consistent with the raised and
affirmed ratings."
Each LFT transaction is backed by a pool of fixed-rate personal
consumer loans and contains a sequential principal payment
structure in which the classes are paid principal by seniority. The
transactions each also benefit from credit enhancement in the form
of a reserve account, overcollateralization, subordination for the
higher-rated tranches, and excess spread.
All five LFT transactions S&P reviewed are still in their revolving
periods and are scheduled to enter amortization between 2025 and
2026.
S&P said, "Our cash flow modeling assumed that for the transactions
in their revolving period, each pool would revolve to the
worst-case composition permitted by the transaction documents and
enter amortization. We applied our current cash flow modeling
assumptions below to all transactions."
Cash Flow Modeling Assumptions
S&P ran multiple stressed cash flow scenarios commensurate with the
various rating scenarios. S&P's scenarios included certain
assumptions:
-- Annualized monthly loss rates of approximately 15.65% to
15.85%, which increase linearly during 12 months to a peak loss
equal to a rating-stress multiple of the base case. S&P applied
approximately 59% loss assumptions for the 'AAA' rating scenarios.
-- A 7.50% base case recovery rate, haircut accordingly to each
stress scenario and applied over 60 months.
-- Voluntary prepayment speeds of 10%.
-- The cash flow runs show timely interest and principal repayment
of all the notes in the transactions under the respective rating
stress scenarios.
S&P said, "For the LFT 2022-1 transaction, the cash flow results
indicated that the class B notes could support a higher rating. We
limited the rating on the class B note to one notch below our
rating on the class A senior notes since the class A notes have a
favorable position relative to the class B notes in terms of
payment priority and, in the case of an event of default, under
certain scenarios.
"We will continue to monitor the performance of all of the
outstanding transactions to ensure that the credit enhancement
remains sufficient, in our view, to cover our default expectations
under our stress scenarios for each of the rated classes."
Ratings Raised
Lendmark Funding Trust 2020-2
Class A to 'AA (sf)' from 'A (sf)'
Class B to 'A (sf)' from 'BBB+ (sf)'
Class C to 'BBB+ (sf)' from 'BBB- (sf)'
Class D to 'BB (sf)' from 'BB (sf)'
Lendmark Funding Trust 2021-1
Class A to 'AA+ (sf)' from 'AA (sf)'
Class B to 'AA- (sf)' from 'A (sf)'
Class C to 'A- (sf)' from 'BBB- (sf)'
Class D to 'BB+ (sf)' from 'BB (sf)'
Lendmark Funding Trust 2021-2
Class A to 'AA+ (sf)' from 'AA (sf)'
Class B to 'A+ (sf)' from 'A- (sf)'
Class C to 'BBB+ (sf)' from 'BBB- (sf)'
Class D to 'BB (sf)' from 'BB- (sf)'
Lendmark Funding Trust 2022-1
Class C to 'AA (sf)' from 'A (sf)'
Class D to 'A- (sf)' from 'BBB (sf)'
Class E to 'BB (sf)' from 'BB- (sf)'
Lendmark Funding Trust 2023-1
Class B to 'AA+ (sf)' from 'AA (sf)'
Class C to 'AA- (sf)' from 'A (sf)'
Class D to 'A- (sf)' from 'BBB (sf)'
Ratings Affirmed
Lendmark Funding Trust 2022-1
Class A: AAA (sf)
Class B: AA+ (sf)
Lendmark Funding Trust 2023-1
Class A: AAA (sf)
LOBEL AUTOMOBILE 2023-2: DBRS Finalizes BB Rating on Class D Notes
------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings to the following
classes of notes (the Notes) to be issued by Lobel Automobile
Receivables Trust 2023-2 (the Issuer or LOBEL 2023-2):
-- $130,690,000 Class A Notes at AA (sf)
-- $28,894,000 Class B Notes at A (sf)
-- $8,960,000 Class C Notes at BBB (sf)
-- $30,574,000 Class D Notes at BB (sf)
The credit ratings are based on DBRS Morningstar's review of the
following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization,
subordination, amounts held in the reserve fund, and excess spread.
Credit enhancement levels are sufficient to support the DBRS
Morningstar-projected cumulative net loss (CNL) assumption under
various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(2) The DBRS Morningstar CNL assumption is 17.50% based on the
expected pool composition.
(3) The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios for
Rated Sovereigns: September 2023 Update," published on 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.
(4) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
(5) The quality and consistency of historical static pool data for
Lobel originations since 2012.
(6) The legal structure and presence of legal opinions that address
the true sale of the assets to the Issuer, the nonconsolidation of
the special-purpose vehicle with Lobel, that the trust has a valid
first-priority security interest in the assets, and the consistency
with the DBRS Morningstar "Legal Criteria for U.S. Structured
Finance."
Lobel is an indirect auto finance company focused primarily on
independent dealers. The company provides financing to subprime
borrowers who are unable to obtain financing through traditional
sources, such as banks, credit unions, and captive finance
companies.
The rating on the Class A Notes reflects 43.15% of initial hard
credit enhancement provided by the subordinated Notes in the pool,
the reserve account (1.50%), and overcollateralization (11.10%).
The ratings on the Class B, C, and D Notes reflect 30.25%, 26.25%,
and 12.60% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
DBRS Morningstar's credit rating on the securities referenced
herein addresses the credit risk associated with the identified
financial obligations in accordance with the relevant transaction
documents. The associated financial obligations for each of the
rated notes are the related Noteholders' Monthly Interest
Distributable Amount and the related Outstanding Amount.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. The associated contractual payment obligation that is
not a financial obligation is the related interest on unpaid
Noteholders' Interest Carryover Amount for each of the rated
notes.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued. The DBRS Morningstar short-term debt
rating scale provides an opinion on the risk that an issuer will
not meet its short-term financial obligations in a timely manner.
Notes: All figures are in U.S. dollars unless otherwise noted.
MARBLE POINT XXV: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
-----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Marble
Point CLO XXV Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Marble Point
CLO XXV Ltd.
A-1A 565923AA7 LT PIFsf Paid In Full AAAsf
A-1B 565923AL3 LT PIFsf Paid In Full AAAsf
A-1R LT NRsf New Rating
A-2 565923AC3 LT PIFsf Paid In Full AAAsf
A-2R LT AAAsf New Rating
B 565923AE9 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 565923AG4 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating
D 565923AJ8 LT PIFsf Paid In Full BBB-sf
D-R LT BBB-sf New Rating
E 565915AA3 LT PIFsf Paid In Full BB-sf
E-R LT BB-sf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
Marble Point CLO XXV, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Marble Point CLO
Management LLC that originally closed in November 2022. The CLO's
secured notes were refinanced on Nov. 23, 2023 from proceeds of new
secured notes. Net proceeds from the issuance of the secured and
additional subordinated notes will provide financing on a portfolio
of approximately $400.00 million of primarily first lien senior
secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.89, versus a maximum covenant, in accordance with
the initial expected matrix point of 25. 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
96.53% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.34% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% of the portfolio balance in aggregate, while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-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 'BBB+sf' and 'AA+sf' for class A-2R, between
'BB+sf' and 'A+sf' for class B-R, between 'Bsf' 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.
MCA FUND III: DBRS Confirms BB Rating on Class C Notes
------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on the Class A Notes, the
Class B Notes, and the Class C Notes (collectively, the Notes)
issued by MCA Fund III Holding LLC pursuant to the Indenture dated
October 28, 2020, between MCA Fund III Holding LLC, as the Issuer,
and Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS
Morningstar), as the Trustee and Calculation Agent.
-- Class A Notes at A (sf)
-- Class B Notes at BBB (high) (sf)
-- Class C Notes at BB (sf)
The credit ratings on the Notes address the ultimate payment of
interest and the ultimate payment of principal on or before the
Final Maturity Date (as defined in the Indenture referenced
above).
RATING RATIONALE
The confirmation of the credit ratings of the Notes is the result
of an annual surveillance review. The current transaction
performance is within DBRS Morningstar's expectation. The Final
Maturity Date of this transaction is November 15, 2035.
In its analysis, DBRS Morningstar considered the following aspects
of the transaction:
(1) The transaction's capital structure and the form and
sufficiency of available credit enhancement (CE).
(2) Relevant CE in the form of subordination and liquidity
enhancement.
(3) The ability of the rated Notes to withstand projected
collateral loss rates under various cash flow stress scenarios.
(4) The performance of underlying collateral and fund
characteristics such as fund seasoning, fund type, region, and
performance correlation.
(5) DBRS Morningstar's operational risk assessment of the
originator and fund manager.
(6) The legal structure as well as legal opinions addressing
certain matters of the Borrower and the consistency with DBRS
Morningstar's "Legal Criteria for U.S. Structured Finance."
The Notes are backed by a pool of diversified private equity
limited partnership interests in leveraged buyout, mezzanine debt,
secondaries, and venture capital in 68 private equity funds. Most
of the funds in the MCA Fund III Holding LLC portfolio have entered
harvesting periods (six years to nine years seasoned), meaning that
fund managers are focusing on seeking opportunities to exit and
generate distributions that flow back to investors.
The total portfolio net asset value (NAV) was $589.6 million as of
September 2023, down from $643 million compared with August 2022.
The decline in NAV is a net effect of capital calls and return on
investments (including capital gains, return on capital, and
investment income) from August 2022 to September 2023. The limited
partnership interests are currently around 84.5% drawn with a
$122.5 million unfunded capital commitment.
The Class A Notes and the Class B Notes have been amortizing in
accordance with the target loan-to-value ratios. As of the August
2023 payment date, CE to the Notes increased since transaction
inception:
-- Class A: CE increased to 76% from 71%
-- Class B: CE increased to 66% from 58%
-- Class C: CE increased to 55% from 47%
Market volatility, rising inflation, and interest rates have put
pressure on the private equity market by pulling down company
valuations and pausing exits and merger and acquisition activities
in 2023. With the expectation of market headwinds and a potential
recession in 2024, the MCA Fund III Holding LLC portfolio made
downwards adjustments on the NAV that DBRS Morningstar considers
reasonable, and also was stress tested with a slowdown in capital
distributions over the next two years, in the quantitative modeling
process. Each class of Notes is able to withstand a percentage of
tranche defaults from a Monte Carlo asset analysis commensurate
with its respective credit rating.
The current credit ratings on the Notes differ from the credit
ratings implied by the quantitative model, which would have been
higher than the confirmed credit ratings. DBRS Morningstar
considers these differences to be a material deviation from the
model. The highest achievable credit rating for all rated Notes is
capped at A (sf) because of the exposure to the counterparty risk
in the form of future capital calls. The transaction depends on the
ability of CMFG Life Insurance Company to fund the future unfunded
commitments.
Notes: All figures are in U.S. dollars unless otherwise noted.
MERRILL LYNCH 2004-WMC3: Moody's Cuts Rating on Cl. S Certs to Ca
-----------------------------------------------------------------
Moody's Investors Service has downgraded the rating of Class S
issued by Merrill Lynch Mortgage Investors, Inc. 2004-WMC3. The
collateral backing this deal consists of subprime mortgages.
The complete rating actions are as follows:
Issuer: Merrill Lynch Mortgage Investors, Inc. 2004-WMC3
Cl. S*, Downgraded to Ca (sf); previously on Dec 7, 2020 Downgraded
to Caa3 (sf)
* Reflects Interest-Only Class
RATINGS RATIONALE
The rating downgrade of Class S, an Interest Only (IO) bond,
reflects the updated performance of the underlying collateral and
bonds. This IO bond has not received any interest over the past 15
months since its pass-through rate is subject to a calculation that
has reduced the required interest distribution to zero. Moody's
typically rate an IO tranche that missed consecutive 12 months of
payment at C(sf). Notwithstanding, considering that this extended
period of non-payment is attributable to non-credit factors,
namely, an increase in a referenced index rate that reduced the
required interest distribution to zero since August 2022, Moody's
rating reflects the credit profile of bonds linked to this IO
tranche without giving consideration to the extended non-payment.
Principal Methodologies
The methodologies used in this rating were "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.
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.
MORGAN STANLEY 2019-L2: DBRS Cuts Class G-RR Certs Rating to CCC
----------------------------------------------------------------
DBRS Limited (DBRS Morningstar) downgraded the credit ratings on
two classes of Commercial Mortgage Pass-Through Certificates,
Series 2019-L2 issued by Morgan Stanley Capital I Trust 2019-L2 as
follows:
-- Class F-RR to B (low) (sf) from BB (sf)
-- Class G-RR to CCC (sf) from B (high) (sf)
In addition, DBRS Morningstar confirmed the following credit
ratings:
-- 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 X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
The trends on Classes A-S, B, C, D, E, F-RR, X-B, and X-D were
changed to Negative from Stable. All other classes have Stable
trends, except for Class G-RR, which has a credit rating that
generally does not carry trends in commercial mortgage-backed
securities (CMBS) credit ratings.
The credit rating downgrades and Negative trends reflect the
increased risk surrounding the loans in special servicing. As of
the October 2023 remittance, five loans, representing 10.8% of the
pool balance, are in special servicing, two of which have
foreclosure as the workout strategy and one loan is real estate
owned. These loans were liquidated from the pool in the analysis,
resulting in a combined loss in excess of $20.0 million, which is
expected to be contained to the nonrated Class H-RR. The remaining
two specially serviced loans continue to exhibit increased credit
risk from issuance and were analyzed with stressed scenarios to
increase the expected loss. In addition, the transaction is
concentrated by property type with loans backed by office
properties, representing nearly 40.0% of the pool. The office
sector has been challenged considering the rise in vacancy rates in
many submarkets and decrease in investor appetite for that property
type. Several performing office loans in the trust exhibited
increased risks that resulted in a stressed analysis and increased
expected losses that were generally above the pool average expected
loss. The loss projections from the liquidation scenario and
stressed analysis applied for several office and specially serviced
loans support the credit rating downgrades and Negative trends.
Additional loan details are highlighted below.
The credit rating confirmations is reflective of the overall stable
performance of the pool, which reported a weighted-average (WA)
debt service coverage ratio (DSCR) of more than 2.0 times (x) based
on the most recent year-end financials. As of the October 2023
remittance, 49 of the original 50 loans remain in the pool, with an
aggregate trust balance of $915.3 million, representing a
collateral reduction of 2.1% since issuance. Four loans,
representing 9.1% of the pool balance, are fully defeased,
including the largest loan in pool, Ohana Waikiki Malia Hotel &
Shops (Prospectus ID#1, 6.9% of the pool balance). Nine loans,
representing 16.4% of the pool balance, are on servicer's watchlist
and five of which (10.8% of the current pool balance) are being
flagged for noncredit related reasons and the others are monitored
for servicing trigger event and low DSCRs.
The specially serviced loans with the largest loss forecast, State
of Kentucky Portfolio (Prospectus ID#16, 2.4% of the pool balance),
is secured by five government-occupied office buildings, located
throughout Frankfort, Kentucky. The buildings include Millcreek
Office Park, First City Complex, Hudson Hollow, Court of Appearls,
and Capital City. The loan transferred to special servicing in
August 2022 for imminent monetary default and was last paid through
July 2023. The largest tenant, Cabinet for Health & Family Service,
occupies the entire building at First City Complex and majority of
the space at Millcreek Office Park. The tenant had terminated its
lease at Millcreek Office Park in March 2023 and as a result, the
tenant's portfolio net rentable area (NRA) was reduced to 26.3%
from 52.3%. In addition, the tenant's lease at First City Complex
had expired in June 2023. Details surrounding the termination fee
and a leasing update was requested from the servicer. According to
the March 2023 rent roll, the occupancy rate was reported at 81.2%;
however, when incorporating the for Cabinet for Health & Family
Service's reduced footprint, occupancy is estimated to have dropped
to about 55.0%. Currently LoopNet is marketing 172,380 square feet
(sf) of space (49.1% of the NRA) as available for lease at the
subject. According to Reis, office properties in the Southeast
submarket reported a Q2 2023 rate of 28.3%, compared with the Q2
2022 figure of 28.3% and the forecast rate of 23.4% by 2028.
The loan has been cash managed since June 2022 and approximately
$0.5 million is held in the cash management account. While
financial reporting has been limited for this loan since issuance,
the servicer provided borrower financials for the trailing 12
months ended March 31, 2023, showing a net operating income (NOI)
of $2.6 million, relatively in line with the DBRS Morningstar NOI
of $2.5 million but is expected to drop considering the decline in
occupancy. According to the servicer, the borrower intends to
transition ownership to the trust. A receiver was appointed in
April 2023 and the servicer continues to work through foreclosure
proceedings. Based on the April 2023 appraisal, the subject was
valued at $15.8 million, a significant decline from the issuance
value of $34.4 million. With this review, DBRS Morningstar analyzed
the loan with a liquidation scenario, resulting in a loss severity
in excess of 50.0%.
A loan of concern is CompuCom World Headquarters (CompuCom;
Prospectus ID#11, 2.7% of the pool balance), which is secured by a
three-story office building located in Fort Mill, South Carolina.
At issuance, the entire building was solely occupied by CompuCom,
as the subject serves as the tenant's global headquarters on a
lease through October 2032,with four five-year extension options
and no early termination options. However, the entire space was
advertised as available on LoopNet, suggesting CompuCom has gone
dark. The loan was structured with a cash trap in the event
CompuCom goes dark; however, the loan documents at issuance also
allowed for the cash flow sweep requirement to be waived if the
DSCR exceeds 1.25x for two consecutive calendar quarters. Since the
YE2022 DSCR was reported at 1.41x and has consistently reported a
coverage above the threshold, it is unlikely that excess cash is
currently being reserved. DBRS Morningstar has requested additional
information regarding CompuCom's departure and the cash management
status. According to the Q2 2023 Reis report, office properties in
the York County of Charlotte reported an average vacancy rate of
4.4%, compared with the Q2 2022 figures of 4.6%. The issuance
appraisal noted a dark value of $25.4 million, which results in a
loan-to-value ratio (LTV) approaching 100%. Considering the subject
is likely dark, coupled by the generally challenged office sector
and lack of meaningful cash to be yielded from the cash trap
provision, DBRS Morningstar analyzed this loan with a stressed LTV
and applied a probability of default penalty, resulting in an
expected loss nearly 1.5x the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
MOSAIC SOLAR 2022-3: Fitch Affirms 'BBsf' Rating on Class D Notes
-----------------------------------------------------------------
Fitch Ratings has affirmed Mosaic Solar Loan Trust 2022-3 (Mosaic
2022-3) notes as detailed below.
Entity/Debt Rating Prior
----------- ------ -----
Mosaic Solar Loan
Trust 2022-3
A 61946KAA2 LT AA-sf Affirmed AA-sf
B 61946KAB0 LT A-sf Affirmed A-sf
C 61946KAC8 LT BBBsf Affirmed BBBsf
D 61946KAD6 LT BBsf Affirmed BBsf
TRANSACTION SUMMARY
Mosaic 2022-3 is a securitisation of consumer loans backed by
residential solar equipment. The originator is Solar Mosaic, LLC,
one of the longest-established solar lenders in the U.S.; it has
financed residential solar energy systems since 2014 and
contributed solar loans to public securitisations since 2017.
KEY RATING DRIVERS
Performance Within Expectations: As of the October servicer report,
the average annualised default rate (ADR) stood at 1.4%, decreasing
to 58bp over the last six months, versus 1.2% implied in Fitch's
modelled assumptions. The cumulative default rate (CDR) is 1.1%,
consistent with expectations. The 30+ days past due (dpd) levels
have come down to 45bp, after reaching almost 90bp early in the
transaction's life. Fitch expects prepayments to increase in the
medium term, and to ultimately reach its lifetime expectation of
10% over the assets' 20- to 25-year term and 10- to 15-year
weighted average life (WAL, also considering prepayments).
Extrapolated Asset Assumptions Maintained: At closing, Fitch
considered both originator-wide data and previous Mosaic
transactions to set a lifetime default expectation of 8.3% and a
30% base case recovery rate. Fitch maintains these assumptions,
given that performance has been in line with expectations. Fitch's
rating default rates (RDRs) for 'AA-sf', 'A-sf', 'BBBsf', 'BBsf'
are, respectively, 33.5%, 24.9%, 20% and 13.7%. Fitch's Rating
Recovery Rates (RRRs) for 'AA-sf', 'A-sf', 'BBBsf', 'BBsf' are,
respectively, 19%, 21.8%, 23.3% and 25.5%.
Limited History Determines 'AAsf' Cap: Residential solar loans in
the U.S. have long terms, many of which are now at 25 years (and a
small portion at 30 years). For Mosaic, more than seven years of
performance data are available, which compare favourably with that
of other solar ABS that Fitch currently rates and the solar
industry at large.
Target OC And Amortisation Trigger: The class A and B notes
amortise based on target over-collateralisation (OC) percentages.
The target OC is 100% of the outstanding adjusted balance for the
first 16 months, ensuring that there is no leakage of funds
initially, irrespective of the collateral performance; then it
falls to 10.5%. OC for the class A and B notes combined currently
stands at 15.6%, so, if no further OC is accumulated, 5.6% will be
lost starting the 17th month after closing by paying down the notes
to the target OC. This mechanism was considered in its closing
analysis.
The transaction's escalating cumulative loss trigger protects the
class A and B notes against deteriorating performance, by switching
the payment waterfall to turbo-sequential, deferring any interest
payments for the class C and D notes and thus accelerating the
senior note deleveraging. The repayment timings of the class C and
D notes are highly sensitive to the timing of a trigger breach.
Standard, Reputable Counterparties: The transaction accounts are
with Wilmington Trust Company (A/Negative/F1), and the servicer's
collection account is with Wells Fargo Bank, N.A. (AA-/Stable/F1+).
