/raid1/www/Hosts/bankrupt/TCR_Public/240317.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, March 17, 2024, Vol. 28, No. 76
Headlines
1211 AVENUE 2015-1211: Fitch Affirms BB Rating on Class E Certs
AGL CLO 29: Fitch Assigns 'BB-sf' Rating on Class E Notes
ANCHORAGE CAPITAL 28: Fitch Assigns 'B-sf' Rating on Class F Notes
ANCHORAGE CREDIT 7: Moody's Hikes Rating on $15MM E Notes From Ba1
APIDOS CLO XLVII: Moody's Assigns (P)B3 Rating to $500,000 F Notes
BAYVIEW OPPORTUNITY 2024-SN1: Fitch Gives 'B' Rating on F Notes
BELMONT PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
BENEFIT STREET IV: S&P Assigns Prelim BB-(sf) Rating on E-R4 Notes
BHG SECURITIZATION 2024-1CON: Fitch Gives BB(EXP) Rating on E Notes
BMO 2024-C8: S&P Assigns Prelim BB- (sf) Rating on Cl. XGRR Certs
BRAVO RESIDENTIAL 2024-NQM2: Fitch Gives B Rating on Cl. B-2 Notes
BX TRUST 2024-CNYN: Moody's Assigns (P)B1 Rating to Cl. HRR Certs
CARVAL CLO II: Moody's Cuts Rating on $7MM Cl. F-R Notes to Caa1
CHASE HOME 2024-2: Fitch Assigns Bsf Final Rating on Cl. B-5 Certs
CIFC FUNDING 2017-I: Fitch Assigns 'BB-sf' Rating on Cl. E-RR Notes
CIFC FUNDING 2022-II: Fitch Affirms 'BBsf' Rating on Class E Notes
DK TRUST 2024-SPBX: Fitch Assigns B+(EXP) Rating on Cl. HRR Certs
ELMWOOD CLO 16: S&P Assigns B- (sf) Rating on Class F-R Notes
ELMWOOD CLO 26: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
FANNIE MAE 2024-R02: S&P Assigns 'B+(sf)' Rating on Cl. 1B-2 Notes
FREDDIE MAC 2024-HQA1: Moody's Gives '(P)Ba1' Rating to 10 Tranches
GALAXY CLO XXIV: Moody's Assigns B3 Rating to $200,000 F-R Notes
GALAXY XXIV: Fitch Assigns 'BBsf' Rating on Class E-R Notes
GS MORTGAGE 2021-GR3: Moody's Ups Rating on Cl. B-5 Certs to Ba3
GS MORTGAGE 2024-PJ2: Fitch Assigns 'B-sf' Rating on Cl. B-5 Certs
GS MORTGAGE 2024-RPL2: Fitch Gives B(EXP)sf Rating on Cl. B-2 Certs
HINNT LLC 2024-A: Moody's Assigns (P)B3 Rating to Class E Notes
HPS PRIVATE 2024-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
JP MORGAN 2024-HE1: Fitch Assigns 'Bsf' Rating on Class B-2 Certs
JP MORGAN 2024-HE1: Fitch Assigns B(EXP)sf Rating on Cl. B-2 Certs
KATAYMA CLO II: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
MADISON PARK XLII: S&P Affirms B+ (sf) Rating on Class E Notes
MARBLE POINT XIV: Moody's Ups Rating on $24.9MM D Notes From Ba1
MORGAN STANLEY 2024-INV1: Fitch Assigns Bsf Rating on Cl. B-5 Certs
MP CLO VII: Fitch Lowers Rating on Class F-RR Notes to 'CCCsf'
NATIONAL COLLEGIATE 2007-A: Fitch Affirms Bsf Rating on Cl. C Notes
NEUBERGER BERMAN 36: S&P Assigns BB- (sf) Rating on Cl. E-R2 Notes
NEUBERGER BERMAN 54: Fitch Assigns BB-(EXP)sf Rating on Cl. E Notes
NEUBERGER BERMAN 55: Fitch Assigns BB(EXP)sf Rating on Cl. E Notes
NEUBERGER BERMAN 55: Moody's Assigns (P)B3 Rating to Class F Notes
NYMT LOAN 2024-CP1: Fitch Gives 'B(EXP)sf' Rating on Cl. B-2 Notes
OBX TRUST 2024-HYB2: Moody's Assigns (P)B2 Rating to Cl. B-2 Notes
OCP CLO 2016-11: S&P Affirms BB (sf) Rating on Class E-R2 Notes
OCTAGON INVESTMENT 31: Moody's Cuts Rating on $11MM F Notes to Caa1
PALMER SQUARE 2018-1: Fitch Assigns 'BBsf' Rating on Cl. D-R Notes
PALMER SQUARE 2022-3: Moody's Gives Ba2 Rating to $40MM D-R Notes