Commingling risk with regard to the latter is mitigated by transfer
of collections within two business days, the high initial share of
payments under an Automated Clearing House arrangement and Wells
Fargo's ratings.
Reserve Fund; No Swap: A reserve fund can be used, in certain
cases, to cover defaults and provides the notes with liquidity,
although it would not be replenished, if used, as long as the
cumulative loss trigger is breached. As both assets and liabilities
pay a fixed coupon, there is no need for an interest rate hedge
and, thus, no exposure to swap counterparties.
Established Specialised Lender: Mosaic is one of the first-movers
among U.S. solar loan lenders, with the longest history among the
originators of the solar ABS that Fitch rates. Underwriting is
mostly automated and in line with that of other U.S. ABS
originators.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Weaker-than-expected asset performance on a sustained basis and a
simultaneous fall in prepayment activity may put pressure on the
rating or lead to a Negative Rating Outlook.
Material changes in policy support, the economics of purchasing and
financing photovoltaic panels and batteries, and/or ground-breaking
technological advances that make the existing equipment obsolete
may also negatively affect the rating.
Below, Fitch shows model-implied rating sensitivities to changes in
default and/or recovery assumptions. As transaction performance is
in line with expectations, the model has not been re-run since
closing.
Increase of defaults (Class A / B / C / D):
+10%: 'AA-sf' / 'Asf' / 'A-sf'/ 'BBB-sf'
+25%: 'A+sf' / 'A-sf' / 'BBB+sf' / 'BBBsf'
+50%: 'Asf' / 'BBB+sf' / 'BBBsf' / 'BBB-sf'
Decrease of recoveries (Class A / B / C / D):
-10%: 'AAsf' / 'A+sf' / 'Asf' / 'A-sf'
-25%: 'AAsf' / 'Asf' / 'Asf' / 'BBB+sf'
-50%: 'AA-sf' / 'Asf' / 'A-sf' / 'BBB+sf'
Increase of defaults and decrease of recoveries (Class A / B / C /
D):
+10% / -10%: 'AA-sf' / 'Asf' / 'A-sf' / 'BBB+sf'
+25% / -25%: 'A+sf' / 'A-sf' / 'BBB+sf' / 'BBBsf'
+50% / -50%: 'A-sf' / 'BBBsf' / 'BBB-sf' / 'BB+sf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch currently cap ratings in the 'AAsf' category due to limited
performance history, while the rating of 'AA-sf' is further
constrained by the sensitivity of model results. As a result, a
positive rating action could result from an increase in credit
enhancement due to the class A notes' deleveraging, underpinned by
good transaction performance, for example, through high prepayments
and defaults consistently below expectations.
Below Fitch shows model-implied rating sensitivities, capped at
'AA+sf', to changes in default and/or recovery assumptions. As
transaction performance is in line with expectations, the model has
not been re-run since closing.
Decrease of defaults (Class A / B / C / D):
-10%: 'AA+sf' / 'A+f' / 'A+sf' / 'Asf'
-25%: 'AA+sf' / 'AAsf' / 'A+sf' / 'A+sf'
-50%: 'AA+sf' / 'AA+sf' / 'AA-sf' / 'AA-sf'
Increase of recoveries (Class A / B / C / D):
+10%: 'AAsf' / 'A+sf' / 'Asf' / 'A-sf'
+25%: 'AA+sf' / 'A+sf' / 'A+sf' / 'A-sf'
+50%: 'AA+sf' / 'AA-sf' / 'A+sf' / 'Asf'
Decrease of defaults and increase of recoveries (Class A / B / C /
D):
-10% / +10%: 'AA+sf' / 'AA-sf' / 'A+sf' / 'Asf'
-25% / +25%: 'AA+sf' / 'AAsf' / 'A+sf' / 'A+sf'
-50% / +50%: 'AA+sf' / 'AA+sf' / 'AA-sf' / 'AA-sf'
DATA ADEQUACY
The historical information available for this originator did not
cover the asset tenor of up to 30 years, as originations began in
2014. Fitch applied a rating cap at the 'AAsf' category to address
this limitation.
The amortising nature of the assets, the data available from
previous Mosaic transactions and the application of an ADR to the
static portfolio allowed us to determine lifetime default
assumptions. Taking into account this analytical approach, the
rating committee considered the available data sufficient to
support a rating in the 'AAsf' category.
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.
MVW 2023-2: Fitch Assigns 'BBsf' Rating on D Notes, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Outlooks to notes issued by
MVW 2023-2 LLC.
Entity/Debt Rating Prior
----------- ------ -----
MVW 2023-2 LLC
A LT AAAsf New Rating AAA(EXP)sf
B LT Asf New Rating A(EXP)sf
C LT BBBsf New Rating BBB(EXP)sf
D LT BBsf New Rating BB(EXP)sf
TRANSACTION SUMMARY
The notes are backed by a pool of fixed-rate timeshare loans
originated by Marriott Ownership Resorts, Inc. (MORI) or one of its
wholly owned subsidiaries or affiliates. MORI is a subsidiary of
Marriott Vacations Worldwide Corporation (MVW).
The MVW 2023-2 pool includes timeshare loans relating to Marriott
Vacation Club Resorts, Sheraton Vacation Club Resorts, Westin
Vacation Club Resorts, Hyatt Vacation Club Platinum Program
(formerly referred to as the WHV Platinum Program or legacy Welk)
Resorts and Hyatt Vacation Club Heritage (formerly referred to as
the Hyatt Residence Club) Resorts.
While all the brands are owned by MVW, due to exclusive license
agreements with the respective hotel brands, each will remain
separately branded under one VO business owned by MVW. This is
MORI's 29th term securitization.
KEY RATING DRIVERS
Borrower Risk — Slightly Stronger Collateral Pool: This is the
ninth transaction to include timeshare loans relating to Marriott
Vacation Club Resorts, Sheraton Vacation Club Resorts and Westin
Vacation Club Resorts. Overall, the 2023-2 initial pool is slightly
stronger than the 2023-1 pool, as the weighted average (WA) FICO
score of 736 is up slightly from 732 in 2023-1. Fifteen-year loans
declined slightly to 43.0% from 43.7% in 2023-1. The concentration
of foreign obligors is at 2.9%, comparable with 3.5% in 2023-1.
Furthermore, $32 million of called collateral from the MVW 2017-1
transaction is expected to be added via prefunding with significant
seasoning of 82 months.
The 2023-2 initial pool includes 60.1% of Marriott Vacation Club
collateral, up from 52.0% in 2023-1, which performs stronger than
other brands except Westin Vacation Club. The Sheraton Vacation
Club and Hyatt Vacation Club Platinum Program collateral, which
have historically had higher forecast losses compared with other
brands, is down to 14.9% and 10.8% from 19.7% and 11.17%,
respectively. This is also the seventh transaction to include Hyatt
Vacation Club Heritage loans, which represent 4.0% of the initial
pool.
Forward-Looking Approach on CGD Proxy — Varied Performance: With
the exception of certain foreign segments, the Marriott Vacation
Club 2010-2016 vintages continue to display improved performance
relative to the weaker 2007-2009 periods, although more recent
vintages remain under stress. The other portfolios also experienced
stress during the recession. Since then, the Westin Vacation Club
loan performance has improved but has experienced elevated defaults
in recent periods.
The Sheraton Vacation Club loan performance has deteriorated in
recent years, driven by Sheraton Flex and the longer 15-year term
loans, with the newly included Hyatt Vacation Club Heritage loans
since the 2020-1 transaction showing overall high projected losses
on par with, and in some cases, exceeding the Sheraton Vacation
Club loans.
The Hyatt Vacation Club Platinum Program loan performance in recent
vintages has been tracking consistently below that of the
recessionary 2006-2009 vintages but has been weaker compared with
the 2010-2013 periods. Fitch's base case cumulative gross default
(CGD) proxy is 13.00% for 2023-2.
Structural Analysis — Sufficient CE Structure: Initial hard
credit enhancement (CE) is 39.00%, 23.25%, 13.25% and 7.00% for
class A, B, C and D notes, respectively. CE is slightly down from
39.30% for the class A notes relative to 2023-1, but up for the
class B, C and D notes from 22.65%, 10.15% and 2.50%, respectively.
Available CE is sufficient to support stressed 'AAAsf', 'Asf',
'BBBsf' and 'BBsf' multiples of Fitch's base case CGD proxy of
13.00%.
Originator/Seller/Servicer Operational Review — Adequate
Origination/Servicing: MVW/MORI has demonstrated sufficient
abilities as originator and servicer of timeshare loans, as
evidenced by the historical delinquency and default performance of
securitized trusts and of the managed portfolio.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CGD levels higher than the base case and would likely result in
declines of CE and remaining default coverage levels available to
the notes. Additionally, unanticipated increases in prepayment
activity could also result in a decline in coverage. Declining
default coverage may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
Hence, Fitch conducts sensitivity analysis by stressing both a
transaction's initial base case CGD and prepayment assumptions and
examining the rating implications on all classes of issued notes.
The CGD sensitivity stresses the CGD proxy to the level necessary
to reduce each rating by one full category, to non-investment
grade, 'BBsf' and to 'CCCsf' based on the break-even loss coverage
provided by the CE structure. The prepayment sensitivity includes
1.5x and 2.0x increases to the prepayment assumptions representing
moderate and severe stresses, respectively. These analyses are
intended to provide an indication of the rating sensitivity of
notes to unexpected deterioration of a trust's performance.
Additionally, Fitch conducts increases of 1.5x and 2.0x to the CGD
proxy, which represents moderate and severe stresses, respectively.
These analyses are intended to provide an indication of the rating
sensitivity of notes to unexpected deterioration of a trust's
performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. If cumulative net loss (CNL) is 20% less
than the projected proxy, the expected ratings would be maintained
for the class A note at a stronger rating multiple. For the class
B, C, and D notes, the multiples would increase, resulting in
potential upgrade of four notches, one rating category and four
notches, respectively.
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.
NEUBERGER BERMAN 53: Fitch Assigns 'BB-sf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Neuberger
Berman Loan Advisers NBLA CLO 53, Ltd.
Entity/Debt Rating
----------- ------
Neuberger Berman
Loan Advisers
CLO 53, Ltd.
A LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Neuberger Berman Loan Advisers NBLA CLO 53, Ltd. is an arbitrage
cash flow collateralized loan obligation (CLO) that will be managed
by Neuberger Berman Loan Advisers II LLC. Net proceeds from the
issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $350 million of primarily
first lien senior secured loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.61, 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
94.21% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 72.77% versus a
minimum covenant, in accordance with the initial expected matrix
point of 69.3%.
Portfolio Composition (Positive): 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 (Neutral): The transaction has a 0.9-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.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A, between 'BB+sf'
and 'A+sf' for class B, between 'BB-sf' and 'BBB+sf' for class C,
between less than 'B-sf' and 'BB+sf' for class D, and between less
than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A 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, '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, 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.
OAKWOOD MORTGAGE 1999-A: Moody's Hikes Class M-1 Debt to 'Caa1'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of two bonds
from two US residential mortgage-backed transactions (RMBS), backed
by manufactured housing units issued by multiple issuers.
The complete rating actions are as follows:
Issuer: MERIT Securities Corp Series 13
M1, Upgraded to B2 (sf); previously on Jun 10, 2016 Upgraded to
Caa1 (sf)
Issuer: Oakwood Mortgage Investors, Inc., Series 1999-A
M-1, Upgraded to Caa1 (sf); previously on Mar 9, 2018 Upgraded to
Caa3 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
OCTAGON 66: Fitch Assigns Final 'BB-sf' Rating on Class E-R Notes
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Octagon 66, Ltd. Reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Octagon 66, Ltd.
A1-R LT NRsf New Rating
A2-R LT AAAsf New Rating
B-1 67577WAC5 LT PIFsf Paid In Full AAsf
B-2 67577WAJ0 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C-1 67577WAE1 LT PIFsf Paid In Full A+sf
C-2 67577WAL5 LT PIFsf Paid In Full A+sf
C1-R LT A+sf New Rating
C2-R LT Asf New Rating
D 67577WAG6 LT PIFsf Paid In Full BBB-sf
D-R LT BBB-sf New Rating
E 67577XAA7 LT PIFsf Paid In Full BB-sf
E-R LT BB-sf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
Octagon 66, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by Octagon
Credit Investors, LLC., which originally closed in July 2022. The
CLO's secured notes were refinanced in whole on Nov. 16, 2023
("First Refinancing Date") from proceeds of new secured notes. The
secured and subordinated notes will provide financing on a
portfolio of approximately $550 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 (WARF) of the indicative
portfolio is 24.01 versus a maximum covenant, in accordance with
the initial expected matrix point of 24.5 Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
95.85% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.53% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.28%.
Portfolio Composition (Positive): 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 (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 weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2-R, between
'BB+sf' and 'A+sf' for class B-R, between 'BB-sf' and 'Asf' for
class C-1-R, between 'B+sf' and 'BBB+sf' for class C-2-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-2-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-2-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, 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.
OPEN TRUST 2023-AIR: Moody's Assigns Ba3 Rating to Cl. HRR Certs
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to six
classes of CMBS securities, issued by OPEN Trust 2023-AIR,
Commercial Mortgage Pass-Through Certificates, Series 2023-AIR:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba1 (sf)
Cl. HRR, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
The certificates are collateralized by a single loan backed by a
first lien mortgage on the borrower's fee simple and/or leasehold
interests in 38 open-air retail centers totaling approximately 8.5
million collateral SF across 15 states. Moody's ratings are based
on the credit quality of the loan and the strength of the
securitization structure.
Moody's approach to rating this transaction involved the
application of Moody's Large Loan and Single Asset/Single Borrower
Commercial Mortgage-Backed Securitization methodology. The rating
approach for securities backed by a single loan compares the credit
risk inherent in the underlying collateral with the credit
protection offered by the structure. The structure's credit
enhancement is quantified by the maximum deterioration in property
value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss
for various rating levels. In assigning single borrower ratings,
Moody's also consider a range of qualitative issues as well as the
transaction's structural and legal aspects.
The collateral portfolio consists of 38 open-air retail centers
located across 15 states and 25 distinct markets. Together, the
properties offer approximately 8,535,929 SF of aggregate NRA.
Individual properties average 224,630 SF in size, ranging from a
low of 41,066 SF to a high of 495,400 SF. As of August 7, 2023, the
portfolio is approximately 93.5% occupied by approximately 654
distinct tenants operating across a variety of industries such as
services, electronics, food, and entertainment. Approximately 23
properties are anchored by a grocer and/or pharmacy and 15 are
big-box anchored.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, Moody's make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile.
The Moody's first mortgage DSCR is 1.00x, which is lower than
Moody's first mortgage stressed DSCR at a 9.25% constant of 1.08x.
Moody's DSCR is based on Moody's stabilized net cash flow.
Moody's LTV ratio for the first mortgage balance is 94.4% based on
Moody's Value. Adjusted Moody's LTV ratio for the first mortgage
balance is 83.7% using a cap rate adjusted for the current interest
rate environment.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The property quality
grade is 2.45.
Notable strengths of the transaction include: strong anchor
tenancy, high occupancy with granular tenancy, strong leasing
spreads, geographic diversity, multiple-property pooling, and
capital expenditures.
Notable concerns of the transaction include: rollover risk,
secondary/tertiary market exposure, floating-rate interest-only
loan profile, prior bankruptcy, dated third party reports, and
credit negative legal features.
The principal methodology used in these ratings was "Large Loan
and Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published in July 2022.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
PALMER SQUARE 2023-3: S&P Assigns Prelim BB-(sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Palmer
Square CLO 2023-3 Ltd./Palmer Square CLO 2023-3 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 Palmer Square Capital Management LLC.
This is Palmer Square Capital Management LLC's fourth CLO in 2023.
The preliminary ratings are based on information as of Nov. 22,
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
Palmer Square CLO 2023-3 Ltd./
Palmer Square CLO 2023-3 LLC
Class A-1, $300.00 million: AAA (sf)
Class A-2, $25.00 million: AAA (sf)
Class B, $55.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $17.50 million: BB- (sf)
Subordinated notes, $40.235 million: Not rated
PARK AVENUE 2022-2: S&P Assigns Prelim BB-(sf) Rating on D-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-R, C-R, and D-R replacement notes from Park Avenue
Institutional Advisers CLO Ltd. 2022-2/Park Avenue Institutional
Advisers CLO LLC 2022-2, a CLO originally issued in November 2022
that is managed by Park Avenue Institutional Advisers LLC, a wholly
owned subsidiary of The Guardian Life Insurance Co. of America.
The preliminary ratings are based on information as of Nov. 22,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Dec. 5, 2023, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-1-R, A-2-R, B-R, and D-R notes are
expected to be issued at a lower spread over three-month CME term
SOFR than the original notes.
-- The replacement class C-R notes is expected to be issued at a
higher spread over three-month CME term SOFR than the original
notes.
-- The replacement class A-2-R notes are expected to be issued at
a floating spread, replacing the current floating A-2a and fixed
A-2b original notes.
-- The stated maturity and reinvestment period will be extended by
two years.
-- The weighted average life test date will be extended by one
year.
-- The non-call period will be extended approximately by two
years.
-- All of the identified underlying collateral obligations have
credit ratings assigned by S&P Global Ratings.
-- Of the identified underlying collateral obligations, 97.89%
have recovery ratings assigned by S&P Global Ratings.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
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.
"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
Park Avenue Institutional Advisers CLO Ltd. 2022-2/
Park Avenue Institutional Advisers CLO LLC 2022-2
Class A-1-R, $204.75 million: AAA (sf)
Class A-2-R, $42.25 million: AA (sf)
Class B-R (deferrable), $19.50 million: A (sf)
Class C-R (deferrable), $17.10 million: BBB- (sf)
Class D-R (deferrable), $11.40 million: BB- (sf)
Subordinated notes, $32.11 million: Not rated
PIKES PEAK 15: Fitch Assigns 'BB-sf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Pikes
Peak CLO 15 (2023) Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Pikes Peak CLO 15
(2023) Ltd
A LT NRsf New Rating NR(EXP)sf
A-L LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
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 (WARF) 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 appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
100% first lien senior secured loans. The weighted average recovery
rate (WARR) of the indicative portfolio is 74.7% versus a minimum
covenant, in accordance with the initial expected matrix point of
71.4%.
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: DBRS Gives Prov. BB Rating on Class E Notes
-----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the classes of notes to
be issued by Prestige Auto Receivables Trust 2023-2 (PART 2023-2 or
the Issuer):
-- $33,000,000 Class A-1 Notes at R-1 (high) (sf)
-- $80,770,000 Class A-2 Notes at AAA (sf)
-- $38,950,000 Class B Notes at AA (sf)
-- $30,490,000 Class C Notes at A (sf)
-- $32,240,000 Class D Notes at BBB (sf)
-- $31,170,000 at Class E Notes at BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The provisional ratings are based on DBRS Morningstar's review of
the following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination,
overcollateralization (OC), amounts held in the reserve account,
and excess spread. Credit enhancement levels are sufficient to
support DBRS Morningstar-projected expected cumulative net loss
(CNL) assumptions under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(2) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
-- DBRS Morningstar has performed an operational review of
Prestige and considers the entity to be an acceptable originator
and servicer of subprime auto receivables. Additionally, the
transaction has an acceptable backup servicer.
-- The Company's management team has extensive experience. The
Company has been lending to the subprime auto sector since 1994 and
has considerable experience lending to Chapter 7 and 13 obligors.
(3) The credit quality of the collateral and performance of
Prestige's auto loan portfolio.
-- Prestige shared vintage CNL data with DBRS Morningstar broken
down by credit tier, payment-to-income ratio, and other buckets.
-- The Company continues to evaluate and adjust its underwriting
standards as necessary to target and maintain the credit quality of
its loan portfolio.
-- The DBRS Morningstar rating category loss multiples for each
rating assigned are within the published criteria.
(4) The DBRS Morningstar CNL assumption is 16.10% based on the
expected cutoff date pool composition.
-- The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios for
Rated Sovereigns: September 2023 Update," published on 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.
(5) The legal structure and expected presence of legal opinions,
which will address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Prestige, that
the trust has a valid first-priority security interest in the
assets, and consistency with the DBRS Morningstar "Legal Criteria
for U.S. Structured Finance."
The ratings on the Class A-1 and Class A-2 Notes reflect 58.65% of
initial hard credit enhancement provided by subordinated notes in
the pool (49.45%), the reserve account (1.00%), and OC (8.20%). The
ratings on the Class B, Class C, Class D, and Class E Notes reflect
44.15%, 32.80%, 20.80%, and 9.20% of initial hard credit
enhancement, respectively. Additional credit support may be
provided from excess spread available in the structure.
DBRS Morningstar's credit rating on the securities referenced
herein addresses the credit risk associated with the identified
financial obligations in accordance with the relevant transaction
documents. The associated financial obligations for each of the
rated notes are the related Note Interest and the related Note
Balance.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. The associated contractual payment obligations that
are not financial obligations are the related interest on unpaid
Overdue Interest for each of the rated notes.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued. The DBRS Morningstar short-term debt
rating scale provides an opinion on the risk that an issuer will
not meet its short-term financial obligations in a timely manner.
Notes: All figures are in U.S. dollars unless otherwise noted.
PRKCM 2023-AFC4: DBRS Gives Prov. B Rating on Class B-2 Notes
-------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Mortgage-Backed Notes, Series 2023-AFC4 (the Notes) to be issued by
PRKCM 2023-AFC4 Trust (the Trust or the Issuer):
-- $239.9 million Class A-1 at AAA (sf)
-- $36.5 million Class A-2 at AA (sf)
-- $26.7 million Class A-3 at A (sf)
-- $16.1 million Class M-1 at BBB (sf)
-- $12.0 million Class B-1 at BB (sf)
-- $8.2 million Class B-2 at B (sf)
The AAA (sf) credit rating on the Class A-1 Notes reflects 31.30%
of credit enhancement provided by subordinated notes. The AA (sf),
A (sf), BBB (sf), BB (sf), and B (sf) credit ratings reflect
20.85%, 13.20%, 8.60%, 5.15%, and 2.80% 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, primarily first-lien
(99.2%) residential mortgages funded by the issuance of the Notes.
The Notes are backed by 865 mortgage loans with a total principal
balance of $349,188,203 as of the Cut-Off Date (October 1, 2023).
This is the eighth securitization by the Sponsor, Park Capital
Management Sponsor LLC, an affiliate of AmWest Funding Corp.
(AmWest). AmWest is the Seller, Originator, and Servicer of the
mortgage loans.
The pool is about one month seasoned on a weighted-average (WA)
basis, although seasoning may span from zero to 21 months. All
loans in the pool are current as of the Cut-Off Date.
Although the mortgage loans were originated to satisfy the Consumer
Financial Protection Bureau's (CFPB) Qualified Mortgage (QM) and
Ability-to-Repay (ATR) rules where applicable, they 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, approximately 22.7% of the
loans are designated as non-QM. Approximately 17.2% of the loans
are designated as QM Safe Harbor and approximately 17.8% are
designated as QM Rebuttable Presumption.
Approximately 42.4% of the loans are made to investors for business
purposes and, hence, are not subject to the QM/ATR rules. The
mortgage loans were underwritten to program guidelines for
business-purpose loans that are designed to rely on the
property-level cash flows for approximately 28.0% of the loans, and
mortgagor's credit profile and debt-to-income ratio, property
value, and the available assets, where applicable, for
approximately 14.4% of the loans. Since the loans were made to
investors for business purposes, they are exempt from the CFPB ATR
rules and Truth in Lending Act (TILA) and the Real Estate
Settlement Procedures Act (RESPA) Integrated Disclosure rule.
For investor loans originated to investors under debt service
coverage ratio (DSCR) programs (28.0% of the pool), lenders use
property-level cash flow or the DSCR to qualify borrowers for
income. The DSCR is typically calculated as market rental value
(validated by an appraisal report) divided by the principal,
interest, taxes, insurance, and association dues (PITIA).
Also, approximately 3.5% of the pool comprises residential investor
loans underwritten to the property-focused underwriting guidelines.
The loans were underwritten to program guidelines for
business-purpose loans where the lender generally expects the
property (or its value) and the borrower assets to be the primary
source of repayment. The lender reviews the mortgagor's credit
profile, though it does not rely on the borrower's income to make
its credit decision.
In addition, the pool contains nine temporary buy-down mortgage
loans (approximately 0.34%). The initial 12 or 24 monthly payments
made by the borrowers for their respective loans will be less than
their scheduled payments due to the trust, with the difference (for
each borrower) compensated from funds held in a related account
funded by the seller of the mortgaged property, the mortgage
originator, or another party. The funds are not eligible for use to
offset potential missed payments; however, if a loan is prepaid in
full during its buy-down period, any remaining related funds will
be credited to the related borrower.
For this transaction, the Servicer will fund advances of delinquent
principal and interest (P&I) until loans become 90 days delinquent
or are otherwise deemed unrecoverable. Additionally, the Servicer
is obligated to make advances with respect to taxes, insurance
premiums, and reasonable costs incurred in the course of servicing
and disposing of properties (Servicing Advances). If the Servicer
fails in its obligation to make P&I advances, the Master Servicer
(Nationstar Mortgage LLC) will be obligated to fund such advances.
In addition, if the Master Servicer fails in its obligation to make
P&I advances, Citibank, N.A. (rated AA (low) with a Stable trend by
DBRS Morningstar) as the Paying Agent, will be obligated to fund
such advances. The Master Servicer and Paying Agent are responsible
only for P&I Advances; the Servicer is responsible for P&I Advances
and Servicing Advances.
The Sponsor, directly or indirectly through a majority-owned
affiliate, is expected to retain an eligible horizontal residual
interest consisting of the Class B-3 Notes and Class XS Notes,
collectively representing at least 5% of the fair value of the
Notes, to satisfy the credit risk-retention requirements under
Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
On any date on or after the earlier of (1) the payment date
occurring in October 2026 or (2) on or after the payment date when
the aggregate stated principal balance of the mortgage loans is
reduced to less than or equal to 20% of the Cut-Off Date balance,
the Sponsor may terminate the Issuer (Optional Termination) by
purchasing the loans, any real estate owned (REO) properties, and
any other property remaining in the Issuer at the optional
termination price, specified in the transaction documents. After
such a purchase, the Sponsor will have to complete a qualified
liquidation, which requires a complete liquidation of assets within
the Trust and the distribution of proceeds to the appropriate
holders of regular or residual interests.
The Controlling Holder in the transaction is a majority holder (or
majority holders if there is no single majority holder) of the
outstanding Class XS Notes, initially, the Seller. The Controlling
Holder will have the option, but not the obligation, to repurchase
any mortgage loan that becomes 90 or more days delinquent under the
Mortgage Banker Association (MBA) Method (or in the case of any
mortgage loan that has been subject to a forbearance plan related
to the impact of the Coronavirus Disease (COVID-19) pandemic, on
any date from and after the date on which such loan becomes 90 or
more days delinquent under the MBA Method from the end of the
forbearance period) 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.
The transaction employs a sequential-pay cash flow structure with a
pro rata principal payment among the Class A-1, A-2, and A-3 Notes
(senior classes of Notes) subject to certain performance triggers
related to cumulative losses or delinquencies exceeding a specified
threshold (Credit Event). Also, principal proceeds can be used to
cover interest shortfalls on the senior classes of Notes (IIPP)
before being applied sequentially to amortize the balances of the
Notes. For the Class A-3 Notes (only after a Credit Event) and for
the mezzanine and subordinate classes of notes, principal proceeds
can be used to cover interest shortfalls after the more senior
tranches are paid in full. Also, the excess spread can be used to
cover realized losses first before being allocated to unpaid Cap
Carryover Amounts due to Class A-1 down to Class A-3 Notes. Of
note, the interest and principal otherwise available to pay the
Class B-3 Notes interest and interest shortfalls may be used to pay
the Class A coupons' Cap Carryover Amounts on any payment date.
DBRS Morningstar's credit ratings on the Notes address the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Notes are the related
interest payment amount, any interest carryforward amount, and the
related note amount.
DBRS Morningstar's credit ratings on Classes A-1, A-2, and A-3 also
address the credit risk associated with the increased rate of
interest applicable to these Notes if they remain outstanding on
the step-up date (November 2027) in accordance with the applicable
transaction documents.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction documents that are not financial
obligations. For example, in this transaction, DBRS Morningstar's
ratings do not address the payment of any cap carryover amounts.
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.
PRPM 2023-RCF2: Fitch Assigns Final 'BBsf' Rating on Cl. M-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to PRPM 2023-RCF2, LLC.
Entity/Debt Rating Prior
----------- ------ -----
PRPM 2023-RCF2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBBsf New Rating BBB(EXP)sf
M-2 LT BBsf New Rating BB(EXP)sf
B LT NRsf New Rating NR(EXP)sf
CERT LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the residential mortgage-backed
notes to be issued by PRPM 2023-RCF2, Asset Backed Notes, series
2023-RCF2 (PRPM 2023-RCF2), as indicated. The notes are supported
by 657 loans with a balance of $202.13 million as of the cutoff
date. This will be the fourth PRPM transaction rated by Fitch.
The notes are secured by a pool of fixed- and adjustable-rate
mortgage loans (some of which have an initial interest-only [IO]
period) that are primarily fully amortizing with original terms to
maturity of primarily 15 years to 40 years and are secured by first
liens primarily on one- to four-family residential properties,
units in planned unit developments (PUDs), co-ops, condominiums,
single-wide manufactured housing and 5- to 20-unit multifamily
properties.
Based on the transaction documents, 93.0% of the pool is comprised
of collateral that had a defect or exception to guidelines that
made it ineligible to remain in a government-sponsored entity (GSE)
pool, 4.6% are ITIN (individual tax identification number) loans
and 2.4% are seasoned performing loans.
According to Fitch, 87.8% of the loans are nonqualified mortgages
(non-QM, or NQM) as defined by the Ability-to-Repay (ATR) rule (the
Rule), 0.8% are safe-harbor QM loans and the remaining 11.3% are
exempt from the QM rule as they are investment properties or were
originated prior to the ATR rule taking effect in January 2014. The
discrepancy in non-QM percentages is due to Fitch considering
scratch and dent loans originated after January 2014 as non-QM
loans.
Fairway Independent Mortgage Corporation (Fairway) originated 25.0%
of the loans and the remaining 75.0% were originated by various
other third-party originators, each contributing less than 10%.
Fitch assesses Fairway as an 'Average' originator.
SN Servicing Corp. (SN) will service 94.7% of the loans in the pool
and Fay Servicing LLC (Fay) will service 5.3% of the loans. Fitch
rates SN and Fay 'RPS3' and 'RSS2', respectively.
There is LIBOR exposure in this transaction. While the majority of
the loans in the collateral pool comprise fixed-rate mortgages,
2.02% of the pool comprises loans with an adjustable rate that
reference the one-year CMT (constant maturity Treasury), six-month
LIBOR and 30-day Secured Overnight Financing Rate. 0.15% of the
pool is an ARM loan that references the six-month LIBOR index. The
offered A and M notes do not have LIBOR exposure as the coupons are
fixed-rate and capped at available funds. The B note is a
principal-only bond and is not entitled to interest.
Similar to other NQM transactions, classes A and M classes have a
step-up coupon feature if the deal is not called in November 2027.
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 8.0% above a long-term sustainable level (versus
7.6% on a national level as of 1Q23, down 0.2% qoq). The rapid gain
in home prices through the pandemic has shown 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.
Nonprime Credit Quality (Negative): The collateral consists of 657
first lien fixed-rate and ARM loans with maturities of up to 40
years totaling $202 million (including deferred balances).
Specifically, the pool comprises 93.55% 30-year fully amortizing
fixed-rate loans, 2.08% 15-year fully amortizing fixed-rate loans,
1.96% 30-year fully amortizing ARM loans, 1.66% 30-year and 40-year
fixed-rate and ARM loans with an initial IO period between one and
10 years, 0.49% 20-year and 25-year fully amortizing fixed-rate
loans and 0.27% one-year and 25-year balloon loans (IO). The pool
is seasoned at 24 months per the transaction documents (27 months,
as determined by Fitch).
The borrowers in this pool have relatively strong credit profiles
with a Fitch-determined weighted average (WA) FICO score of 718 (in
line with the 718 WA FICO per the transaction documents) and a
46.1% Fitch-determined debt-to-income ratio (DTI), as well as
moderate leverage, with an original combined loan-to-value ratio
(CLTV), as determined by Fitch, of 83.1% (82.1% per the transaction
documents), translating to a Fitch-calculated sustainable LTV ratio
(sLTV) of 81.2%.
In Fitch's analysis, Fitch re-coded occupancy based on due
diligence findings for some loans; as a result, Fitch will have
more investor properties in its analysis than are shown in the
transaction documents. In Fitch's analysis it considers 78.5% of
the pool to consist of loans where the borrower maintains a primary
residence (85.5% based on transaction documents), while 16.5%
comprises investor properties (9.5% based on transaction documents)
and 5.0% represents second homes (5.1% per transaction documents).
In Fitch's analysis, Fitch re-coded property types based on due
diligence findings; as a result, the percentages will not tie out
to the property types in the transaction documents. In Fitch's
analysis, the majority of the loans (82.1%) are to single-family
homes and PUDs; 10.9% are to condos; 0.2% are to co-ops; and 6.7%
are to multifamily homes, manufactured housing and other property
types. In the analysis, Fitch treated manufactured properties and
properties coded as other occupancy types as multifamily and the
probability of default (PD) was increased for these loans, as a
result.
In total, 65.2% of the loans were originated through a retail
channel. According to Fitch, 87.8% of the loans are designated as
non-QM loans and 0.8% are safe-harbor QM loans, while the remaining
11.3% are exempt from QM status. In Fitch's analysis, Fitch
considered scratch and dent loans originated after January 2014 to
be non-QM since they are no longer eligible to be in GSE pools; as
a result, Fitch's non-QM, QM and exempt from QM percentages will
not tie out to the transaction documents.
The pool contains four loans over $1.0 million, with the largest
loan at $1.17 million.
Fitch determined that self-employed, non-debt service coverage
ratio (non-DSCR) borrowers make up 27.2% of the pool; salaried
non-DSCR borrowers make up 71.0%; and 1.7% comprises investor cash
flow DSCR loans. About 16.5% of the pool comprises loans for
investor properties, according to Fitch (14.8% underwritten to
borrowers' credit profiles and 1.7% comprising investor cash flow
loans). According to Fitch, there are no second liens in the pool
and 27 loans have subordinate financing.
Around 16.8% of the pool is concentrated in California. The largest
MSA concentration is in the Los Angeles MSA (6.7%), followed by the
New York MSA (6.0%) and the Phoenix MSA (5.0%). The top three MSAs
account for 17.8% of the pool. As a result, there was no penalty
for geographic concentration.
According to Fitch, 99.9% of the pool is current as of Sept. 30,
2023. Overall, the pool characteristics resemble nonprime
collateral; therefore, the pool was analyzed using Fitch's nonprime
model.
Guideline Exception Loans (Negative): Roughly 92% of the collateral
consists of loans that had defects or exceptions to guidelines at
origination with a substantial portion originally underwritten to
GSE guidelines. The exceptions ranged from those that are
immaterial to Fitch's analysis (loan seasoning and mortgage
insurance issues) to those that are handled by Fitch's model due to
tape attributes (prior delinquencies and LTVs above guidelines) to
loans with potential compliance exceptions that received loss
adjustments (loans with miscalculated DTIs and potential ATR
issues). In addition, there are loans with missing documentation
that may extend foreclosure timelines or increase loss severity
(LS), which Fitch is able to account for in its loss analysis.
Non-QM Loans with Less than Full Documentation (Negative):
Approximately 37.1% of the pool was underwritten to less than full
documentation, according to Fitch (per the transaction documents,
93.3% was underwritten to full documentation and 6.7% was
underwritten to less than full documentation). Specifically, 2.6%
was underwritten to an alternative documentation program for
verifying income, 1.7% comprises a DSCR product, 1.6% comprises a
no documentation product and 0.7% comprises a streamline refinance.
Overall, Fitch increased the PD on non-full documentation loans to
reflect the additional risk.
In Fitch's analysis, Fitch considered less than full documentation
loans as 23.8% stated documentation, 3.5% less than full
documentation and 9.9% no documentation. The remaining 62.9% were
considered full documentation. Due to due diligence findings and
documentation treatment of certain loan documentation types (e.g.
DSCR, Alt-Doc or other), Fitch's documentation types will not match
the documentation types in the transaction documents, which viewed
the transaction as 93.3% full documentation.
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 Protection Bureau's (CFPB)
ATR Rule. This reduces the risk of borrower default arising from
lack of affordability, misrepresentation or other operational
quality risks due to the rigor of the Rule's mandates with respect
to underwriting and documentation of the borrower's ATR.
Sequential Deal Structure with Overcollateralization (Mixed): The
transaction utilizes a sequential payment structure with no
advances of delinquent principal or interest. The transaction also
includes a structural feature where it reallocates interest from
the more junior classes to pay principal on the more senior classes
on or after the occurrence of a credit event. The amount of
interest paid out as principal to the more senior classes is added
to the balance of the affected junior classes. This feature allows
for a faster paydown of the senior classes.
Offsetting this positive is that the transaction will not write
down the bonds due to potential losses or undercollateralization.
During periods of adverse performance, the subordinate bonds will
continue to be paid interest from available funds, at the expense
of principal payments that otherwise would have supported the more
senior bonds, while a more traditional structure would have seen
them written down and accruing a smaller amount of interest. The
potential for increasing amounts of undercollateralization is
partially mitigated by the reallocation of available funds after
the 68th payment date.
The coupons on the notes are based upon the lower of the available
funds cap (AFC) or the stated coupon. If the AFC is paid it is
considered a coupon cap shortfall (interest shortfall) and the
coupon cap shortfall amount is the difference between interest that
was paid (per the AFC) and what should have been paid based upon
the stated coupon.
If the transaction is not called, the coupons step up 100 basis
points (bps). The class B and the certificate class will be issued
as principal-only (PO) bonds and will not accrue interest.
The transaction has overcollateralization (OC), which will provide
subordination and protect the classes from losses.
Classes will not be written down by realized losses.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national 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
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 there is
some potential rating migration, with higher MVDs for all rated
classes compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Infinity. The third-party due diligence described in
Form 15E focused on four areas: compliance review, data integrity,
servicing review and title review. Fitch considered this
information in its analysis. Based on the results of the 100% due
diligence performed on the pool, Fitch did adjust the expected
losses.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria."
The sponsor, PRP-LB V, LLC, engaged Infinity to perform the review.
Loans reviewed under these engagements were given initial and final
compliance grades.
Fitch also received notes on exceptions based on the post close QC
performed by the GSEs on 93% of the pool. Fitch took these notes
into account during its analysis of the transaction.
An exception and waiver report was provided to Fitch, indicating
that the pool of reviewed loans has a number of exceptions and
waivers. Fitch determined that some of the exceptions and waivers
do materially affect the overall credit risk of the loans and
increased its loss expectations on these loans to account for the
issues found in the due diligence process on the loans that are
considered scratch and dent with material findings. For the
remaining loans, Fitch did not consider the exceptions (if any) to
be material due to the presence of compensating factors, such as
having liquid reserves or a FICO above guideline requirements or
LTVs or DTIs below guideline requirements. Therefore, no
adjustments were needed to compensate for these occurrences on the
non-scratch and dent loans.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format. The ASF data tape
layout was established with input from various industry
participants, including rating agencies, issuers, originators,
investors and others, to produce an industry standard for the
pool-level data in support of the U.S. RMBS securitization market.
The data contained in the data tape layout were populated by the
due diligence company and no material discrepancies were noted.
ESG CONSIDERATIONS
PRPM 2023-RCF2 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to elevated operational risk, which
resulted in an increase in expected losses. While the reviewed
originators and servicing parties did not have a material impact on
the expected losses, the Tier 2 R&W framework with an unrated
counterparty along with approximately 56% of the loans in the pool
being underwritten by originators that have not been assessed by
Fitch resulted in an increase in the expected losses and is
relevant to the ratings.
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.
RAD CLO 22: Fitch Assigns 'BBsf' Rating on E Notes, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to RAD CLO
22 Ltd.
Entity/Debt Rating
----------- ------
Rad CLO 22 Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BBsf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
RAD CLO 22, Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Irradiant Partners, LP. Net proceeds from the issuance of the
secured and 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'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.58, 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
98.49% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.14% versus a
minimum covenant, in accordance with the initial expected matrix
point of 74%.
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 5.2-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.
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-2, between
'BB+sf' and 'A+sf' for class B, between 'Bsf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, '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.
RCKT MORTGAGE 2023-CES3: Fitch Assigns Bsf Rating on Cl. B-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings to the residential
mortgage-backed notes issued by RCKT Mortgage Trust 2023-CES3 (RCKT
2023-CES3).
Entity/Debt Rating Prior
----------- ------ -----
RCKT Mortgage
Trust 2023-CES3
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1A LT AAAsf New Rating AAA(EXP)sf
A-1B LT AAAsf New Rating AAA(EXP)sf
A-1L LT WDsf Withdrawn AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT AAsf New Rating AA(EXP)sf
A-4 LT Asf New Rating A(EXP)sf
A-5 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
LT-R LT NRsf New Rating NR(EXP)sf
M-1 LT Asf New Rating A(EXP)sf
M-2 LT BBBsf New Rating BBB(EXP)sf
R LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The notes are supported by 4,846 loans with a total balance of
approximately $371 million as of the cut-off date. The pool is
backed by prime, closed-end second-lien collateral originated by
Rocket Mortgage, LLC, formerly known as Quicken Loans, LLC.
Distributions of principal and interest and loss allocations are
based on a senior-subordinate, sequential pay structure, which also
presents a 50% excess cashflow turbo feature.
Fitch has withdrawn the expected rating of 'AAA(EXP)sf' for the
previous class A-1L notes as the loan was not funded at close and
is no longer being offered.
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 9.3% above a long-term sustainable level (versus
7.6% on a national level as of 1Q23, down 0.2% qoq). 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.
Prime Credit Quality (Positive): The collateral consists of 4,846
loans totaling $371 million and seasoned at approximately one month
in aggregate. The borrowers have a strong credit profile consisting
of a 741 Fitch model FICO, a 37% debt-to-income ratio (DTI) and
moderate leverage comprising a 76% sustainable loan-to-value ratio
(sLTV).
Of the pool, 99.4% consists of loans where the borrower maintains a
primary residence and 0.6% represents second homes, while 93.6% of
loans were originated through a retail channel. Additionally, 43.4%
of loans are designated as qualified mortgages (QM), 27.4% are
higher priced QM (HPQM) and 29.2% are non-QM. Given the 100% loss
severity (LS) assumption, no additional penalties were applied for
the HPQM and non-QM loan statuses.
Second Lien Collateral (Negative): The entirety of the collateral
pool comprises closed-end second-lien loans originated by Rocket
Mortgage. Fitch assumed no recovery and a 100% LS 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 to Fitch's
probability of default (PD) assumption.