POST CLO 2024-1: Fitch Assigns 'BB-(EXP)' Rating on Class E Notes
PRET TRUST 2024-RPL1: Fitch Assigns B(EXP) Rating on Cl. B-2 Notes
PROVIDENT FUNDING 2021-INV2: Moody's Ups Rating on B-5 Certs to B2
RAD CLO 23: Fitch Assigns 'BB-sf' Rating on Class E Notes
RCKT MORTGAGE 2021-1: Moody's Ups Rating on Cl. B-4 Certs to Ba2
REGATTA XXVII: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
RR 25 LTD: Fitch Assigns 'BB+(EXP)sf' Rating on Class D-R Notes
RR 25 LTD: Moody's Assigns B3 Rating to $800,000 Class E-R Notes
SEQUOIA MORTGAGE 2024-3: Fitch Gives 'BB(EXP)sf' Rating on B4 Certs
SIERRA TIMESHARE 2024-1: Fitch Assigns BB-(EXP)sf Rating on D Notes
SLM STUDENT 2004-10: Fitch Lowers Rating on B Notes to 'BBsf'
TELOS CLO 2013-3: Moody's Lowers Rating on $24.1MM E-R Notes to Ca
TEXAS DEBT 2024-I: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. E Notes
VERUS SECURITIZATION 2024-INV1: S&P Assigns (P) B-(sf) on B-2 Notes
[*] Fitch Affirms 13 Classes on Three 2014 Canadian CMBS Deals
[*] Fitch Affirms 35 Tranches on 7 Collateralized Loan Obligations
[*] Fitch Affirms 37 Classes on 12 National Collegiate Trusts
[*] Fitch Cuts 13 Classes on Three US CMBS BMARK 2018 Vintage Deals
[*] Moody's Takes Action on $91.4MM of US RMBS Issued 2003-2006
[*] Moody's Upgrades Ratings on $58MM of US RMBS Issued 2004
*********
1211 AVENUE 2015-1211: Fitch Affirms BB Rating on Class E Certs
---------------------------------------------------------------
Fitch Ratings has affirmed eight classes of 1211 Avenue of the
Americas Trust 2015-1211 commercial mortgage pass-through
certificates. The Rating Outlooks for classes C, D and E have been
revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
1211 Avenue of the
Americas Trust 2015-1211
A-1A1 90117PAA3 LT AAAsf Affirmed AAAsf
A-1A2 90117PAC9 LT AAAsf Affirmed AAAsf
B 90117PAJ4 LT AA-sf Affirmed AA-sf
C 90117PAL9 LT A-sf Affirmed A-sf
D 90117PAN5 LT BBB-sf Affirmed BBB-sf
E 90117PAQ8 LT BBsf Affirmed BBsf
X-A 90117PAE5 LT AAAsf Affirmed AAAsf
X-B 90117PAG0 LT AA-sf Affirmed AA-sf
TRANSACTION SUMMARY
The certificates represent the beneficial interests in the mortgage
loan securing the borrower's fee simple interest in a 45-story
office building totaling approximately two million sf of office and
retail space, located at 1211 Avenue of the Americas in New York,
NY. The 10-year, fixed-rate, interest-only loan matures in August
2025.
KEY RATING DRIVERS
Overall Stable Performance Since Issuance; Near Term Maturity: The
affirmations reflect overall stable performance from issuance. The
Negative Outlooks reflect concerns related to the loan's
refinanceability given the upcoming August 2025 maturity, the size
of the outstanding debt amount, and Fitch's stressed debt service
coverage ratio (DSCR) on the total debt of 0.97x.
The property continues to maintain a high occupancy, with
servicer-reported occupancy of 96% as of September 2023, up from
91.5% at issuance. The most recent servicer-reported net cash flow
(NCF) DSCR was 2.36x as of September 2023 compared to 2.34x as of
YE 2022, 2.31x at YE 2021 and 2.38x at YE 2020. The subject has
benefitted from the recent news that tenants Fox Corporation and
News Corporation both recently renewed for 20 years through 2042.