Sequential Structure with Turbo Feature (Positive): The transaction
features a monthly excess cashflow priority of payments that
distributes remaining amounts from the interest and principal
priority of payments. These amounts will be applied as principal
first to repay any current and previously allocated cumulative
applied realized loss amounts and then to repay any potential net
weighted average coupon (WAC) shortfalls.
Unlike other transactions that include a material amount of excess
interest, RCKT 2023-CES3 does not distribute all remaining amounts
to the class XS notes. Instead, 50% of any remaining cash
thereafter will be implemented to pay principal for classes
A-1A/A-1B to B-3 sequentially. The other 50% is allocated to pay
the owner trustee, collateral trustee, Delaware trustee, paying
agent, custodian, asset manager and reviewer for extraordinary
trust expenses to the extent not paid due to application of the
annual cap and, subsequently, to class XS. This is a much more
supportive structure and ensures the transaction will benefit from
excess interest regardless of default timing.
To haircut the excess cashflow present in the transaction, Fitch
tested the structure at a 50 basis points (bps) servicing fee and
applied haircuts to the WAC through a rate modification assumption.
This assumption was derived as a 2.5% haircut on 40% of the
non-delinquent projection in Fitch's stresses. Given the lower
projected delinquency (as a result of the charge-off feature
described below), there was a higher current percentage and a
higher rate modification assumption, as a result.
180-Day Charge-off Feature (Positive): The asset manager has the
ability, but not the obligation, to instruct the servicer to write
off the balance of a loan at 180 days delinquent (DQ) based on the
Mortgage Bankers Association (MBA) delinquency method. To the
extent the servicer expects a meaningful recovery in any
liquidation scenario, the asset manager may direct the servicer to
continue to monitor the loan and not charge it off.
The 180-day charge-off feature will result in losses incurred
sooner while there is a larger amount of excess interest to protect
against losses. This compares favorably with a delayed liquidation
scenario where the loss occurs later in the life of the transaction
and less excess is available. If the loan is not charged off due to
a presumed recovery, this will provide added benefit to the
transaction, above Fitch's expectations.
Additionally, subsequent recoveries realized after the write-down
at 180 days' DQ, excluding forbearance mortgage or loss mitigation
loans, will be passed on to bondholders as principal.
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 metropolitan statistical area level. Sensitivity
analysis was conducted at the state and national level to assess
the effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 41.1% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC Diligence, LLC. The third-party due diligence
described in Form 15E focused on credit, regulatory compliance, and
property valuation. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment to
its analysis: a 5% PD credit to the 25% of the pool by loan count
in which diligence was conducted. This adjustment resulted in a
16bps reduction to the 'AAAsf' expected loss.
ESG CONSIDERATIONS
RCKT 2023-CES3 has an ESG Relevance Score of '4 [+]' for
Transaction Parties & Operational Risk due to lower operational
risk considering R&W, transaction due diligence and originator and
servicer assessments which has a positive 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.
REALT 2016-2: DBRS Confirms B(high) Rating on Class G Certs
-----------------------------------------------------------
DBRS Limited upgraded its credit ratings on three classes of the
Commercial Mortgage Pass-Through Certificates, Series 2016-2 issued
by Real Estate Asset Liquidity Trust (REALT) Series 2016-2 as
follows:
-- Class C to AAA (sf) from AA (high) (sf)
-- Class X to AA (high) (sf) from AA (sf)
-- Class D to AA (sf) from AA (low) (sf)
In addition, DBRS Morningstar confirmed its credit ratings on the
remaining five classes as follows:
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class E at A (sf)
-- Class F at BB (high) (sf)
-- Class G at B (high) (sf)
All trends are Stable.
The credit rating upgrades reflect the significant paydown since
issuance for the transaction and the overall stable performance of
the remaining collateral. Since DBRS Morningstar's last credit
rating action, two loans (5.0% of the original pool balance) were
repaid in full at their scheduled maturity dates. In total, loan
repayments and amortization have reduced the pool balance to $163.6
million as of the October 2023 reporting, representing a collateral
reduction of 61.2% since issuance. Two loans, representing 13.2% of
the current balance, are scheduled to mature in the second half of
2024. Both of the remaining 2024 maturities benefit from some level
of meaningful recourse to the loan's sponsor, as do the majority of
the remaining loans in the pool. One loan is fully defeased,
representing 5.5% of the current pool balance. Three loans,
representing 20.4% of the pool balance, are on the servicer's
watchlist and there are no specially serviced or delinquent loans.
The largest loan on the servicer's watchlist, 480 Heslper Road
(Prospectus ID#7, 8.1% of the pool), is being monitored for
deferred maintenance and the upcoming maturity. The loan is
performing as expected, with a debt service coverage ratio (DSCR)
of nearly 2.0 times (x) as of YE2022. The collateral anchored
retail property in Cambridge is nearly fully occupied and benefits
from long-term tenancy that generally has lease expiration dates
beyond the loans scheduled maturity date in October 2024. The loan
is also full recourse to the sponsor. Given the strong credit
metrics, a refinance is expected at maturity. The remaining two
loans on the servicer's watchlist, The Opus (Prospetus ID#8, 7.2%
of the pool) and The Duke of Devonshire (Prospectus ID#17, 5.2% of
the pool), are being monitored for low DSCRs that were below
breakeven based on the YE2022 financials. The Opus loan is secured
by a boutique hotel in Vancouver, and cash flows were affected by
the decline in travel amid the Coronavirus Disease (COVID-19)
pandemic. However, revenue per available room has rebounded
significantly with the 2023 reporting, which showed performance
above pre-pandemic levels, suggesting the 2023 cash flows should
show significant improvement over the prior year.
The Duke of Devonshire loan is secured by a 105-unit independent
living facility in Ottawa. The loan has been on the servicer's
watchlist intermittently since October 2017 for a low DSCR, driven
by depressed occupancy rates since issuance. Performance declines
have been attributed to an oversupply in the local market. The
property is owned and operated by Chartwell Retirement Residences
(Chartwell; rated BBB (low) with a Negative trend by DBRS
Morningstar). As noted in the press release for that credit in
April 2023, DBRS Morningstar noted the Negative trend reflected the
company's debt load coupled with the slower-than-expected occupancy
recovery and elevated operating expense environment attributed to
the effects of the pandemic.
As of March 2023, the property was 56.0% occupied, an improvement
from 44.0% in December 2021. Litigation against the vendor has been
ongoing since January 2018 relating to breach of
contract/fraudulent misrepresentation claims, with the most recent
update from the servicer indicating litigation was still in the
discovery stage. The loan is full recourse to Chartwell and,
although the company has recently dealt with some challenges within
their portfolio, it is noteworthy that the subject loan has never
been delinquent. However, the sustained performance declines and
ongoing litigation could affect the scheduled maturity in September
2024. As such, in the analysis for this review, DBRS Morningstar
modeled the loan with an elevated probability of default, resulting
in an expected loss (EL) that was nearly double the pool average
EL.
The transaction is concentrated by property type with loans backed
by office, retail, and industrial properties representing 34.8%,
19.0%, and 14.9% 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. Despite the high
concentration of office loans, the majority of the collateral
properties benefit from historically stable operations, with a
significant concentration of government tenants and leases signed
to tenants on a long-term basis. According to the YE2022 reporting,
the pool's office loans reported weighted-average occupancy and
DSCR figures of more than 95% and 1.50x. It is noteworthy that
there is a concentration of leases expiring during 2024, but all
affected loans (excluding one representing 3.3% of the pool)
benefit from some level of meaningful recourse to the loan's
sponsor.
Notes: All figures are in Canadian dollars unless otherwise noted.
REALT 2017: DBRS Confirms B Rating on Class G Certs
---------------------------------------------------
DBRS, Inc. upgraded its credit ratings on three classes of the
Commercial Mortgage Pass-Through Certificates, Series 2017 issued
by Real Estate Asset Liquidity Trust (REALT) Series 2017 as
follows:
-- Class B to AA (high) (sf) from AA (sf)
-- Class X to AA (high) (sf) from AA (low) (sf)
-- Class C at to AA (sf) from A (high) (sf)
In addition, DBRS Morningstar confirmed its credit ratings on the
following classes:
-- Class A-2 at AAA (sf)
-- Class D-1 at BBB (high) (sf)
-- Class D-2 at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
DBRS Morningstar also changed the trends on Classes D-1 and D-2 to
Positive from Stable. The trends on all remaining classes are
Stable.
The credit rating upgrades and Positive trends reflect the paydown
of approximately $70.3 million since DBRS Morningstar's last credit
rating action in November 2022 and the overall stable-to-improving
performance of the remaining collateral. While there are increased
risks for a few loans, to which DBRS Morningstar applied elevated
probability of default (POD) factors in its analysis, reported
performance metrics for most of the pool have been strong, as
illustrated by the weighted-average (WA) debt service coverage
ratio (DSCR) of 1.74 times (x) based on the most recent year-end
financials, compared with the YE2021 DSCR of 1.56x.
As of the October 2023 remittance, 43 of the original 71 loans
remain in the pool with a current trust balance of $185.6 million,
reflecting collateral reduction of 54.4% since issuance. Since the
last credit rating action, the pool size has been reduced by 27.5%.
One loan is defeased, representing 4.2% of the pool. To date, there
have been no losses to the trust. There are no delinquent or
specially serviced loans, although one loan representing 14.2% of
the pool balance is on the servicer's watchlist because of
occupancy challenges, as further described below. It is also
noteworthy that the majority of the loans in the pool benefit from
some level of material recourse to the loan sponsor.
Ten loans, representing 22.4% of the current pool balance, have
maturity dates within the next 12 months and are expected to repay
at the scheduled maturity date or execute short-term forbearances,
based on their healthy credit metrics. This expected paydown will
lead to further improvement in credit enhancement, especially for
the senior and mid-capital stack bonds. The highest property type
concentration is retail, representing 42.1% of the pool, followed
by self-storage and industrial making up 26.2% and 12.0%,
respectively. Although the Coronavirus Disease (COVID-19) pandemic
exacerbated existing concerns within the retail sector and changing
consumer trends, there have not been any loan defaults or other
indicators to date suggesting significantly increased risks from
issuance. Only three loans, representing 8.3% of the pool balance,
are backed by office properties, further highlighting the favorable
makeup of the pool's underlying collateral.
The largest loan in the pool is Skyline Thunder Centre (Prospectus
ID#1; 14.2% of the current pool balance), which is secured by the
borrower's fee interest in a 168,087-square-foot (sf) anchored
retail property in Thunder Bay, Ontario. The loan was added to the
servicer's watchlist in September 2020 following the departure of
previous tenants Home Outfitters, Marks Work Warehouse, and Pier 1
Imports, which drove occupancy to a low of 65% at YE2019. Occupancy
has rebounded slightly, most recently reported at 83.3% as of
February 2023, but below the issuance occupancy rate of 99%.
According to servicer reported financials, the YE2022 DSCR was
0.88x, up from 0.40x at YE2020, but well below the DBRS Morningstar
DSCR of 1.31x at issuance. Over the next year, six tenants
composing approximately 20% of net rentable area (NRA) have
scheduled lease expirations, including the largest tenant Old Navy
which accounts for 8.9% of NRA and has a lease scheduled to expire
in November 2024. Mitigating factors include no prior events of
default or relief requests, as well as the loan's full recourse
nature to the sponsor, Skyline Commercial REIT. To account for the
increased risks associated with the occupancy challenges, DBRS
Morningstar analyzed this loan with a POD penalty resulting in an
expected loss that was more than three times the pool WA expected
loss.
The Worthington Office North Bay loan (Prospectus ID#22, 3.0% of
the current pool balance) is secured by a 71,491-sf office property
in North Bay, Ontario, and is considered a loan of concern because
of its declining performance metrics since issuance. According to
the servicer reported financials, occupancy and DSCR were 69.9% and
0.86x, respectively, as of YE2022, compared with 71.8% and 0.88x at
YE2021, well below the issuance occupancy of 91% and the DBRS
Morningstar DSCR of 1.38x at issuance. Most recently, the former
third-largest tenant Strickland Larmer vacated 8.0% of NRA upon
lease expiration in 2022 while the two largest tenants, Canada Post
Corporation, 27.3% of NRA, and Redpath Mining 12.8% of NRA,
extended their leases to 2027 and 2032, respectively. In its
analysis, DBRS Morningstar applied a POD penalty to this loan,
reflecting the increased risk associated with the performance
challenges, resulting in an expected loss that was more than double
the pool WA expected loss.
Notes: All figures are in Canadian dollars unless otherwise noted.
REGIONAL MANAGEMENT 2021-2: S&P Raises D Notes Rating to BB+ (sf)
-----------------------------------------------------------------
S&P Global Ratings raised its ratings on nine classes of notes and
affirmed its ratings on 10 classes of notes from Regional
Management Issuance Trust (RMIT) 2020-1, 2021-1, 2021-2, 2022-1,
and 2022-2B.
S&P said, "The rating actions reflect our view of each
transaction's current and future collateral pool performance, as
well as each transaction's structure and credit enhancement. Our
analysis also incorporates secondary credit factors, including
credit stability, payment priorities under various scenarios, and
sector- and issuer-specific analyses. The upgrades and affirmations
reflect our view that the total credit support as a percentage of
the series' pool balances, compared with our expected defaults, is
commensurate with each raised and affirmed rating. Note, we
previously removed our ratings caps on the notes for the four RMIT
series issued prior to RMIT 2022-2B.
"We also reviewed each transaction's operational, legal, and
counterparty risks, and considering all of these factors, we
believe that the creditworthiness of the notes is consistent with
the raised and affirmed ratings."
Each RMIT transaction is backed by a pool of fixed-rate personal
consumer loans and contains a sequential principal payment
priority, which pays the classes of notes in order of seniority.
Each transaction also benefits from credit enhancement in the form
of a reserve account, overcollateralization, subordination for the
higher-rated tranches, and excess spread.
Of the five RMIT transactions we reviewed, four remain in their
revolving periods and are scheduled to stop revolving and enter
amortization between 2024 and 2026. The oldest transaction's (RMIT
2020-1) revolving period ended on Sept. 30, 2023, and has entered
amortization. S&P said, "Since then, collections are no longer used
to acquire additional loans but rather are used to redeem the
notes. We upgraded the series 2020-1 class A, B, C, and D notes in
part based on the trust pool's characteristics becoming fixed and
known, as well as the transaction's actual performance to date and
the total credit enhancement available for the respective classes.
We expect the credit enhancement to continue to grow for the
remaining life of the transaction."
The four most recent transactions remain in their revolving periods
and, similar to its approach at the initial issuance, S&P used cash
flow modeling assumptions reflective of the worst-case pool
composition permitted by the transaction document eligibility
criteria.
Cash Flow Modeling Assumptions
S&P rans multiple stressed cash flow scenarios commensurate with
the various rating scenarios. S&P's scenarios included certain
assumptions:
-- Annualized monthly loss rates of approximately 11.00% to
15.48%, which increased linearly over 12 months to a peak loss
equal to a rating-stressed multiple of the base case, which for the
'AAA' stress rating scenario, approximated 50.00%-67.00%.
-- A 3.00% base case recovery rate applied over 48 months, and a
haircut accordingly for each stress scenario.
-- Voluntary prepayment speeds ranging from 3.00%-10.00%.
-- The cash flow results showed the timely payment of interest and
principal for all of the notes in the transactions under the
respective rating stress scenarios.
S&P will continue to monitor the performance of all of the
outstanding transactions to ensure that the credit enhancement
remains sufficient, in its view, to cover its default expectations
under our stress scenarios for each of the rated classes.
Ratings Raised
Regional Management Issuance Trust 2020-1
Class A to AAA (sf) from A (sf)
Class B to AA+ (sf) from A- (sf)
Class C to A+ (sf) from BBB+ (sf)
Class D to BBB (sf) from BB+ (sf)
Regional Management Issuance Trust 2021-1
Class A to AA- (sf) from A (sf)
Class B to A+ (sf) from A- (sf)
Class C to BBB+ (sf) from BBB- (sf)
Class D to BB+ (sf) from BB- (sf)
Regional Management Issuance Trust 2022-1
Class A to AA+ (sf) from AA (sf)
Ratings Affirmed
Regional Management Issuance Trust 2021-2
Class A: AA- (sf)
Class B: A- (sf)
Class C: BBB- (sf)
Class D: BB (sf)
Regional Management Issuance Trust 2022-1
Class B: A- (sf)
Class C: BBB- (sf)
Class D: BB (sf)
Regional Management Issuance Trust 2022-2B
Class A: AAA (sf)
Class B: A- (sf)
Class C: BBB- (sf)
RR 27 LTD: Fitch Assigns Final 'BBsf' Rating on Class D Notes
-------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to RR
27 LTD.
Entity/Debt Rating Prior
----------- ------ -----
RR 27 LTD
A-1a LT AAAsf New Rating AAA(EXP)sf
A-1b LT AAAsf New Rating AAA(EXP)sf
A-2 LT WDsf Withdrawn AA(EXP)sf
A-2a LT AA+sf New Rating
A-2b LT AAsf New Rating
B LT Asf New Rating
B-1 LT WDsf Withdrawn A+(EXP)sf
B-2 LT WDsf Withdrawn A(EXP)sf
C-1 LT BBBsf New Rating BBB(EXP)sf
C-2 LT BBB-sf New Rating BBB-(EXP)sf
D LT BBsf New Rating BB(EXP)sf
E LT NRsf New Rating NR(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
RR 27 LTD (the issuer) is an arbitrage cash flow collateralized
loan obligation (CLO) that will be managed by Redding Ridge Asset
Management LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans.
Fitch has withdrawn expected ratings of 'AA(EXP)sf', 'A+(EXP)sf',
and 'A(EXP)sf' for the class A-2 notes, class B-1 notes, and class
B-2 notes, respectively, as they were not issued.
Instead, Fitch has assigned final ratings of 'AA+sf', 'AAsf', and
'Asf' with a Stable Rating Outlook for the class A-2a notes, class
A-2b notes and class B notes, respectively, as they were
newly-issued.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
100% first-lien senior secured loans and has a weighted average
recovery assumption of 73.7%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 37% of the portfolio balance in aggregate, while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
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 is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1a, between
'BBB+sf' and 'AA+sf' for class A-1b, between 'BB+sf' and 'A+sf' for
class A-2a, between 'BB+sf' and 'A+sf' for class A-2b, between
'B+sf' and 'BBB+sf' for class B, between less than 'B-sf' and
'BB+sf' for class C-1, between less than 'B-sf' and 'BB+sf' for
class C-2; and between less than 'B-sf' and 'B+sf' for class D.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1a and class
A-1b 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 A-2a, 'AAAsf' for class A-2b,
'A+sf' for class B, 'A+sf' for class C-1, 'A-sf' for class C-2; and
'BBB+sf' for class D.
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.
SEQUOIA MORTGAGE 2023-5: Fitch Assigns 'BBsf' Rating on B-4 Certs
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates issued by Sequoia Mortgage Trust
2023-5 (SEMT 2023-5)
Entity/Debt Rating Prior
----------- ------ -----
SEMT 2023-5
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-25 LT AAAsf New Rating AAA(EXP)sf
A-IO1 LT AAAsf New Rating AAA(EXP)sf
A-IO2 LT AAAsf New Rating AAA(EXP)sf
A-IO3 LT AAAsf New Rating AAA(EXP)sf
A-IO4 LT AAAsf New Rating AAA(EXP)sf
A-IO5 LT AAAsf New Rating AAA(EXP)sf
A-IO6 LT AAAsf New Rating AAA(EXP)sf
A-IO7 LT AAAsf New Rating AAA(EXP)sf
A-IO8 LT AAAsf New Rating AAA(EXP)sf
A-IO9 LT AAAsf New Rating AAA(EXP)sf
A-IO10 LT AAAsf New Rating AAA(EXP)sf
A-IO11 LT AAAsf New Rating AAA(EXP)sf
A-IO12 LT AAAsf New Rating AAA(EXP)sf
A-IO13 LT AAAsf New Rating AAA(EXP)sf
A-IO14 LT AAAsf New Rating AAA(EXP)sf
A-IO15 LT AAAsf New Rating AAA(EXP)sf
A-IO16 LT AAAsf New Rating AAA(EXP)sf
A-IO17 LT AAAsf New Rating AAA(EXP)sf
A-IO18 LT AAAsf New Rating AAA(EXP)sf
A-IO19 LT AAAsf New Rating AAA(EXP)sf
A-IO20 LT AAAsf New Rating AAA(EXP)sf
A-IO21 LT AAAsf New Rating AAA(EXP)sf
A-IO22 LT AAAsf New Rating AAA(EXP)sf
A-IO23 LT AAAsf New Rating AAA(EXP)sf
A-IO24 LT AAAsf New Rating AAA(EXP)sf
A-IO25 LT AAAsf New Rating AAA(EXP)sf
A-IO26 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT NRsf New Rating NR(EXP)sf
A-IOS LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the residential mortgage-backed
certificates issued by Sequoia Mortgage Trust 2023-5 (SEMT 2023-5)
as indicated. The certificates are supported by 317 loans with a
total balance of approximately $340.1 million as of the cutoff
date. The pool consists of prime jumbo fixed-rate mortgages
acquired by Redwood Residential Acquisition Corp. from various
mortgage originators. Distributions of principal and interest (P&I)
and loss allocations are based on a senior-subordinate,
shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
317 loans totaling approximately $340.1 million and seasoned
approximately seven months in aggregate. The borrowers have a
strong credit profile (773 model FICO and 35.0% debt to income
ratio [DTI]) and moderate leverage (76.5% sustainable loan to value
ratio [sLTV] and 70.6% mark-to-market combined LTV ratio [cLTV]).
Overall, the pool consists of 95.1% of loans where the borrower
maintains a primary residence, while 4.9% are second-home; 76.3% of
the loans were originated through a retail channel. Additionally,
99.7% are designated as qualified mortgage (QM) loans, and 0.3% are
designated as QM rebuttable presumption.
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 7.4% above a long-term sustainable level (versus
7.6% on a national level as of 1Q23, down 0.2% since last quarter).
Home prices increased 1.0% yoy nationally as of August 2023 despite
regional declines but are still being supported by limited
inventory.
Shifting-Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps to maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent (a stop-advance loan). Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps to limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in high
delinquency scenarios.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 39.8% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
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, AMC, Digital Risk and Incenter. The
third-party due diligence described in Form 15E focused on credit,
compliance, and property valuation. Fitch considered this
information in its analysis and, as a result, Fitch made the
following adjustment(s) to its analysis: a 4.2% reduction in its
analysis. This adjustment resulted in a 13bps reduction to the
'AAAsf' expected loss.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SOUND POINT 37: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Sound Point CLO 37, Ltd.
Entity/Debt Rating
----------- ------
Sound Point
CLO 37, Ltd.
A-1 LT NR(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Sound Point CLO 37, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Sound
Point CLO C-MOA, LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $400.0 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.1, versus a maximum covenant, in accordance with
the initial target matrix point of 24.7. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.5% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.3% versus a
minimum covenant, in accordance with the initial target matrix
point of 72.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40.1% of the portfolio balance in aggregate while
the top five obligors can represent up to 9.0% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D; and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 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, '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 the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
SYMPHONY CLO 40: S&P Assigns BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to Symphony CLO 40
Ltd./Symphony CLO 40 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 Symphony Alternative Asset Management
LLC, a subsidiary of Nuveen 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 debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Symphony CLO 40 Ltd./Symphony CLO 40 LLC
Class A-1(i), $183.00 million: AAA (sf)
Class A-1-L loans(i), $69.00 million: AAA (sf)
Class A-2, $8.00 million: AAA (sf)
Class B, $44.00 million: AA (sf)
Class C-1 (deferrable), $14.00 million: A+ (sf)
Class C-2 (deferrable), $8.00 million: A (sf)
Class D (deferrable), $26.00 million: BBB- (sf)
Class E (deferrable), $11.00 million: BB- (sf)
Subordinated notes, $36.40 million: Not rated
(i)All or a portion of the class A-1-L loans can be converted into
class A-1 notes. Any conversion of loans to notes will result in
the reduction of such amount from the class A-1-L loans and a
proportionate increase in class A-1 notes. No notes may be
converted to loans. Upon all loans being converted to notes, the
class A-1-L loans will cease to be outstanding.
TRIMARAN CAVU 2023-2: S&P Assigns BB- (sf) Rating on Cl. E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Trimaran CAVU 2023-2
Ltd./Trimaran CAVU 2023-2 LLC's fixed- and floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Trimaran Advisors LLC.
The 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
Trimaran CAVU 2023-2 Ltd./Trimaran CAVU 2023-2 LLC
Class A, $283.500 million: Not rated
Class B-1, $53.000 million: AA (sf)
Class B-2, $5.500 million: AA (sf)
Class C-1 (deferrable), $23.000 million: A+ (sf)
Class C-2 (deferrable), $4.000 million: A+ (sf)
Class D-1A (deferrable), $18.000 million: BBB (sf)
Class D-1B (deferrable), $4.500 million: BBB (sf)
Class D-2 (deferrable), $4.500 million: BBB- (sf)
Class E (deferrable), $14.175 million: BB- (sf)
Subordinated notes, $48.250 million: Not rated
UBS COMMERCIAL 2017-C4: Fitch Affirms B- Rating to 2 Tranches
-------------------------------------------------------------
Fitch Ratings has affirmed UBS Commercial Mortgage Trust,
commercial mortgage pass-through certificates, series 2017-C4 (UBS
2017-C4). Rating Outlooks on six classes have been revised to
Negative from Stable. The under criteria observation (UCO) has been
resolved.
Entity/Debt Rating Prior
----------- ------ -----
UBS 2017-C4
A3 90276RBD9 LT AAAsf Affirmed AAAsf
A4 90276RBE7 LT AAAsf Affirmed AAAsf
AS 90276RBH0 LT AAAsf Affirmed AAAsf
ASB 90276RBC1 LT AAAsf Affirmed AAAsf
B 90276RBJ6 LT AA-sf Affirmed AA-sf
C 90276RBK3 LT A-sf Affirmed A-sf
D 90276RAL2 LT BBB-sf Affirmed BBB-sf
E 90276RAN8 LT BB-sf Affirmed BB-sf
F 90276RAQ1 LT B-sf Affirmed B-sf
XA 90276RBF4 LT AAAsf Affirmed AAAsf
XB 90276RBG2 LT AA-sf Affirmed AA-sf
XD 90276RAA6 LT BBB-sf Affirmed BBB-sf
XE 90276RAC2 LT BB-sf Affirmed BB-sf
XF 90276RAE8 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 affirmations reflect the impact of the criteria and generally
stable performance of the pool since Fitch's prior rating action.
The Negative Outlooks reflect the high concentration of office
loans (27.8%) and the potential for downgrades from any further
deterioration of the Fitch Loans of Concern (FLOCs) and loans in
special servicing, most notably 1600 Corporate Campus (2.9% of the
pool), Fairmount at Brewerytown (4.0%), 144 South Harrison (4.1%)
and 401 West Ontario (0.9%).
Fitch has identified 12 loans (27.8% of the pool) as FLOCs, which
include three loans (5.3%) in special servicing. Fitch's current
ratings reflect a 'Bsf' rating case loss of 5.4%
Fitch Loans of Concern: 1600 Corporate Center (2.9% of the pool),
the largest contributor to loss expectations, is secured by a
256,238 sf suburban office building in Rolling Meadows, Illinois.
Performance has deteriorated due to the departure of the second
largest tenant, Alliant Credit Union (25% of NRA) at lease
expiration in 2022 and downsizing by the largest tenant, Bank of
America. Bank of America downsized to 25% of the building square
footage from 36% in conjunction with a lease renewal through 2029.
As of March 2023 occupancy was 40% with NOI DSCR of -0.90x. The
loan transferred in December 2022 as the sponsor indicated
unwillingness to contribute any further capital to the property. A
receiver was appointed in July 2023, and the servicer is pursuing
foreclosure.
The loan's 'Bsf' rating case loss of 60% (prior to concentration
adjustments) reflects a discount to a recent appraisal value, which
equates to a recovery value of $32 psf.
Fairmount at Brewerytown (4.0%), the second largest contributor to
loss, is secured by a six-story mid-rise loft style apartment
building with a total of 161 units, 12,450-sf of ground floor
retail space and garage parking for 110 vehicles. The loan returned
to master servicing in March 2022 subsequent to local developers
assuming the loan in October 2021. The new sponsors specialize in
revitalizing underused spaces and have direct experience in the
subject location and product-type conversions. The loan has been
current since the assumption. The loan had previously transferred
to special servicing in June 2020 due to payment default. The
property was impacted by the pandemic with tenants not making
rental payments, along with incurring significant capex costs
related to HVAC and other repairs which were creating cash flow
issues prior to the pandemic. The borrower continues to replace
faulty HVAC throughout the building as units turn over. The most
recently reported occupancy as of YE 2022 was 71% with NOI DSCR of
1.23x, which compares with 92% at YE 2020 with NOI DSCR of 1.16x.
The loan's 'Bsf' rating case loss of 14% (prior to concentration
adjustments) reflects an 8.50% cap rate and a 7.5% stress to YE
2022 NOI which equates to a stressed value of $150,000 per unit.
The next largest contributor to loss, 144 South Harrison (4.1%), is
secured by a 156-unit mid-rise multifamily building in East Orange,
New Jersey, approximately 15 miles from New York City. The building
was constructed in 2017 and consists of 26 studio units, 79
one-bedrooms, 26 one-bed plus study units, and 25 two-bedrooms. As
of March 2023, occupancy was 93%, an improvement from 90% at YE
2022 and 92% at YE 2021. Although occupancy has remained stable,
cash flow has deteriorated with NOI DSCR of 1.08x as of March 2023
as compared to 1.13x at YE 2022 and 1.46x at YE 2021. Cashflow has
been affected by higher expenses, most notably in a significantly
higher 'Other Expense' line item, in addition to higher payroll and
benefits, R&M and real estate taxes.
The loan's 'Bsf' rating case loss of 12% (prior to concentration
adjustments) reflects an 8.75% cap rate, 7.5% stress to YE 2022 NOI
and elevated probability of default to reflect heightened default
risk due to deteriorated cashflow. This equates to a stressed value
of $162,000 per unit.
Minimal Change in Credit Enhancement: (CE): As of the October 2023
distribution date, the pool's aggregate balance has been reduced by
14.2% from issuance. Twelve loans representing 40% of the pool are
interest-only for the full term. An additional 17 loans
representing 35% of the pool were structured with partial
interest-only terms, all of which have commenced amortization. The
vast majority of loans are scheduled to mature in 2027, though
there is one (1.5% of the pool) maturing in 2023 and one (0.6% of
the pool) maturing in 2026.
Credit Opinion Loans: Three loans, representing 12.2% of the pool,
had credit opinions at issuance. 237 Park Avenue (7.1% of the
pool), 245 Park Avenue (4.3%) and Del Amo Fashion Center (0.7%)
remain credit opinion loans.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool level losses from
underperforming or specially serviced loans. Downgrades to the
'AA-sf' and 'AAAsf' categories are not likely due to the position
in the capital structure but may occur should interest shortfalls
affect the classes.
Downgrades to the 'BBB-sf' and A-sf' category would occur should
overall pool losses increase significantly and/or one or more large
loans have an outsized loss, which would erode CE. Downgrades to
the 'BB-sf' and 'B-sf' categories would occur should loss
expectations increase and if performance of the FLOCs fail to
stabilize or loans default and/or transfer to the special servicer.
FLOCs with potential for further deterioration that would drive
potential downgrades include 144 South Harrison, 1600 Corporate
Center, DoubleTree Berkeley Marina, 401 West Ontario, and Fairmount
at Brewerytown.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Factors that could lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades of the 'A-sf' and 'AA-sf' categories would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection, increased concentrations and further
underperformance of the FLOCs could cause this trend to reverse.
Upgrades to the 'BBB-sf' category would be limited based on
sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls. Upgrades to 'BB-sf' and
'B-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.
UNISON TRUST 2023-2: DBRS Gives Prov. BB(low) Rating on B Notes
---------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Notes to be issued by Unison Trust 2023-2 (UNSN 2023-2 or the
Transaction):
-- $91.8 million Class A at BBB (sf)
-- $21.6 million Class B at BB (low) (sf)
The BBB (sf) rating reflects credit enhancement of 54.70% for the
Class A notes, and the BB (low) (sf) rating reflects credit
enhancement of 44.00% for the Class B notes.
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 the homeowners 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 earns an investment return based on the
future value of the property. Some HEI programs include a returns
cap, but no caps exist in UNSN 2023-2.
Like reverse mortgage loans, the HEI underwriting approach is
asset-based, meaning there is greater emphasis placed on the value
of the underlying property and the amount of home equity than on
the credit quality of the homeowner. The property value is the main
focus for predicting investment return because it is the primary
source of funds to satisfy the obligation. HEIs are nonrecourse; in
a default situation a homeowner is not required to provide
additional funds when the HEI settlement amount exceeds the
remaining equity value in the property (after accounting for any
other obligations such as senior liens, if applicable). Recovery of
the Investment Amount and any Originator return is primarily
subject to the amount of appreciation/depreciation on the property,
the amount of debt that may be senior to the HEI, and the cap on
investor return, if applicable.
As of the cut-off date, 46 contracts in the Transaction are
first-lien contracts, representing roughly $3.81 million in current
intrinsic value; 814 are second-lien contracts, representing
roughly $72.04 million in current intrinsic value; 161 are
third-lien contracts, representing roughly $17.25 million in
current intrinsic value; and two are fourth-lien contracts,
representing roughly $0.12 million in current intrinsic value.
Of the pool, 4.08% of the contracts by original investment amount
are first lien and have a weighted-average (WA) original
sensitivity ratio of 4.03, 77.28% are second-lien contracts and
have a WA sensitivity ratio of 3.96, 18.50% of the pool are
third-lien contracts with a WA sensitivity ratio of 4.00, and the
remaining 0.13% of the pool are fourth-lien contracts and have a WA
sensitivity ratio of 4.00. This brings the entire transaction's WA
sensitivity ratio to 3.97. To better understand the impact and
mechanics of sensitivity ratio, please see the example below, in
the Contract Mechanics—Worked Example section in the related
presale report. The current unadjusted loan-to-value ratio (LTV) of
the pool is 40.42% (i.e., of senior liens ahead of the contracts).
At cut-off, the pool had a WA original Option-to-Value of 15.50%
and a WA original Loan-plus-Option-to-Value of 72.17%.
The Transaction uses a sequential structure in which cash
distributions are first made to reduce the Interest Amount and Cap
Carryover Amount on the Class A Notes. Payments are then made to
the Note Amount of the Class A Notes until such notes reduced to
zero. With respect to the Class B Notes, payments are first made to
reduce the Interest Amount and Cap Carryover Amount as long as
these payments don't exceed the Class B Interest Payment Cap.
Payments will not be made to the Class B Notes unless and until an
Optional Redemption, Clean-Up Call, Mandatory Call Date, or
Indenture Default. Upon an Optional Redemption, Clean-Up Call,
Mandatory Call Date, or Indenture Default, payments are made to the
aggregate Note Amount on the outstanding Notes.
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
Note Amount, Interest Amount, and Cap Carryover 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.
VERUS SECURITIZATION 2023-INV3: S&P Assigns 'B (sf)' on B-2 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Verus Securitization
Trust 2023-INV3's mortgage-backed notes series 2023-INV3.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable rate residential mortgage loans (some with
interest-only periods) secured by single-family residences,
townhouses, planned unit developments, two- to four-family
residential properties, condominiums, five– to 10-unit
multi-family properties, mixed-use properties, and condotels to
both prime and non-prime borrowers. The pool has 1,030 residential
mortgage loans including five cross-collateralized loans, which are
backed by 34 properties, for a total property count of 1,059. The
loans in the pool are ability-to-repay exempt.
S&P said, "After we assigned preliminary ratings, the issuer
dropped 20 loans from the pool and updated both the balances and
payment histories for all the loans to reflect a cutoff date of
Nov. 1, 2023, resulting in a final pool balance of $367,902,130.
Loss coverage estimates subsequently decreased by up to 15 basis
points for certain rating categories. The final pool's 'AAA' and
'B' loss coverage requirements were determined to be 38.75% and
3.60% as compared to 38.90% and 3.60%, respectively, at the time of
preliminary ratings. The final ratings we assigned are unchanged
from our preliminary ratings on all classes."
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representations and warranties framework, and geographic
concentration;
-- The mortgage aggregator, Invictus Capital Partners, and any S&P
Global Ratings reviewed originator; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "Per our latest macroeconomic update, after
stronger-than-expected growth so far, the U.S. economy is poised to
slow down for the rest of 2023 and come in below trend for the next
two years. While we now expect the economy to expand 2.3% this year
(up from 1.7% in our June forecast), we see growth slowing to 1.3%
in 2024 and 1.4% in 2025 before approaching trend-like growth of
1.8% in 2026. The balance of risk to our baseline forecast is
tilted to the downside, and the policy interest rate appears to be
at or close to a peak. We anticipate one more rate hike in this
tightening cycle, but the monetary stance will continue to tighten
in real terms, peaking in the second quarter of next year. We
updated our market outlook as it relates to the 'B' projected
archetypal loss level and therefore revised and lowered our 'B'
foreclosure frequency to 2.50% from 3.25%, which reflects the level
prior to April 2020, preceding the COVID-19 pandemic. The update
reflects our benign view of the mortgage and housing market as
demonstrated through general national-level home price behavior,
unemployment rates, mortgage performance, and underwriting."
Ratings Assigned
Verus Securitization Trust 2023-INV3
Class A-1, $203,817,000: AAA (sf)
Class A-2, $38,814,000: AA (sf)
Class A-3, $44,332,000: A (sf)
Class M-1, $31,456,000: BBB- (sf)
Class B-1, $20,970,000: BB- (sf)
Class B-2, $10,118,000: B (sf)
Class B-3, $18,395,130: Not rated
Class A-IO-S, $367,902,130(i): Not rated
Class XS, $367,902,130(i): Not rated
Class R, not applicable: Not rated
(i)The notional amount equals the aggregate stated principal
balance of loans in the pool as of the cutoff date.
WARWICK CAPITAL 2: Fitch Assigns 'BB-sf' Rating on Class E Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Warwick
Capital CLO 2 Ltd.
Entity/Debt Rating
----------- ------
Warwick Capital
CLO 2 Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Warwick Capital CLO 2 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Warwick Capital CLO Management LLC. Net proceeds from the issuance
of the secured and 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+'/'B', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 22.45, versus a maximum covenant, in
accordance with the initial expected matrix point of 25.0. 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
100% first-lien senior secured loans. The weighted average recovery
rate (WARR) of the indicative portfolio is 76% versus a minimum
covenant, in accordance with the initial expected matrix point of
68.8%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.2-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
metrics. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes; and as
these notes are in the highest rating category of 'AAAsf'.
For all other notes, 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.
WELLS FARGO 2017-RB1: DBRS Cuts Certs Rating on 2 Classes to B
--------------------------------------------------------------
DBRS Limited downgraded its credit ratings on 11 classes of the
Commercial Mortgage Pass-Through Certificates, Series 2017-RB1
issued by Wells Fargo Commercial Mortgage Trust 2017-RB1 as
follows:
-- Class E1 to B (high) (sf) from BB (sf)
-- Class E2 to B (sf) from BB (low) (sf)
-- Class E to B (sf) from BB (low) (sf)
-- Class F1 to CCC (sf) from B (high) (sf)
-- Class F2 to CCC (sf) from B (sf)
-- Class F to CCC (sf) from B (sf)
-- Class EF to CCC (sf) from B (sf)
-- Class G1 to C (sf) from B (low) (sf)
-- Class G2 to C (sf) from B (low) (sf)
-- Class G to C (sf) from B (low) (sf)
-- Class EFG to C (sf) from B (low) (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 B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
The trends on Class B, Class X-B, Class C, Class X-D, Class D,
Class E1, Class E2, and Class E were changed to Negative from
Stable. Class F1, Class F2, Class F, Class EF, Class G1, Class G2,
Class G, and Class EFG have credit ratings that do not typically
carry trends in commercial mortgage-backed securities (CMBS)
ratings. All remaining classes have Stable trends.
The credit rating downgrades and Negative trends reflect the
sizable loss projections associated with one of the specially
serviced loans, 340 Bryant (Prospectus ID#17, 2.7% of the pool),
paired with the high concentration of loans secured by office
properties, representing 53.4% of the pool, several of which are
exhibiting increased credit risk to the trust with exposure to more
challenged markets in Connecticut and San Francisco. In addition,
the capital structure of the transaction is noteworthy, as the
junior tranches carry small balances, providing little cushion to
mitigate against any additional loss and/or performance volatility
for the remaining loans in the pool, supporting the credit rating
actions.
The 340 Bryant loan is secured by a 62,270-square foot (sf), Class
B office property in downtown San Francisco. In December 2021, the
property's largest former tenant, WeWork (77.0% of net rentable
area (NRA)), terminated its leases ahead of their scheduled
expirations in 2028 and 2029. While the tenant paid a termination
fee of approximately $5.0 million, the borrower has been unable to
backfill the space since the tenant's departure, resulting in
negative cash flow. The loan subsequently transferred to special
servicing in September 2022 for imminent default as a result of the
borrower's inability to continue covering the debt payments, and as
of the September 2023 reporting, foreclosure has been filed with
the borrower's cooperation. The remaining tenant, Logitech (23.0%
of the NRA) has indicated that it will not renew upon the lease
expiry in April 2024. Given the soft market conditions, low
occupancy rate, and general challenges in backfilling the currently
vacant space, the value of the property has likely declined
significantly from the issuance figure of $52.0 million and has the
potential to decline further. In its analysis for this review, DBRS
Morningstar liquidated the loan from the trust based on a stressed
value, resulting in an implied loss of nearly $12.5 million, or a
loss severity in excess of 85%. Based on these results, the
outstanding balance of Class H-1 would be written down by nearly
80.0%, significantly eroding the transaction's credit support,
particularly toward the bottom of the capital stack.
In general, the office sector has been facing challenging times,
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 select office loans in the transaction
continue to perform as expected, DBRS Morningstar identified three
loans backed by office properties, representing 16.4% of the pool,
showing performance declines from issuance or otherwise exhibiting
increased risks from issuance. These loans were analyzed with
stressed scenarios, including increased probability of default
(POD) penalties and/or increased loan-to-value (LTV) ratios, as
applicable, to increase the expected losses. The resulting
weighted-average (WA) expected loss for these loans that were
adjusted was approximately 1.75 times (x) the pool WA figure.