It has been also reported that the borrower is planning a number of
upgrades at the property including renovating the existing lobby,
adding an additional lobby along 47th Street and upgrading the
outdoor plazas. Despite the positive news regarding the renewal,
Fitch expects lower expense reimbursements given a base year reset
for Fox Corporation and News Corporation in 2026.
Fitch's current NCF has decreased to $85 million from $92.1 million
at the last rating action, largely due to a higher vacancy
assumption, lower expense reimbursements, and the loss of tenant
Axis Reinsurance (previously 6.2% of NRA), who vacated upon lease
expiration in August 2023. Fitch's issuance NCF was $95.5 million.
Above Average Property Quality in Strong Location: 1211 Avenue of
the Americas consists of a 45-story, class A office building
located in Midtown Manhattan. The property is adjacent to
Rockefeller Center and in close proximity to subway lines and major
transportation hubs.
High-Quality Tenancy: The top five tenants account for
approximately 92.1% of the NRA and include Fox Corporation (39.3%
of NRA; rated A-; lease expiry in 2042), News Corporation (24.5% of
NRA; rated BBB-; lease expiry in 2042), Ropes & Gray (16.7% of NRA;
lease expiry in March 2027), RBC (3.2% of NRA; rated AA-; lease
expiry in December 2026) and Nordea (2.2% of NRA; rated AA-; lease
expiry in April 2031). Tenants with investment-grade credit ratings
account for approximately 69.2% of the NRA. Approximately 3% of the
NRA expires before the loan maturity in August 2025.
Fitch Leverage: The $1.035 billion mortgage loan has a Fitch DSCR
and loan-to-value (LTV) of 0.97x and 91.3%, respectively, and debt
of $514 psf. Fitch applied a stressed cap rate of 7.50% in its
analysis.
Sponsorship and Property Manager: The loan sponsor is Ivanhoé
Cambridge Inc. and the property is sub-managed by IC US Capital
Properties LLC.
Single Asset Office: The transaction is secured by a single office
property and is, therefore, more susceptible to single-event risks
related to the secular shifts in market demand for office space,
sponsor, or the largest tenants occupying the property.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades are possible with sustained and significant decline in
asset occupancy and/or a material deterioration in property NCF. A
downgrade to classes C, D and E are possible if the loan fails to
repay at maturity, interest shortfalls affect the classes and/or
there is a prolonged workout of the loan leading to a value
decline.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes B through E are possible with stable to
improved occupancy and sustained cash flow improvement, but will be
limited due to the upcoming maturity. Fitch rates classes A-1A1 and
A-1A2 at 'AAAsf'; therefore, upgrades are not possible.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
AGL CLO 29: Fitch Assigns 'BB-sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to AGL CLO
29 Ltd.
Entity/Debt Rating Prior
----------- ------ -----
AGL CLO 29 Ltd.
A-1 LT AAAsf New Rating AAA(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 LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
AGL CLO 29 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by AGL
CLO Credit 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', 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 matrix point of 25.75. 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
99.76% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.2% versus a
minimum covenant, in accordance with the initial matrix point of
70.3%.
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 5.1-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 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-1, 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-1 and 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, 'AAsf' for class C, 'Asf' for
class D; and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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.
ANCHORAGE CAPITAL 28: Fitch Assigns 'B-sf' Rating on Class F Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Anchorage
Capital CLO 28 Ltd.
Entity/Debt Rating
----------- ------
Anchorage Capital
CLO 28, Ltd.
A LT NRsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D-1 LT BBB-sf New Rating
D-2 LT BBB-sf New Rating
E LT BB-sf New Rating
F LT B-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Anchorage Capital CLO 28 Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) that will be managed by
Anchorage Collateral Management, L.L.C. Net proceeds from the
issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $399 million of primarily
first lien senior secured leveraged loans. There is a defaulted
asset, which is being reported by manager as a current pay and is
excluded from its reporting.
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 25.4, versus a maximum covenant, in
accordance with the initial expected matrix point of 25.4. 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
97.73% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.3% versus a
minimum covenant, in accordance with the initial expected matrix
point of 68.7%.
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 11.5% 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 '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 'B-sf' 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, 'AAsf' for class C, 'Asf' for
class D, 'BBB+sf' for class E; and 'BB+sf' for class F.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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.
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.
ANCHORAGE CREDIT 7: Moody's Hikes Rating on $15MM E Notes From Ba1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Anchorage Credit Funding 7, Ltd.:
US$41,000,000 Class B-R Senior Secured Fixed Rate Notes due 2037,
Upgraded to Aaa (sf); previously on October 19, 2023 Upgraded to
Aa1 (sf)
US$15,000,000 Class C-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037, Upgraded to Aa1 (sf); previously on October 19,
2023 Upgraded to Aa3 (sf)
US$12,000,000 Class D-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037, Upgraded to Aa3 (sf); previously on October 19,
2023 Upgraded to A3 (sf)
US$15,000,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2037, Upgraded to Baa2 (sf); previously on October 19, 2023
Upgraded to Ba1 (sf)
Anchorage Credit Funding 7, Ltd., originally issued in March 2019
and partially refinanced in April 2021 is a managed cashflow CBO.
The notes are collateralized primarily by a portfolio of corporate
bonds and loans. The transaction's reinvestment period will end in
April 2024.
A comprehensive review of all credit ratings for the respective
transactions have been conducted during a rating committee.
RATINGS RATIONALE
These rating actions reflect the benefit of the short period of
time remaining before the end of the deal's reinvestment period in
April 2024. In light of the reinvestment restrictions during the
amortization period which limit the ability of the manager to
effect significant changes to the current collateral pool, Moody's
analyzed the deal assuming a higher likelihood that the collateral
pool characteristics will be maintained and continue to satisfy
certain covenant requirements.
In particular, Moody's noted that the deal currently benefits from
interest income on portfolio assets that significantly exceeds the
fixed rate of interest payable on the rated notes, due to the
deal's exposure to approximately 39% in floating-rate loans that
generate a weighted average spread (WAS) of 4.69% over their
reference rates. Additionally, Moody's assumed that the deal will
benefit from a shorter weighted average life (WAL), which reduces
the time the rated notes are exposed to the credit risk of the
underlying portfolio.
No action was taken on the Class A notes because its expected loss
remain commensurate with its current rating, after taking into
account the CLO's latest portfolio information, its relevant
structural features and its actual over-collateralization and
interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, weighted average coupon, and weighted average recovery
rate, are based on its published methodology and could differ from
the trustee's reported numbers. For modeling purposes, Moody's used
the following base-case assumptions:
Performing par and principal proceeds balance: $295,905,149
Defaulted par: $5,942,663
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3316
Weighted Average Spread (WAS): 4.69%
Weighted Average Coupon (WAC): 6.11%
Weighted Average Recovery Rate (WARR): 34.30%
Weighted Average Life (WAL): 4.71 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS, WAC, or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
APIDOS CLO XLVII: Moody's Assigns (P)B3 Rating to $500,000 F Notes
------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to two classes of
notes to be issued by Apidos CLO XLVII Ltd (the "Issuer" or "Apidos
XLVII").
Moody's rating action is as follows:
US$320,000,000 Cl. A-1 Senior Secured Floating Rate Notes due 2037,
Assigned (P)Aaa (sf)
US$500,000 Cl. F Mezzanine Deferrable Floating Rate Notes due 2037,
Assigned (P)B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes".
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Apidos XLVII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10.0% of the portfolio may consist of second lien loans,
unsecured loans and permitted non-loan assets. Moody's expect the
portfolio to be approximately 85% ramped as of the closing date.
CVC Credit Partners, LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer will issue six other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3075
Weighted Average Spread (WAS): 3.527%
Weighted Average Coupon (WAC): 4.90%
Weighted Average Recovery Rate (WARR): 46.00%
Weighted Average Life (WAL): 8.1 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
BAYVIEW OPPORTUNITY 2024-SN1: Fitch Gives 'B' Rating on F Notes
---------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Bayview Opportunity Master Fund VII Trust 2024-SN1 (BVABS
2024-SN1).
Entity/Debt Rating Prior
----------- ------ -----
BVABS 2024-SN1
A-1 ST F1+sf New Rating F1+(EXP)sf
A-2 LT AAAsf New Rating 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
F LT Bsf New Rating B(EXP)sf
KEY RATING DRIVERS
Collateral Performance - Nonprime Credit Quality: BVABS 2024-SN1 is
backed by SCUSA collateral that is slightly different than prior
SDART pools, with a weighted average (WA) FICO score of 636,
substantially higher than the 605 WA in SDART 2024-1. The pool
notably contains only obligors with FICO scores of 600-680.