One of these loans is Center West (Prospectus ID#3, 7.4% of the
pool), which is secured by the leasehold interest in a 349,298-sf,
Class A office property in the CBD of Los Angeles. The loan has
been on the servicer's watchlist since December 2021 as a result of
increased vacancy and a low debt service coverage ratio (DSCR). At
issuance, the property was only 57.1% occupied, as a result of the
borrower's selective leasing strategy to only high-quality and
established tenants; however, occupancy has since fallen to 34.8%
as of February 2023, likely because of both the borrower's
preference and the current market conditions. Per the YE2022
financial reporting, the loan reported a net cash flow (NCF) of
$2.3 million (a DSCR of 0.64x), well below the DBRS Morningstar
figure derived at issuance of $6.3 million (a DSCR of 1.76x),
reflecting a 35% NCF decline. While the sponsor has maintained the
loan as current despite the operational shortfalls with a large
equity contribution to the relatively low-leverage financing at
issuance, reflecting a going-in LTV of 38.3% (based on the
whole-loan balance of $80.0 million and the issuance appraised
stabilized value of $256.0 million, value has likely declined
significantly since issuance, elevating the loan's refinance risk
approaching 2026. As a result, DBRS Morningstar applied a POD
penalty and assumed a stressed LTV for this loan, resulting in an
expected loss (EL) that was more than 2.0x the pool WA figure.
Another office loan of concern is 1166 Avenue of the Americas
(Prospectus ID#8, 5.3% of the pool), which is secured by the first
five floors of a Class A office property in Midtown Manhattan. The
loan was added to the servicer's watchlist in July 2023 because the
largest tenant, The D.E. Shaw Group (D.E. Shaw; 43.6% of NRA)
confirmed that it will be vacating its space upon lease expiration
in June 2024 (although it may extend the lease by an additional
three to six months beyond the scheduled lease expiration date).
The second largest tenant, Arcesium (20.0% of NRA), has a lease
guaranteed by D.E. Shaw and also has a lease expiration in June
2024. Arcesium is reportedly looking for space elsewhere; although,
a final decision has not been communicated. While the servicer has
reported that a 10-year lease is currently being negotiated with a
prospective tenant that could occupy most of the third floor
(between 15.0% and 20.0% of NRA), occupancy will likely experience
volatility over the near to medium term.
The property generated NCF of $9.8 million in 2022, resulting in a
DSCR of 2.20x, which compares favorably with the issuance figures
of $8.2 million and 1.80x, respectively. The loan is also
structured with a cash sweep that was triggered when D.E. Shaw and
Arcesium failed to provide notice of renewal 18 months prior to
their June 2024 lease expirations. The cash sweep, which will aid
the borrower in its releasing efforts, is structured to trap all
excess cash until an amount equal to $75.0 psf is collected.
According to the September 2023 reporting, the tenant reserve
balance is approximately $2.1 million.
While the upcoming lease rollover is noteworthy, the loan benefits
from structural mitigants, namely, the low going-in LTV ratio of
48.9% (based on the whole-loan balance of $110.0 million and the
issuance appraised value of $225.0 million) and the cash sweep
provisions, which are designed to help mitigate rollover risk by
offsetting leasing costs. Moreover, the loan's maturity date in
2027 will provide the sponsor time to backfill vacant space and
work toward stabilization once tenants begin rolling in 2024.
Furthermore, the property benefits from its excellent location in
Manhattan and a strong loan sponsor, Edward J. Minskoff Equities,
Inc. (EJME), a privately held real estate investment and
development firm based out of Manhattan. EJME has ownership
interests, leases, and/or manages more than 4.0 million sf of
commercial real estate space, which includes other prominent New
York properties such as 51 Astor Place and 590 Madison Avenue. In
its analysis, DBRS Morningstar increased the POD penalty and LTV
ratio for this loan, resulting in an EL that was approximately 1.4x
the pool WA average.
As of the September 2023 remittance, 33 of the original 37 loans
remain in the pool with an aggregate principal amount of $543.2
million, representing a collateral reduction of 14.8% since
issuance as a result of scheduled amortization, loan repayment and
liquidation of one loan. Three loans representing 3.5% of the pool
balance have been fully defeased. The pool is concentrated by loan
size, with the top five and ten loans comprising 40.7% and 64.7% of
the pool balance, respectively. There are only six loans on the
servicer's watchlist, representing 25.2% of the pool, and two
loans, representing 7.0% of the current pool balance, in special
servicing.
The second specially serviced loan, Anaheim Marriott Suites
(Prospectus ID#10, 3.9% of the pool), is secured by a 371-room,
full-service hotel located in Disneyland, California. In its
previous review, DBRS Morningstar had liquidated this loan from the
trust in its analysis with a minor implied loss in excess of $2.0
million; however, the borrower recently signed a reinstatement
agreement in July 2023 and the loan was brought current. The loan
is expected to remain with the special servicer for a period of
monitoring before being transferred back to the master servicer;
however, performance has shown significant improvement, reporting a
DSCR of 1.21 times (x) as of YE2022. While performance is trending
in the right direction, a recent appraisal dated June 2023 valued
the property at $64.5 million, reflecting a 22.3% decline in value
when compared with the issuance value of $83.0 million. As a
result, DBRS Morningstar applied a stressed LTV assumption based on
the updated value, resulting in an EL more than twice the pool
average.
Notes: All figures are in U.S. dollars unless otherwise noted.
WESTLAKE AUTOMOBILE 2023-4: Fitch Assigns BBsf Rating on E Notes
----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Westlake Automobile Receivables Trust 2023-4 (WLAKE 2023-4).
Entity/Debt Rating Prior
----------- ------ -----
Westlake Automobile
Receivables Trust
2023-4
A-1 ST F1+sf New Rating F1+(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-2B LT WDsf Withdrawn AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBBsf New Rating BBB(EXP)sf
E LT BBsf New Rating BB(EXP)sf
The Expected Ratings for the class A-2B notes are being withdrawn
because they are not being issued by WLAKE 2023-4.
KEY RATING DRIVERS
Collateral Performance — Stable Credit Quality: WLAKE 2023-4 is
backed by collateral with subprime credit attributes, with a
weighted average (WA) FICO score of 620, up four points from
2023-3, and an internal WA Westlake score of 3.37, down slightly
from 3.40 in 2023-3. WA seasoning is up at six months, and new
vehicles total just 3.1% of the pool, up slightly from 2.8% in
2023-3. The pool is diverse in vehicle models and state
concentrations. The transaction's percentage of extended-term loans
(61+ months) is at 51.3%, consistent with recent series.
Payment Structure — Sufficient Credit Enhancement: Initial hard
credit enhancement (CE) totals 40.81%, 34.25%, 23.55%, 14.65% and
9.50% for classes A, B, C, D and E, respectively, slightly higher
in each case compared with 2023-3. Excess spread is expected to be
9.08% per annum. Loss coverage for each class of notes is
sufficient to cover the respective multiples of Fitch's rating case
credit net loss (CNL) proxy of 14.00%.
Forward-Looking Approach to Derive Rating Case Proxy — Low Losses
and Delinquencies: Fitch considered economic conditions and future
expectations by assessing key macroeconomic and wholesale market
conditions when deriving the series loss proxy. Fitch used the
2007-2009 and 2015-2018 vintage ranges to derive the loss proxy for
2023-4, representing through-the-cycle performance. Fitch's CNL
rating case proxy for WLAKE 2023-4 is 14.00%.
Seller/Servicer Operational Review — Consistent
Origination/Underwriting/Servicing: Westlake has adequate abilities
as the originator, underwriter and servicer, as evident from
historical portfolio and securitization performance. Fitch deems
Westlake as capable to service this transaction.
Fitch's base-case loss expectation, which does not include a margin
of safety and is not used in Fitch's quantitative analysis to
assign ratings, is 12.00%, based on the agency's Global Economic
Outlook and transaction-based forecast loss projections.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CNL levels that are higher than the rating case and would likely
result in declines of CE and remaining net loss coverage levels
available to the notes. Additionally, unanticipated declines in
recoveries could also result in lower net loss coverage, which 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 rating case CNL and recovery rate
assumptions, as well as by examining the rating implications on all
classes of issued notes. The CNL sensitivity stresses the CNL 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.
Additionally, Fitch conducts 1.5x and 2.0x increases to the CNL
proxy, representing both moderate and severe stresses. Fitch also
evaluates the impact of stressed recovery rates on an auto loan ABS
structure and rating impact with a 50% haircut. 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 rising CE levels and
consideration for potential upgrades. If CNL is 20% less than the
projected proxy, the expected subordinate note ratings could be
upgraded by up to one category.
ESG CONSIDERATIONS
The concentration of electric and hybrid vehicles, at 0.55%, did
not have an impact on Fitch's ratings analysis or conclusion on
this transaction and has no impact on Fitch's ESG Relevance Score.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] DBRS Confirms 20 Ratings From 5 Trust Transactions
------------------------------------------------------
DBRS, Inc. upgraded seven credit ratings and confirmed 20 credit
ratings from five Westlake Automobile Receivables Trust
transactions.
The Affected Ratings Are Available at https://bit.ly/40ER5b2
Here is the list of Issuers:
Westlake Automobile Receivables Trust 2020-2
Westlake Automobile Receivables Trust 2021-1
Westlake Automobile Receivables Trust 2022-2
Westlake Automobile Receivables Trust 2021-3
Westlake Automobile Receivables Trust 2023-1
The credit rating actions are based on the following analytical
considerations:
-- The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary Baseline Macroeconomic Scenarios For
Rated Sovereigns - September 2023 Update, published on September
28, 2023. These baseline macroeconomic scenarios replace DBRS
Morningstar's moderate and adverse COVID-19 pandemic scenarios,
which were first published in April 2020.
-- The transaction parties' capabilities with regard to
originating, underwriting, and servicing.
-- The credit rating actions are the result of collateral
performance to date and DBRS Morningstar's assessment of future
performance assumptions.
-- The transactions' capital structures and the form and
sufficiency of available credit enhancement. The current level of
hard credit enhancement and estimated excess spread are sufficient
to support the DBRS Morningstar-projected remaining cumulative net
loss assumption at a multiple of coverage commensurate with the
credit ratings.
Notes: The principal methodology applicable to the credit ratings
is DBRS Morningstar Master U.S. ABS Surveillance (October 22,
2023).
[*] DBRS Reviews 159 Classes From 14 US RMBS Transactions
---------------------------------------------------------
DBRS, Inc. reviewed 159 classes from 14 U.S. residential
mortgage-backed securities (RMBS) transactions. Of the 159 classes
reviewed, DBRS Morningstar upgraded 24 credit ratings, confirmed
133 credit ratings, and discontinued two credit ratings.
The Affected Ratings Are Available at https://bit.ly/49x9fzM
Here is the list of the Issuers:
Lehman Mortgage Trust 2008-6
MASTR Adjustable Rate Mortgages Trust 2005-2
Lehman XS Trust 2006-5
J.P. Morgan Mortgage Trust 2006-S1
J.P. Morgan Mortgage Trust 2005-A5
GSR Mortgage Loan Trust 2005-AR6
DSLA Mortgage Loan Trust 2005-AR6
Long Beach Mortgage Loan Trust 2005-3
Encore Credit Receivables Trust 2005-4
First Franklin Mortgage Loan Trust 2005-FF9
First Franklin Mortgage Loan Trust 2006-FF8
CWABS Asset-Backed Certificates Trust 2004-BC5
CWABS Asset-Backed Certificates Trust 2006-SPS1
Morgan Stanley Home Equity Loan Trust 2005-2
The credit rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new credit rating levels. The credit rating confirmations
reflect asset performance and credit-support levels that are
consistent with the current credit ratings. The discontinued credit
ratings reflect the full repayment of principal to bondholders.
The pools backing the reviewed RMBS transactions consist of prime,
Alt-A, subprime, option adjustable-rate, and second lien
collateral.
Notes: The principal methodology applicable to the credit ratings
is the U.S. RMBS Surveillance Methodology (March 3, 2023)
[*] Fitch Affirms 11 US RMBS Transactions Issued in Q1 2023
-----------------------------------------------------------
Fitch Ratings, on November 17, 2023, affirmed 382 classes across
the following 11 U.S. RMBS transactions issued in Q1 2023: Goldman
Sachs Mortgage Backed Securities 2023-CCM1, GSMBS 2023-PJ1, GSMBS
2023-PJ2, HOMES 2023-NQM1, JPMMT 2023-1, JPMMT 2023-2, MCMLT
2023-NQM2, SBCLN 2023-MTG1, SEMT 2023-1, SEMT 2023-2, and VERUS
2023-2.
The Entities involved are:
- GSMBS 2023-PJ2
- Mill City Mortgage Loan Trust 2023-NQM2
- Sequoia Mortgage Trust 2023-2
- J.P. Morgan Mortgage Trust 2023-2
- Sequoia Mortgage Trust 2023-1
- Verus Securitization Trust 2023-2
- Santander Bank Mortgage Credit-Linked Notes, Series 2023-MTG1
- GSMBS 2023-CCM1
- J.P. Morgan Mortgage Trust 2023-1
- GSMBS 2023-PJ1
- HOMES 2023-NQM1
A list of the Affected Ratings is available at:
https://tinyurl.com/yhppxz6s
Entity/Debt Rating Prior
----------- ------ -----
SBCLN 2023-MTG1
M-1 80290CBM5 LT BBB+sf Affirmed BBB+sf
M-2 80290CBN3 LT BBB+sf Affirmed BBB+sf
M-3 80290CBP8 LT BBBsf Affirmed BBBsf
M-4 80290CBQ6 LT BBsf Affirmed BBsf
M-5 80290CBR4 LT Bsf Affirmed Bsf
GSMBS 2023-PJ1
A-1 36267TAA6 LT AA+sf Affirmed AA+sf
A-1-X 36267TAB4 LT AA+sf Affirmed AA+sf
A-10 36267TAS7 LT AAAsf Affirmed AAAsf
A-11 36267TAT5 LT AAAsf Affirmed AAAsf
A-11-X 36267TAU2 LT AAAsf Affirmed AAAsf
A-12 36267TAV0 LT AAAsf Affirmed AAAsf
A-13 36267TAW8 LT AAAsf Affirmed AAAsf
A-13-X 36267TAX6 LT AAAsf Affirmed AAAsf
A-14 36267TAY4 LT AAAsf Affirmed AAAsf
A-15 36267TAZ1 LT AAAsf Affirmed AAAsf
A-15-X 36267TBA5 LT AAAsf Affirmed AAAsf
A-16 36267TBB3 LT AAAsf Affirmed AAAsf
A-17 36267TBC1 LT AAAsf Affirmed AAAsf
A-17-X 36267TBD9 LT AAAsf Affirmed AAAsf
A-18 36267TBE7 LT AAAsf Affirmed AAAsf
A-19 36267TBF4 LT AAAsf Affirmed AAAsf
A-19-X 36267TBG2 LT AAAsf Affirmed AAAsf
A-2 36267TAC2 LT AA+sf Affirmed AA+sf
A-20 36267TBH0 LT AAAsf Affirmed AAAsf
A-21 36267TBJ6 LT AAAsf Affirmed AAAsf
A-21-X 36267TBK3 LT AAAsf Affirmed AAAsf
A-22 36267TBL1 LT AAAsf Affirmed AAAsf
A-23 36267TBM9 LT AA+sf Affirmed AA+sf
A-23-X 36267TBN7 LT AA+sf Affirmed AA+sf
A-24 36267TBP2 LT AA+sf Affirmed AA+sf
A-3 36267TAD0 LT AAAsf Affirmed AAAsf
A-3-A 36267TAE8 LT AAAsf Affirmed AAAsf
A-3-X 36267TAF5 LT AAAsf Affirmed AAAsf
A-4 36267TAG3 LT AAAsf Affirmed AAAsf
A-4-A 36267TAH1 LT AAAsf Affirmed AAAsf
A-5 36267TAJ7 LT AAAsf Affirmed AAAsf
A-5-X 36267TAK4 LT AAAsf Affirmed AAAsf
A-6 36267TAL2 LT AAAsf Affirmed AAAsf
A-7 36267TAM0 LT AAAsf Affirmed AAAsf
A-7-X 36267TAN8 LT AAAsf Affirmed AAAsf
A-8 36267TAP3 LT AAAsf Affirmed AAAsf
A-9 36267TAQ1 LT AAAsf Affirmed AAAsf
A-9-X 36267TAR9 LT AAAsf Affirmed AAAsf
A-X 36267TBQ0 LT AA+sf Affirmed AA+sf
B-1 36267TBR8 LT AA-sf Affirmed AA-sf
B-2 36267TBS6 LT A-sf Affirmed A-sf
B-3 36267TBT4 LT BBB-sf Affirmed BBB-sf
B-4 36267TBU1 LT BB-sf Affirmed BB-sf
B-5 36267TBV9 LT B-sf Affirmed B-sf
VERUS 2023-2
A-1 92539DAA6 LT AAAsf Affirmed AAAsf
A-2 92539DAB4 LT AAsf Affirmed AAsf
A-3 92539DAC2 LT Asf Affirmed Asf
M-1 92539DAD0 LT BBB-sf Affirmed BBB-sf
Goldman Sachs
Mortgage Backed
Securities
2023-CCM1
A-1 362918AA2 LT AAAsf Affirmed AAAsf
A-2 362918AB0 LT AAsf Affirmed AAsf
A-3 362918AC8 LT Asf Affirmed Asf
B-1 362918AE4 LT BB-sf Affirmed BB-sf