However, the internal WA loan funded score (LFS) is 536, just one
point higher than 535 in SDART 2024-1. WA seasoning is 10.0 months
and new vehicles total 47.7% of the pool compared with 30.4% in
SDART 2024-1. In addition, the pool is diverse in vehicle models
and geographic concentrations. The transaction's percentage of
extended-term loans (61+ months) is elevated at 96.3% and
greater-than-72-month term loans total 24.8%.
Payment Structure - Sufficient CE: Initial hard CE totals 37.90%,
30.55%, 23.40%, 15.15%, 11.15%, and 8.25% for classes A, B, C, D,
E, and F, respectively, lower than classes A-C in SDART 2024-1, but
higher for class D. Excess spread is expected to be 6.47% per
annum. Loss coverage for each class of notes is sufficient to cover
the respective multiples of Fitch's rating case cumulative net loss
(CNL) proxy of 13.00%.
Forward-Looking Approach to Derive Rating Case Proxy - Increasing
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 with securitization
credit to derive the 13.00% rating case loss proxy for BVABS
2024-SN1, representing through-the-cycle performance. 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 11.00%, based on Fitch's Global Economic Outlook and
transaction-based forecasted projections.
Seller/Servicer Operational Review - Consistent
Origination/Underwriting/Servicing: Santander Consumer USA Inc (SC)
has adequate abilities as the originator, underwriter, and
servicer, as evident from historical portfolio and securitization
performance. Fitch rates SC's ultimate parent, Banco Santander,
S.A. A-/F2/Stable. Fitch deems SC as capable to service this
transaction.
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 higher than the rating case, and would likely result in
declines of CE and remaining net loss coverage levels available to
the notes. In addition, 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.
Fitch also conducts 1.5x and 2.0x increases to the CNL proxy,
representing both moderate and severe stresses. Additionally, Fitch
evaluates the effect 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.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on comparing or recomputing certain
information with respect to 100 loans from the statistical data
file. Fitch considered this information in its analysis and it did
not have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
The concentration of hybrid and electric vehicles in the pool of
approximately 6.0% 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.
BELMONT PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Belmont Park
CLO Ltd./Belmont Park CLO LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Blackstone Liquid Credit Strategies
LLC.
The preliminary ratings are based on information as of March 13,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Belmont Park CLO Ltd./Belmont Park CLO LLC
Class A-1, $240.00 million: AAA (sf)
Class A-2, $8.00 million: AAA (sf)
Class B, $56.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $15.40 million: BB- (sf)
Subordinated notes, $44.90 million: Not rated
BENEFIT STREET IV: S&P Assigns Prelim BB-(sf) Rating on E-R4 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R4, A-R4, B-R4, C-R4, D-1A-R4, D-1B-R4, D-2-R4, and E-R4
replacement debt from Benefit Street Partners CLO IV Ltd./Benefit
Street Partners CLO IV LLC, a CLO managed by Benefit Street
Partners LLC. This is the fourth refinancing of the transaction
that originally closed in May 2014.
The preliminary ratings are based on information as of March 11,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the March 14, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. S&P
said, "At that time, we expect to withdraw our ratings on the
original debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class X-R4, A-R4, B-R4, C-R4, D-1A-R4, D-1B-R4,
D-2-R4, and E-R4 notes are expected to be issued at generally
higher interest rates than the notes issued in the third
refinancing.
-- The replacement class X-R4, A-R4, B-R4, C-R4, D-1A-R4, D-2-R4,
and E-R4 notes are expected to be issued with floating spreads, and
class D-1B-R4 notes is expected to be issued with a fixed coupon.
-- The non-call period will be extended to April 2025; the
reinvestment period will be extended to April 2026; and the stated
maturity will be extended to April 2034.
-- In connection with the refinancing, the issuer is modifying
certain concentration limitations and some of the provisions
related to workout assets.
-- The class X-R4 notes are expected to be issued in connection
with this refinancing. These notes are expected to be paid down
using interest proceeds during the first seven payment dates
beginning with the payment date in July 2024.