B-2 362918AF1 LT B-sf Affirmed B-sf
M-1 362918AD6 LT BBB-sf Affirmed BBB-sf
GSMBS 2023-PJ2
A1 362938AA0 LT AA+sf Affirmed AA+sf
A10 362938AS1 LT AAAsf Affirmed AAAsf
A11 362938AT9 LT AAAsf Affirmed AAAsf
A11X 362938AU6 LT AAAsf Affirmed AAAsf
A12 362938AV4 LT AAAsf Affirmed AAAsf
A13 362938AW2 LT AAAsf Affirmed AAAsf
A13X 362938AX0 LT AAAsf Affirmed AAAsf
A14 362938AY8 LT AAAsf Affirmed AAAsf
A15 362938AZ5 LT AAAsf Affirmed AAAsf
A15X 362938BA9 LT AAAsf Affirmed AAAsf
A16 362938BB7 LT AAAsf Affirmed AAAsf
A17 362938BC5 LT AAAsf Affirmed AAAsf
A17X 362938BD3 LT AAAsf Affirmed AAAsf
A18 362938BE1 LT AAAsf Affirmed AAAsf
A19 362938BF8 LT AAAsf Affirmed AAAsf
A19X 362938BG6 LT AAAsf Affirmed AAAsf
A1X 362938AB8 LT AA+sf Affirmed AA+sf
A2 362938AC6 LT AA+sf Affirmed AA+sf
A20 362938BH4 LT AAAsf Affirmed AAAsf
A21 362938BJ0 LT AAAsf Affirmed AAAsf
A21X 362938BK7 LT AAAsf Affirmed AAAsf
A22 362938BL5 LT AAAsf Affirmed AAAsf
A23 362938BM3 LT AA+sf Affirmed AA+sf
A23X 362938BN1 LT AA+sf Affirmed AA+sf
A24 362938BP6 LT AA+sf Affirmed AA+sf
A3 362938AD4 LT AAAsf Affirmed AAAsf
A3A 362938AE2 LT AAAsf Affirmed AAAsf
A3X 362938AF9 LT AAAsf Affirmed AAAsf
A4 362938AG7 LT AAAsf Affirmed AAAsf
A4A 362938AH5 LT AAAsf Affirmed AAAsf
A5 362938AJ1 LT AAAsf Affirmed AAAsf
A5X 362938AK8 LT AAAsf Affirmed AAAsf
A6 362938AL6 LT AAAsf Affirmed AAAsf
A7 362938AM4 LT AAAsf Affirmed AAAsf
A7X 362938AN2 LT AAAsf Affirmed AAAsf
A8 362938AP7 LT AAAsf Affirmed AAAsf
A9 362938AQ5 LT AAAsf Affirmed AAAsf
A9X 362938AR3 LT AAAsf Affirmed AAAsf
AX 362938BQ4 LT AA+sf Affirmed AA+sf
B1 362938BR2 LT AA-sf Affirmed AA-sf
B2 362938BS0 LT A-sf Affirmed A-sf
B3 362938BT8 LT BBB-sf Affirmed BBB-sf
B4 362938BU5 LT BB-sf Affirmed BB-sf
B5 362938BV3 LT B-sf Affirmed B-sf
HOMES 2023-NQM1
A1 43761JAA5 LT AAAsf Affirmed AAAsf
A2 43761JAB3 LT AAsf Affirmed AAsf
A3 43761JAC1 LT Asf Affirmed Asf
B1 43761JAE7 LT BBsf Affirmed BBsf
B2 43761JAF4 LT Bsf Affirmed Bsf
M1 43761JAD9 LT BBBsf Affirmed BBBsf
SEMT 2023-1
A1 81749BAA9 LT AAAsf Affirmed AAAsf
A10 81749BAK7 LT AAAsf Affirmed AAAsf
A11 81749BAL5 LT AAAsf Affirmed AAAsf
A12 81749BAM3 LT AAAsf Affirmed AAAsf
A13 81749BAN1 LT AAAsf Affirmed AAAsf
A14 81749BAP6 LT AAAsf Affirmed AAAsf
A15 81749BAQ4 LT AAAsf Affirmed AAAsf
A16 81749BAR2 LT AAAsf Affirmed AAAsf
A17 81749BAS0 LT AAAsf Affirmed AAAsf
A18 81749BAT8 LT AAAsf Affirmed AAAsf
A19 81749BAU5 LT AAAsf Affirmed AAAsf
A2 81749BAB7 LT AAAsf Affirmed AAAsf
A20 81749BAV3 LT AAAsf Affirmed AAAsf
A21 81749BAW1 LT AAAsf Affirmed AAAsf
A22 81749BAX9 LT AAAsf Affirmed AAAsf
A23 81749BAY7 LT AAAsf Affirmed AAAsf
A24 81749BAZ4 LT AAAsf Affirmed AAAsf
A25 81749BBA8 LT AAAsf Affirmed AAAsf
A3 81749BAC5 LT AAAsf Affirmed AAAsf
A4 81749BAD3 LT AAAsf Affirmed AAAsf
A5 81749BAE1 LT AAAsf Affirmed AAAsf
A6 81749BAF8 LT AAAsf Affirmed AAAsf
A7 81749BAG6 LT AAAsf Affirmed AAAsf
A8 81749BAH4 LT AAAsf Affirmed AAAsf
A9 81749BAJ0 LT AAAsf Affirmed AAAsf
AIO1 81749BBB6 LT AAAsf Affirmed AAAsf
AIO10 81749BBL4 LT AAAsf Affirmed AAAsf
AIO11 81749BBM2 LT AAAsf Affirmed AAAsf
AIO12 81749BBN0 LT AAAsf Affirmed AAAsf
AIO13 81749BBP5 LT AAAsf Affirmed AAAsf
AIO14 81749BBQ3 LT AAAsf Affirmed AAAsf
AIO15 81749BBR1 LT AAAsf Affirmed AAAsf
AIO16 81749BBS9 LT AAAsf Affirmed AAAsf
AIO17 81749BBT7 LT AAAsf Affirmed AAAsf
AIO18 81749BBU4 LT AAAsf Affirmed AAAsf
AIO19 81749BBV2 LT AAAsf Affirmed AAAsf
AIO2 81749BBC4 LT AAAsf Affirmed AAAsf
AIO20 81749BBW0 LT AAAsf Affirmed AAAsf
AIO21 81749BBX8 LT AAAsf Affirmed AAAsf
AIO22 81749BBY6 LT AAAsf Affirmed AAAsf
AIO23 81749BBZ3 LT AAAsf Affirmed AAAsf
AIO24 81749BCA7 LT AAAsf Affirmed AAAsf
AIO25 81749BCB5 LT AAAsf Affirmed AAAsf
AIO26 81749BCC3 LT AAAsf Affirmed AAAsf
AIO3 81749BBD2 LT AAAsf Affirmed AAAsf
AIO4 81749BBE0 LT AAAsf Affirmed AAAsf
AIO5 81749BBF7 LT AAAsf Affirmed AAAsf
AIO6 81749BBG5 LT AAAsf Affirmed AAAsf
AIO7 81749BBH3 LT AAAsf Affirmed AAAsf
AIO8 81749BBJ9 LT AAAsf Affirmed AAAsf
AIO9 81749BBK6 LT AAAsf Affirmed AAAsf
B1 81749BCD1 LT AA-sf Affirmed AA-sf
B2 81749BCE9 LT A-sf Affirmed A-sf
B3 81749BCF6 LT BBB-sf Affirmed BBB-sf
B4 81749BCG4 LT BBsf Affirmed BBsf
JPMMT 2023-1
A-1 465978AA2 LT AA+sf Affirmed AA+sf
A-1-A 465978AB0 LT AA+sf Affirmed AA+sf
A-1-B 465978AC8 LT AA+sf Affirmed AA+sf
A-1-C 465978AD6 LT AA+sf Affirmed AA+sf
A-1-X 465978AE4 LT AA+sf Affirmed AA+sf
A-10 465978BS2 LT AAAsf Affirmed AAAsf
A-10-A 465978BT0 LT AAAsf Affirmed AAAsf
A-10-B 465978BU7 LT AAAsf Affirmed AAAsf
A-10-C 465978BV5 LT AAAsf Affirmed AAAsf
A-10-X 465978BW3 LT AAAsf Affirmed AAAsf
A-11 465978BX1 LT AAAsf Affirmed AAAsf
A-11-A 465978BY9 LT AAAsf Affirmed AAAsf
A-11-B 465978BZ6 LT AAAsf Affirmed AAAsf
A-11-C 465978CA0 LT AAAsf Affirmed AAAsf
A-11-X 465978CB8 LT AAAsf Affirmed AAAsf
A-12 465978CC6 LT AAAsf Affirmed AAAsf
A-12-A 465978CD4 LT AAAsf Affirmed AAAsf
A-12-B 465978CE2 LT AAAsf Affirmed AAAsf
A-12-C 465978CF9 LT AAAsf Affirmed AAAsf
A-12-X 465978CG7 LT AAAsf Affirmed AAAsf
A-13 465978CH5 LT AA+sf Affirmed AA+sf
A-13-A 465978CJ1 LT AA+sf Affirmed AA+sf
A-13-B 465978CK8 LT AA+sf Affirmed AA+sf
A-13-C 465978CL6 LT AA+sf Affirmed AA+sf
A-13-X 465978CM4 LT AA+sf Affirmed AA+sf
A-14 465978CN2 LT AA+sf Affirmed AA+sf
A-14-A 465978CP7 LT AA+sf Affirmed AA+sf
A-14-B 465978CQ5 LT AA+sf Affirmed AA+sf
A-14-C 465978CR3 LT AA+sf Affirmed AA+sf
A-14-X 465978CS1 LT AA+sf Affirmed AA+sf
A-15 465978CT9 LT AA+sf Affirmed AA+sf
A-15-A 465978CU6 LT AA+sf Affirmed AA+sf
A-15-B 465978CV4 LT AA+sf Affirmed AA+sf
A-15-C 465978CW2 LT AA+sf Affirmed AA+sf
A-15-X 465978CX0 LT AA+sf Affirmed AA+sf
A-2 465978AF1 LT AAAsf Affirmed AAAsf
A-3 465978AG9 LT AAAsf Affirmed AAAsf
A-3-A 465978AH7 LT AAAsf Affirmed AAAsf
A-3-C 465978AJ3 LT AAAsf Affirmed AAAsf
A-3-X 465978AK0 LT AAAsf Affirmed AAAsf
A-4 465978AL8 LT AAAsf Affirmed AAAsf
A-4-A 465978AM6 LT AAAsf Affirmed AAAsf
A-4-B 465978AN4 LT AAAsf Affirmed AAAsf
A-4-C 465978AP9 LT AAAsf Affirmed AAAsf
A-4-X 465978AQ7 LT AAAsf Affirmed AAAsf
A-5 465978AR5 LT AAAsf Affirmed AAAsf
A-5-A 465978AS3 LT AAAsf Affirmed AAAsf
A-5-B 465978AT1 LT AAAsf Affirmed AAAsf
A-5-C 465978AU8 LT AAAsf Affirmed AAAsf
A-5-X 465978AV6 LT AAAsf Affirmed AAAsf
A-6 465978AW4 LT AAAsf Affirmed AAAsf
A-6-A 465978AX2 LT AAAsf Affirmed AAAsf
A-6-B 465978AY0 LT AAAsf Affirmed AAAsf
A-6-C 465978AZ7 LT AAAsf Affirmed AAAsf
A-6-X 465978BA1 LT AAAsf Affirmed AAAsf
A-7 465978BB9 LT AAAsf Affirmed AAAsf
A-7-A 465978BC7 LT AAAsf Affirmed AAAsf
A-7-B 465978BD5 LT AAAsf Affirmed AAAsf
A-7-C 465978BE3 LT AAAsf Affirmed AAAsf
A-7-X 465978BF0 LT AAAsf Affirmed AAAsf
A-8 465978BG8 LT AAAsf Affirmed AAAsf
A-8-A 465978BH6 LT AAAsf Affirmed AAAsf
A-8-B 465978BJ2 LT AAAsf Affirmed AAAsf
A-8-C 465978BK9 LT AAAsf Affirmed AAAsf
A-8-X 465978BL7 LT AAAsf Affirmed AAAsf
A-9 465978BM5 LT AAAsf Affirmed AAAsf
A-9-A 465978BN3 LT AAAsf Affirmed AAAsf
A-9-B 465978BP8 LT AAAsf Affirmed AAAsf
A-9-C 465978BQ6 LT AAAsf Affirmed AAAsf
A-9-X 465978BR4 LT AAAsf Affirmed AAAsf
A-X-1 465978CY8 LT AA+sf Affirmed AA+sf
A-X-2 465978CZ5 LT AA+sf Affirmed AA+sf
B-1 465978DA9 LT AA-sf Affirmed AA-sf
B-2 465978DB7 LT A-sf Affirmed A-sf
B-3 465978DC5 LT BBB-sf Affirmed BBB-sf
B-4 465978DD3 LT BB-sf Affirmed BB-sf
B-5 465978DE1 LT B-sf Affirmed B-sf
JPMMT 2023-2
A-1 46656DAA9 LT AA+sf Affirmed AA+sf
A-1-A 46656DAB7 LT AA+sf Affirmed AA+sf
A-1-B 46656DAC5 LT AA+sf Affirmed AA+sf
A-1-C 46656DAD3 LT AA+sf Affirmed AA+sf
A-1-X 46656DAE1 LT AA+sf Affirmed AA+sf
A-10 46656DBS9 LT AAAsf Affirmed AAAsf
A-10-A 46656DBT7 LT AAAsf Affirmed AAAsf
A-10-B 46656DBU4 LT AAAsf Affirmed AAAsf
A-10-C 46656DBV2 LT AAAsf Affirmed AAAsf
A-10-X 46656DBW0 LT AAAsf Affirmed AAAsf
A-11 46656DBX8 LT AAAsf Affirmed AAAsf
A-11-A 46656DBY6 LT AAAsf Affirmed AAAsf
A-11-B 46656DBZ3 LT AAAsf Affirmed AAAsf
A-11-C 46656DCA7 LT AAAsf Affirmed AAAsf
A-11-X 46656DCB5 LT AAAsf Affirmed AAAsf
A-12 46656DCC3 LT AAAsf Affirmed AAAsf
A-12-A 46656DCD1 LT AAAsf Affirmed AAAsf
A-12-B 46656DCE9 LT AAAsf Affirmed AAAsf
A-12-C 46656DCF6 LT AAAsf Affirmed AAAsf
A-12-X 46656DCG4 LT AAAsf Affirmed AAAsf
A-13 46656DCH2 LT AA+sf Affirmed AA+sf
A-13-A 46656DCJ8 LT AA+sf Affirmed AA+sf
A-13-B 46656DCK5 LT AA+sf Affirmed AA+sf
A-13-C 46656DCL3 LT AA+sf Affirmed AA+sf
A-13-X 46656DCM1 LT AA+sf Affirmed AA+sf
A-14 46656DCN9 LT AA+sf Affirmed AA+sf
A-14-A 46656DCP4 LT AA+sf Affirmed AA+sf
A-14-B 46656DCQ2 LT AA+sf Affirmed AA+sf
A-14-C 46656DCR0 LT AA+sf Affirmed AA+sf
A-14-X 46656DCS8 LT AA+sf Affirmed AA+sf
A-15 46656DCT6 LT AA+sf Affirmed AA+sf
A-15-A 46656DCU3 LT AA+sf Affirmed AA+sf
A-15-B 46656DCV1 LT AA+sf Affirmed AA+sf
A-15-C 46656DCW9 LT AA+sf Affirmed AA+sf
A-15-X 46656DCX7 LT AA+sf Affirmed AA+sf
A-2 46656DAF8 LT AAAsf Affirmed AAAsf
A-3 46656DAG6 LT AAAsf Affirmed AAAsf
A-3-A 46656DAH4 LT AAAsf Affirmed AAAsf
A-3-C 46656DAJ0 LT AAAsf Affirmed AAAsf
A-3-X 46656DAK7 LT AAAsf Affirmed AAAsf
A-4 46656DAL5 LT AAAsf Affirmed AAAsf
A-4-A 46656DAM3 LT AAAsf Affirmed AAAsf
A-4-B 46656DAN1 LT AAAsf Affirmed AAAsf
A-4-C 46656DAP6 LT AAAsf Affirmed AAAsf
A-4-X 46656DAQ4 LT AAAsf Affirmed AAAsf
A-5 46656DAR2 LT AAAsf Affirmed AAAsf
A-5-A 46656DAS0 LT AAAsf Affirmed AAAsf
A-5-B 46656DAT8 LT AAAsf Affirmed AAAsf
A-5-C 46656DAU5 LT AAAsf Affirmed AAAsf
A-5-X 46656DAV3 LT AAAsf Affirmed AAAsf
A-6 46656DAW1 LT AAAsf Affirmed AAAsf
A-6-A 46656DAX9 LT AAAsf Affirmed AAAsf
A-6-B 46656DAY7 LT AAAsf Affirmed AAAsf
A-6-C 46656DAZ4 LT AAAsf Affirmed AAAsf
A-6-X 46656DBA8 LT AAAsf Affirmed AAAsf
A-7 46656DBB6 LT AAAsf Affirmed AAAsf
A-7-A 46656DBC4 LT AAAsf Affirmed AAAsf
A-7-B 46656DBD2 LT AAAsf Affirmed AAAsf
A-7-C 46656DBE0 LT AAAsf Affirmed AAAsf
A-7-X 46656DBF7 LT AAAsf Affirmed AAAsf
A-8 46656DBG5 LT AAAsf Affirmed AAAsf
A-8-A 46656DBH3 LT AAAsf Affirmed AAAsf
A-8-B 46656DBJ9 LT AAAsf Affirmed AAAsf
A-8-C 46656DBK6 LT AAAsf Affirmed AAAsf
A-8-X 46656DBL4 LT AAAsf Affirmed AAAsf
A-9 46656DBM2 LT AAAsf Affirmed AAAsf
A-9-A 46656DBN0 LT AAAsf Affirmed AAAsf
A-9-B 46656DBP5 LT AAAsf Affirmed AAAsf
A-9-C 46656DBQ3 LT AAAsf Affirmed AAAsf
A-9-X 46656DBR1 LT AAAsf Affirmed AAAsf
A-X-1 46656DCY5 LT AA+sf Affirmed AA+sf
A-X-2 46656DCZ2 LT AA+sf Affirmed AA+sf
A-X-3 46656DDA6 LT AA+sf Affirmed AA+sf
A-X-4 46656DDB4 LT AA+sf Affirmed AA+sf
A-X-5 46656DDC2 LT AA+sf Affirmed AA+sf
B-1 46656DDD0 LT AA-sf Affirmed AA-sf
B-2 46656DDE8 LT A-sf Affirmed A-sf
B-3 46656DDF5 LT BBB-sf Affirmed BBB-sf
B-4 46656DDG3 LT BB-sf Affirmed BB-sf
B-5 46656DDH1 LT B-sf Affirmed B-sf
SEMT 2023-2
A1 81744KAA4 LT AAAsf Affirmed AAAsf
A10 81744KAK2 LT AAAsf Affirmed AAAsf
A11 81744KAL0 LT AAAsf Affirmed AAAsf
A12 81744KAM8 LT AAAsf Affirmed AAAsf
A13 81744KAN6 LT AAAsf Affirmed AAAsf
A14 81744KAP1 LT AAAsf Affirmed AAAsf
A15 81744KAQ9 LT AAAsf Affirmed AAAsf
A16 81744KAR7 LT AAAsf Affirmed AAAsf
A17 81744KAS5 LT AAAsf Affirmed AAAsf
A18 81744KAT3 LT AAAsf Affirmed AAAsf
A19 81744KAU0 LT AAAsf Affirmed AAAsf
A2 81744KAB2 LT AAAsf Affirmed AAAsf
A20 81744KAV8 LT AAAsf Affirmed AAAsf
A21 81744KAW6 LT AAAsf Affirmed AAAsf
A22 81744KAX4 LT AAAsf Affirmed AAAsf
A23 81744KAY2 LT AAAsf Affirmed AAAsf
A24 81744KAZ9 LT AAAsf Affirmed AAAsf
A25 81744KBA3 LT AAAsf Affirmed AAAsf
A3 81744KAC0 LT AAAsf Affirmed AAAsf
A4 81744KAD8 LT AAAsf Affirmed AAAsf
A5 81744KAE6 LT AAAsf Affirmed AAAsf
A6 81744KAF3 LT AAAsf Affirmed AAAsf
A7 81744KAG1 LT AAAsf Affirmed AAAsf
A8 81744KAH9 LT AAAsf Affirmed AAAsf
A9 81744KAJ5 LT AAAsf Affirmed AAAsf
AIO1 81744KBB1 LT AAAsf Affirmed AAAsf
AIO10 81744KBL9 LT AAAsf Affirmed AAAsf
AIO11 81744KBM7 LT AAAsf Affirmed AAAsf
AIO12 81744KBN5 LT AAAsf Affirmed AAAsf
AIO13 81744KBP0 LT AAAsf Affirmed AAAsf
AIO14 81744KBQ8 LT AAAsf Affirmed AAAsf
AIO15 81744KBR6 LT AAAsf Affirmed AAAsf
AIO16 81744KBS4 LT AAAsf Affirmed AAAsf
AIO17 81744KBT2 LT AAAsf Affirmed AAAsf
AIO18 81744KBU9 LT AAAsf Affirmed AAAsf
AIO19 81744KBV7 LT AAAsf Affirmed AAAsf
AIO2 81744KBC9 LT AAAsf Affirmed AAAsf
AIO20 81744KBW5 LT AAAsf Affirmed AAAsf
AIO21 81744KBX3 LT AAAsf Affirmed AAAsf
AIO22 81744KBY1 LT AAAsf Affirmed AAAsf
AIO23 81744KBZ8 LT AAAsf Affirmed AAAsf
AIO24 81744KCA2 LT AAAsf Affirmed AAAsf
AIO25 81744KCB0 LT AAAsf Affirmed AAAsf
AIO26 81744KCC8 LT AAAsf Affirmed AAAsf
AIO3 81744KBD7 LT AAAsf Affirmed AAAsf
AIO4 81744KBE5 LT AAAsf Affirmed AAAsf
AIO5 81744KBF2 LT AAAsf Affirmed AAAsf
AIO6 81744KBG0 LT AAAsf Affirmed AAAsf
AIO7 81744KBH8 LT AAAsf Affirmed AAAsf
AIO8 81744KBJ4 LT AAAsf Affirmed AAAsf
AIO9 81744KBK1 LT AAAsf Affirmed AAAsf
B1 81744KCD6 LT AA-sf Affirmed AA-sf
B2 81744KCE4 LT A-sf Affirmed A-sf
B3 81744KCF1 LT BBB-sf Affirmed BBB-sf
B4 81744KCG9 LT BB-sf Affirmed BB-sf
MCMLT 2023-NQM2
A-1 59981CAA0 LT AAAsf Affirmed AAAsf
A-2 59981CAB8 LT AAsf Affirmed AAsf
A-3 59981CAC6 LT Asf Affirmed Asf
B-1 59981CAE2 LT BBsf Affirmed BBsf
B-2 59981CAF9 LT Bsf Affirmed Bsf
M-1 59981CAD4 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Limited Change in Rating Expectations since Issuance (Neutral)
The 11 transactions (seven Prime and four Non-Prime) reviewed were
all issued within the past year. Expected losses are only
marginally higher from issuance driven by a slight uptick in early
delinquencies (DQ).
Overall, borrower performance remains stable since origination. The
percentage of current borrowers decreased only 94 bps for Prime
transactions and 350 bps for Non-Prime on average. However, two
Prime deals have experienced substantial jumps in serious
delinquencies. The percentage of dirty current borrowers in JPPMT
2023-1 has increased by 396 bps, and the percentage of 60+ day
delinquent borrowers in JPMMT 2023-2 has increased by 220 bps.
The current average Prime 'AAAsf' expected loss is 7.35%, which is
up 92bps since issuance. The current average Non-Prime 'AAAsf'
expected loss is 27.33%, up 45bps. Average credit enhancement for
'AAAsf' rated bonds increased moderately since origination for
Prime and Non-Prime deals by 41bps and 143 bps, respectively. The
slight increase in expected losses are offset by the slight
increase in credit enhancement.
Rating Cap Analysis (Negative)
The ratings of the SBCLN 2023-MTG1 notes are directly linked to the
Issuer Default Rating (IDR) of the counterparty, Santander Bank
N.A. (BBB+/F2/Stable, as of June 2023). There is no transfer or
sale of assets, and the referenced collateral will remain on
balance sheet as unencumbered assets of the bank. Interest payments
on the notes are unsecured debt obligations of Santander. Funds
from the sale of the notes are deposited in an eligible account at
Citibank N.A. (A+/F1, as of Sept. 2023).
Principal payments on the notes are paid by SBNA or from this
account based on the performance of the underlying guaranteed
portfolio. As a result, there is counterparty risk to both
Santander Bank N.A. and Citibank N.A.; and the ratings will be
capped at the rating of the lowest rated counterparty, which
currently is Santander N.A.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
This defined negative stress 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 decline at the base case.
This analysis indicates that there is some potential rating
migration with higher MVDs compared with the model projection.
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 with no
assumed overvaluation. The analysis assumes positive home price
growth of 10.0%. Excluding the senior classes already rated
'AAAsf', as well as classes that are constrained due to qualitative
rating caps, the analysis indicates there is potential positive
rating migration for all of the other rated classes.
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. For enhanced disclosure of Fitch's
stresses and sensitivities, please refer to Fitch's U.S. RMBS Loss
Metrics.
ESG CONSIDERATIONS
JPMMT 2023-1, JPMMT 2023-2, SEMT 2023-1, and SEMT 2023-2 have an
ESG Relevance Score of '4 [+]' for Transaction Parties &
Operational Risk due to counterparty risk; origination,
underwriting and/or aggregator standards; borrower/lessee/sponsor
risk; originator/servicer/manager/operational risk, which has a
positive impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
MCMLT 2023-NQM2 and VERUS 2023-2 have an ESG Relevance Score of '4'
for Transaction Parties & Operational Risk due to counterparty
risk; origination, underwriting and/or aggregator standards;
borrower/lessee/sponsor risk;
originator/servicer/manager/operational risk , which has a negative
impact on the credit profile, and is relevant to the rating[s] 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.
[*] Fitch Affirms 60 Tranches From Eight CRE CDOs
-------------------------------------------------
Fitch Ratings, on Nov. 17, 2023, upgraded two, downgraded five and
affirmed 60 classes from eight commercial real estate
collateralized debt obligations (CRE CDOs) with exposure to
commercial mortgage-backed securities (CMBS). Stable Rating
Outlooks have been assigned to the two classes following their
upgrades.
Entity/Debt Rating Prior
----------- ------ -----
CT CDO IV Ltd.
E 12642VAG5 LT Dsf Affirmed Dsf
F-FL 12642VAJ9 LT Csf Affirmed Csf
F-FX 12642VAH3 LT Csf Affirmed Csf
G 12642TAA3 LT Csf Affirmed Csf
H 12642TAB1 LT Csf Affirmed Csf
J 12642TAC9 LT Csf Affirmed Csf
K 12642TAD7 LT Csf Affirmed Csf
L 12642TAE5 LT Csf Affirmed Csf
M 12642TAF2 LT Csf Affirmed Csf
Sorin Real Estate
CDO I, Ltd./Corp.
D Floating Rate
Subordinate
83586TAJ3 LT Csf Affirmed Csf
E Floating Rate
Subordinate
83586TAL8 LT Csf Affirmed Csf
F Fixed Rate
Subordinate
83586TAN4 LT Csf Affirmed Csf
N-Star Real Estate
CDO IX, Ltd.
A-2 Floating Rate
Notes 628983AB4 LT Dsf Affirmed Dsf
A-2 Floating Rate
Notes 628983AB4 LT WDsf Withdrawn Dsf
A-3 Floating Rate
Notes 628983AC2 LT Dsf Affirmed Dsf
A-3 Floating Rate
Notes 628983AC2 LT WDsf Withdrawn Dsf
B Floating Rate
Notes 628983AD0 LT Dsf Affirmed Dsf
B Floating Rate
Notes 628983AD0 LT WDsf Withdrawn Dsf
C Deferrable
Fixed Rate Notes
628983AE8 LT Csf Affirmed Csf
C Deferrable
Fixed Rate Notes
628983AE8 LT WDsf Withdrawn Csf
D Deferrable
Fltg Rate Notes
628983AF5 LT Csf Affirmed Csf
D Deferrable
Fltg Rate Notes
628983AF5 LT WDsf Withdrawn Csf
E Deferrable
Fltg Rate Notes
628983AG3 LT Csf Affirmed Csf
E Deferrable
Fltg Rate Notes
628983AG3 LT WDsf Withdrawn Csf
F Deferrable
Fltg Rate Notes
628983AH1 LT Csf Affirmed Csf
F Deferrable
Fltg Rate Notes
628983AH1 LT WDsf Withdrawn Csf
G Deferrable
Fltg Rate Notes
628983AJ7 LT Csf Affirmed Csf
G Deferrable
Fltg Rate Notes
628983AJ7 LT WDsf Withdrawn Csf
H Deferrable
Fltg Rate Notes
628983AK4 LT Csf Affirmed Csf
H Deferrable
Fltg Rate Notes
628983AK4 LT WDsf Withdrawn Csf
J Deferrable
Fixed Rate Notes
628983AL2 LT Csf Affirmed Csf
J Deferrable
Fixed Rate Notes
628983AL2 LT WDsf Withdrawn Csf
K Deferrable
Fixed Rate Notes
628983AM0 LT Csf Affirmed Csf
K Deferrable
Fixed Rate Notes
628983AM0 LT WDsf Withdrawn Csf
Ansonia CDO
2006-1 Ltd. / LLC
A-FL 036510AA3 LT Bsf Upgrade CCCsf
A-FX 036510AB1 LT Bsf Upgrade CCCsf
B 036510AC9 LT Dsf Affirmed Dsf
C 036510AD7 LT Dsf Affirmed Dsf
D 036510AE5 LT Dsf Affirmed Dsf
E 036510AF2 LT Dsf Affirmed Dsf
F 036510AG0 LT Dsf Affirmed Dsf
G 036510AH8 LT Dsf Affirmed Dsf
H 036510AJ4 LT Csf Affirmed Csf
J 036510AK1 LT Csf Affirmed Csf
K 036510AL9 LT Csf Affirmed Csf
L 036510AM7 LT Csf Affirmed Csf
M 036510AN5 LT Csf Affirmed Csf
N 036510AP0 LT Csf Affirmed Csf
O 036510AQ8 LT Csf Affirmed Csf
P 036510AR6 LT Csf Affirmed Csf
Q 036510AS4 LT Csf Affirmed Csf
S 036510AT2 LT Csf Affirmed Csf
T 036510AU9 LT Csf Affirmed Csf
LNR CDO
III Ltd./Corp.
A Floating Rate
Notes 53944PAA0 LT Dsf Affirmed Dsf
B Floating Rate
Notes 53944PAB8 LT Dsf Affirmed Dsf
C Floating Rate
Notes 53944PAC6 LT Csf Affirmed Csf
D Floating Rate
Notes 53944PAD4 LT Csf Affirmed Csf
E-FL Floating Rate
Notes 53944PAF9 LT Csf Affirmed Csf
E-FX Fixed Rate
Notes 53944PAG7 LT Csf Affirmed Csf
F-FL Floating Rate
Notes 53944PAL6 LT Csf Affirmed Csf
F-FX Fixed Rate
Notes 53944PAH5 LT Csf Affirmed Csf
G Floating Rate
Notes 53944PAQ5 LT Csf Affirmed Csf
Anthracite 2004-HY1
Ltd. / Corp.
D 03702YAD2 LT Csf Affirmed Csf
E 03702YAE0 LT Csf Affirmed Csf
F 03702YAF7 LT Csf Affirmed Csf
Crest 2004-1,
Ltd./Corp.
G-1 Notes
22608WAQ2 LT Dsf Affirmed Dsf
G-2 Notes
22608WAR0 LT Dsf Affirmed Dsf
H-1 Notes
22608WAS8 LT Csf Affirmed Csf
H-2 Notes
22608WAT6 LT Csf Affirmed Csf
Preferred Shares
22608X206 LT Csf Affirmed Csf
JER CRE CDO
2005-1 Limited
A 46614KAA4 LT Dsf Affirmed Dsf
A 46614KAA4 LT WDsf Withdrawn Dsf
B-1 46614KAB2 LT Dsf Affirmed Dsf
B-1 46614KAB2 LT WDsf Withdrawn Dsf
B-2 46614KAH9 LT Dsf Affirmed Dsf
B-2 46614KAH9 LT WDsf Withdrawn Dsf
C 46614KAC0 LT Dsf Downgrade Csf
C 46614KAC0 LT WDsf Withdrawn Dsf
D 46614KAD8 LT Dsf Downgrade Csf
D 46614KAD8 LT WDsf Withdrawn Dsf
E 46614KAE6 LT Dsf Downgrade Csf
E 46614KAE6 LT WDsf Withdrawn Dsf
F 46614KAF3 LT Dsf Downgrade Csf
F 46614KAF3 LT WDsf Withdrawn Dsf
G 46614KAG1 LT Dsf Downgrade Csf
G 46614KAG1 LT WDsf Withdrawn Dsf
Fitch has subsequently withdrawn all ratings in JER CRE CDO 2005-1
and N-Star Real Estate CDO IX as they are no longer considered by
Fitch to be relevant to the agency's coverage due to the
transaction no longer being outstanding or significant
undercollateralization of all remaining classes.
KEY RATING DRIVERS
Fitch has upgraded classes A-FL and A-FX in Ansonia CDO 2006-1
Ltd./LLC to 'Bsf' from 'CCCsf' and assigned Stable Outlooks to
reflect increased credit enhancement since Fitch's prior rating
action, and continued amortization expected to result in a full
repayment of these classes. These are timely, non-deferrable
classes where repayment is reliant on three remaining bonds from
three CMBS transactions, which have significant concentration and
adverse selection.
A look-through analysis of the underlying collateral within these
CMBS transactions was performed. The largest of the CMBS
transactions is WBCMT 2004-C12 (79% of the CRE CDO pool), where the
underlying pool is comprised of two retail loans of concern,
including the Callabridge Commons loan flagged for low NOI DSCR,
and the Crossroads Shopping Center loan flagged for the second
largest tenant on a month-to-month lease.
The two smaller CMBS transactions include JPMCC 2005-CB11 (20% of
the CRE CDO pool), whereby the largest asset is real-estate owned
(REO), and WBCMT 2004-C15 (1% of the CRE CDO pool), whereby the
remaining loan is secured by a dark single tenant retail property
leased to CVS with a lease rolling prior to maturity. With the
exception of the one REO asset in JPMCC 2005-CB11, all other loans
within the three CMBS transactions are fully amortizing, with
maturities ranging between June 2024 and July 2026.
Classes affirmed at 'Csf' indicate default is considered
inevitable; these classes are undercollateralized. Classes affirmed
at or being downgrade to 'Dsf' indicate there were insufficient
proceeds to repay the principal balance following the liquidation
of the remaining collateral or they are non-deferrable classes that
have experienced interest payment shortfalls or experienced a prior
Event of Default as set forth in the transaction documents.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
While unlikely, downgrades to classes A-FL and A-FX in Ansonia CDO
2006-1 Ltd./LLC may occur if these classes experience any interest
payment shortfalls, should performance of the underlying loans
deteriorate significantly beyond expectations and/or with an
increased certainty of losses.
Classes already rated 'Csf' have limited sensitivity to further
negative migration given their highly distressed rating level.
However, there is the potential for classes to be downgraded to
'Dsf' at or prior to legal final maturity if they are
non-deferrable classes that have experienced any interest payment
shortfalls or should an Event of Default, as set forth in the
transaction documents, occur.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
While unlikely, further upgrades to classes A-FL and A-FX in
Ansonia CDO 2006-1 Ltd./LLC may be possible with continued
deleveraging of the capital structure, performance stabilization of
the underperforming loans and/or better recoveries than expected of
the underlying collateral.
Upgrades to classes rated 'Csf' and 'Dsf' are not possible given
their undercollateralization or they are non-deferrable classes
that have experienced any interest payment shortfalls or an Event
of Default, as set forth in the transaction documents, occurred.
[*] Fitch Affirms 74 Tranches From 16 CLOs, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed 74 classes from 16 collateralized loan
obligations (CLOs). The Rating Outlooks on all rated tranches
remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Neuberger Berman Loan
Advisers (NBLA) CLO 52, Ltd.
A-2 64135FAC4 LT AAAsf Affirmed AAAsf
B 64135FAE0 LT AAsf Affirmed AAsf
C 64135FAJ9 LT Asf Affirmed Asf
D 64135FAG5 LT BBB-sf Affirmed BBB-sf
E 64135EAA1 LT BB+sf Affirmed BB+sf
Bridge Street CLO III Ltd.
B 10806YAE0 LT AAsf Affirmed AAsf
D 10806YAJ9 LT BBBsf Affirmed BBBsf
E 10806GAA7 LT BB-sf Affirmed BB-sf
Apidos CLO XLII Ltd
A-2 03770GAC0 LT AAAsf Affirmed AAAsf
B 03770GAE6 LT AAsf Affirmed AAsf
C 03770GAG1 LT Asf Affirmed Asf
D 03770GAJ5 LT BBB-sf Affirmed BBB-sf
E 03770HAA2 LT BB+sf Affirmed BB+sf
Ares LXVII CLO Ltd.
A-1 039939AA1 LT AAAsf Affirmed AAAsf
B-1 039939AE3 LT AAsf Affirmed AAsf
B-2 039939AG8 LT AAsf Affirmed AAsf
C 039939AJ2 LT Asf Affirmed Asf
D 039939AL7 LT BBB-sf Affirmed BBB-sf
E 039940AA9 LT BB-sf Affirmed BB-sf
GoldenTree Loan
Management US
CLO 16, Ltd.
A 38138VAC0 LT AAAsf Affirmed AAAsf
A-J 38138VAE6 LT AAAsf Affirmed AAAsf
B 38138VAG1 LT AAsf Affirmed AAsf
C 38138VAJ5 LT Asf Affirmed Asf
D 38138VAL0 LT BBB-sf Affirmed BBB-sf
E 38138GAA7 LT BB-sf Affirmed BB-sf
F 38138GAC3 LT B+sf Affirmed B+sf
TICP CLO XI, Ltd.
A 87249QAA8 LT AAAsf Affirmed AAAsf
B 87249QAC4 LT AA+sf Affirmed AA+sf
Neuberger Berman
Loan Advisers
CLO 46, Ltd.
A 64134QAA5 LT AAAsf Affirmed AAAsf
B 64134QAC1 LT AAsf Affirmed AAsf
C 64134QAE7 LT Asf Affirmed Asf
D 64134QAG2 LT BBB-sf Affirmed BBB-sf
Apidos
CLO XVIII-R
A-1 03767NAC0 LT AAAsf Affirmed AAAsf
A-2 03767NAE6 LT AAAsf Affirmed AAAsf
B 03767NAG1 LT AA+sf Affirmed AA+sf
CQS US CLO
2021-1, Ltd.
A 12659UAA0 LT AAAsf Affirmed AAAsf
E 12661TAA9 LT BB-sf Affirmed BB-sf
CIFC Funding
2022-VII, Ltd.
A-1 12569EAN7 LT AAAsf Affirmed AAAsf
A-2A 12569EAA5 LT AAAsf Affirmed AAAsf
A-2B 12569EAC1 LT AAAsf Affirmed AAAsf
B-1 12569EAE7 LT AAsf Affirmed AAsf
B-2 12569EAG2 LT AAsf Affirmed AAsf
C 12569EAJ6 LT Asf Affirmed Asf
D 12569EAL1 LT BBB-sf Affirmed BBB-sf
E 12569GAA0 LT BB-sf Affirmed BB-sf
Symphony
CLO 37, Ltd.
A-2 87169VAE5 LT AAAsf Affirmed AAAsf
B-1 87169VAG0 LT AAsf Affirmed AAsf
B-2 87169VAJ4 LT AAsf Affirmed AAsf
C 87169VAL9 LT Asf Affirmed Asf
D-1 87169VAN5 LT BBBsf Affirmed BBBsf
D-2 87169VAQ8 LT BBB-sf Affirmed BBB-sf
E 87169WAA1 LT BB-sf Affirmed BB-sf
LCM XVII Limited
Partnership
A-1A-RR 50190AAK8 LT AAAsf Affirmed AAAsf
A-1B-RR 50190AAM4 LT AAAsf Affirmed AAAsf
A-2-RR 50190AAP7 LT AAAsf Affirmed AAAsf
B-RR 50190AAR3 LT AAsf Affirmed AAsf
Capital Four US
CLO III Ltd
B 14016LAE6 LT AAsf Affirmed AAsf
C 14016LAG1 LT Asf Affirmed Asf
D-1 14016LAJ5 LT BBB-sf Affirmed BBB-sf
D-2 14016LAL0 LT BBB-sf Affirmed BBB-sf
E 14016NAA0 LT BB-sf Affirmed BB-sf
Battalion
CLO XXIV Ltd.
A 07135JAA9 LT AAAsf Affirmed AAAsf
B 07135JAC5 LT AAsf Affirmed AAsf
C 07135JAE1 LT Asf Affirmed Asf
D 07135JAG6 LT BBB-sf Affirmed BBB-sf
E 07135KAA6 LT BB-sf Affirmed BB-sf
Sound Point
CLO 35, Ltd.
A-1 83607PAA5 LT AAAsf Affirmed AAAsf
A-2 83607PAC1 LT AAAsf Affirmed AAAsf
B 83607PAE7 LT AAsf Affirmed AAsf
C 83607PAG2 LT Asf Affirmed Asf
D 83607PAJ6 LT BBB-sf Affirmed BBB-sf
E 83607RAA1 LT BB-sf Affirmed BB-sf
Regatta XV
Funding Ltd.
A-1 75888RAC3 LT AAAsf Affirmed AAAsf
A-2 75888RAE9 LT AA+sf Affirmed AA+sf
TRANSACTION SUMMARY
All 16 CLOs are secured primarily by first-lien, senior secured
leveraged loans. All transactions are still in their reinvestment
periods, except for Apidos CLO XVIII-R, LCM XVII Limited
Partnership, Regatta XV Funding Ltd., and TICP CLO XI, Ltd. that
exited their reinvestment period in October 2023.
KEY RATING DRIVERS
Cash Flow Analysis
The affirmations are driven by the portfolios' stable performance
since last rating actions and by credit enhancement (CE) levels
against relevant rating stress loss levels. Fitch analyzed each CLO
based on the current portfolio, and an updated Fitch Stressed
Portfolio (FSP) cash flow analysis. For CLOs out of reinvestment,
FSP analysis was deemed appropriate due to the ability of these
CLOs to continue to reinvest after the end of its/their
reinvestment period, subject to certain conditions. The FSP
analysis stressed the current portfolio to account for permissible
concentration and collateral quality test (CQT) limits.
The current ratings are in line with their respective model-implied
ratings (MIRs), as defined in Fitch's "CLOs and Corporate CDOs
Rating Criteria," except for class B-1, B-2 and C notes in CIFC
Funding 2022-VII, Ltd. and class D-1 notes in Symphony CLO 37, Ltd.
The aforementioned notes were affirmed one notch below the MIR, due
to limited positive cushions at the respective MIR rating levels,
in view of a potential portfolio deterioration in the context of
weakening macroeconomic environment.
The Stable Outlooks for all remaining tranches reflect Fitch's
expectation that the notes have sufficient level of credit
protection to withstand potential deterioration in the credit
quality of the portfolios in stress scenarios commensurate with
each class' rating.
Stable Asset Performance, Asset Credit Quality and Asset Security
As of the latest reporting, the credit quality of the portfolios is
generally at the 'B'/'B-' rating level. The average Fitch weighted
average rating factors (WARF) of the performing portfolios is 24.8,
while the average Fitch weighted average recovery rate (WARR) is at
75.3%. Average exposure to issuers with a Negative Outlook and
Fitch's watchlist is 17.2% and 5.9%, respectively. Refer to the
supplemental Rating Action Report in the "Related Content" section
above for additional deal specific information.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed. Fitch conducted rating
sensitivity analysis on the closing date of each CLO, incorporating
increased levels of defaults and reduced levels of recovery rates
among other sensitivities. The outcome of the analysis at initial
rating assignment remain in line with Fitch's expectations.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Except for tranches already at the highest 'AAAsf' rating, upgrades
may occur in the event of better-than-expected portfolio credit
quality and transaction performance. Fitch conducted rating
sensitivity analysis on the closing date of each CLO, incorporating
increased levels of defaults and reduced levels of recovery rates
among other sensitivities. The outcome of the analysis at initial
rating assignment remain in line with Fitch's expectations.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
[*] Moody's Takes Action on $28MM of US RMBS Issued 2002-2005
-------------------------------------------------------------
Moody's Investors Service, on Nov. 21, 2023, upgraded the ratings
of two bonds and downgraded the ratings of three bonds from three
US residential mortgage-backed transactions (RMBS), backed by Alt-A
and subprime mortgages issued by multiple issuers.
Complete rating actions are as follows:
Issuer: Chase Funding Trust, Series 2003-5
Cl. IA-5, Downgraded to Ba2 (sf); previously on May 14, 2014
Downgraded to Baa3 (sf)
Cl. IIA-2, Downgraded to A1 (sf); previously on Sep 13, 2018
Upgraded to Aa3 (sf)
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2005-6
Cl. I-A-3, Upgraded to Baa1 (sf); previously on May 4, 2022
Upgraded to Baa3 (sf)
Cl. I-A-4, Upgraded to A1 (sf); previously on May 4, 2022 Upgraded
to A3 (sf)
Issuer: CWABS, Inc., Asset-Backed Certificates, Series 2002-BC3
Cl. M-1, Downgraded to B1 (sf); previously on Dec 1, 2022
Downgraded to Ba2 (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 pool, and an increase in credit enhancement available to
the bonds. The rating downgrades are primarily due to a
deterioration in collateral performance, and/or decline in credit
enhancement available to the bonds due to the deals passing
performance trigger.
The rating downgrade of Class M-1 issued by CWABS, Inc.,
Asset-Backed Certificates, Series 2002-BC3 is also due to
outstanding interest shortfall on the bond that is 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 these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Takes Various Actions on 102 Classes From 37 US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 102 classes from 37 U.S.
RMBS transactions issued between 2001 and 2007. The review yielded
27 upgrades, 69 affirmations, three downgrades, two withdrawals,
and one discontinuance.
A list of Affected Ratings can be viewed at:
https://rb.gy/6drm9a
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends,
-- Erosion of or increases in credit support,
-- Historical and/or outstanding missed interest payments or
interest shortfalls,
-- A small loan count, and
-- Available subordination and/or overcollateralization.
Rating Actions
The rating changes reflect S&P's view regarding the associated
transaction-specific collateral performance and/or structural
characteristics, as well as the specific criteria applicable to
these classes.
The rating affirmations reflect S&P's view that our projected
credit support, collateral performance, and credit-related
reductions in interest on these classes have remained relatively
consistent with our prior projections.
The upgrades primarily reflect the increased credit support. Most
of these transactions have failed their cumulative loss triggers,
which provide a permanent sequential principal payment mechanism.
This prevents credit support from eroding and limits loss exposure.
As a result, the upgrades on these classes reflect their ability to
withstand a higher level of projected losses than previously
anticipated.
*********
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