Replacement And Original Debt Issuances
Replacement debt
-- Class X-R4, $2.00 million: Three-month CME term SOFR + 1.00%
-- Class A-R4, $320.00 million: Three-month CME term SOFR + 1.35%
-- Class B-R4, $60.00 million: Three-month CME term SOFR + 1.90%
-- Class C-R4, $30.00 million: Three-month CME term SOFR + 2.40%
-- Class D-1A-R4, $17.50 million: Three-month CME term SOFR +
3.70%
-- Class D-1B-R4, $10.00 million: 7.64%
-- Class D-2-R4, $7.50 million: Three-month CME term SOFR + 5.15%
-- Class E-R4, $17.50 million: Three-month CME term SOFR + 7.15%
Subordinated notes, $68.48 million: Not applicable
Original debt
-- Class X, $5.00 million: Three-month LIBOR + 0.60%
-- Class A-1-RRR, $310.00 million: Three-month LIBOR + 1.18%
-- Class A-2A-RRR, $60.00 million: Three-month LIBOR + 1.55%
-- Class A-2B-RRR, $10.00 million: 2.23%
-- Class B-RRR, $30.00 million: Three-month LIBOR + 2.15%
-- Class C-RRR, $30.00 million: Three-month LIBOR + 3.60%
-- Class D-RR, $17.50 million: Three-month LIBOR + 6.83%
-- Subordinated notes, $x66.48 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Benefit Street Partners CLO IV Ltd./
Benefit Street Partners CLO IV LLC
Class X-R4, $2.00 million: AAA (sf)
Class A-R4, $320.00 million: AAA (sf)
Class B-R4, $60.00 million: AA (sf)
Class C-R4 (deferrable), 430.00 million: A (sf)
Class D-1A-R4 (deferrable), $17.50 million: BBB (sf)
Class D-1B-R4 (deferrable), $10.00 million: BBB (sf)
Class D-2-R4 (deferrable), $7.50 million: BBB- (sf)
Class E-R4 (deferrable), $17.50 million: BB- (sf)
Subordinated notes, $66.48 million: Not rated
BHG SECURITIZATION 2024-1CON: Fitch Gives BB(EXP) Rating on E Notes
-------------------------------------------------------------------
Fitch Ratings expects to assign ratings and Rating Outlooks to the
notes issued by BHG Securitization Trust 2024-1CON (BHG
2024-1CON).
Entity/Debt Rating
----------- ------
BHG Securitization
Trust 2024-1C
A 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
TRANSACTION SUMMARY
The BHG 2024-1CON trust is a discrete trust backed by a static pool
of consumer loans originated or purchased by Bankers Healthcare
Group, LLC (BHG). This is BHG's first 100% consumer loan
securitization. Previously, the collateral pool consisted a mix of
consumer and commercials loan. BHG 2024-1CON is the ninth ABS
transaction sponsored by BHG and the fifth rated by Fitch.
The actual pool of loans acquired by the grantor trust on the
closing date will include a significant amount of loans that are
not included in the statistical loan pool, as the pool upon closing
is expected to have a current principal balance of at least
$300,000,000, while the current principal balance of the loans in
the loan pool as of the statistical cutoff date is $207,265,877.
The characteristics of the loans as of the closing date may vary
from the characteristics of the loans in the statistical loan pool
as of the statistical cutoff date, although the preliminary
offering memorandum states that such variance is expected to be
immaterial.
KEY RATING DRIVERS
Collateral Pool Comprised of High FICO Borrowers: The BHG 2024-CON
pool shared with Fitch has a weighted average (WA) FICO score of
746; 0.92% of the borrowers have a score below 661 and 51.78% have
a score higher than 740. The WA original term of 91 months is lower
than 92 months in BHG 2023-B, which itself had declined from the
previous transactions.
Default Assumption Reflects Loan and Borrower Characteristics: The
base case default assumption based on the pool is 14.26%. The
default assumption was established by BHG's proprietary risk grade
and loan term.
Fitch set assumptions on segmented performance data from 2014,
which included loans that were re-scored utilizing BHG's updated
underwriting and scoring model, which became effective in 2018.
Through-the-cycle loan performance and characteristics were also
reviewed by Fitch. For certain segments, where Fitch considered the
loans did not have significant historical performance data, Fitch
considered the segment's equivalent commercial loan performance to
arrive at the base case default assumption. Commercial loan
performance was considered given similar borrower characteristics
and BHG's comparable underwriting policies for the guarantor of
commercial loans.
Credit Enhancement Mitigates Stressed Losses: Initial hard credit
enhancement (CE) totals 54.70%, 30.20%, 18.40%, 13.90% and 9.40%
for class A, B, C, D and E notes, respectively. Initial CE is
sufficient to cover Fitch's stressed cash flow assumptions for all
classes. Fitch applied a 'AAAsf' rating stress of 4.5x the base
case default rate for consumer loans. Fitch revised the multiple
from 4.25x for consumer loans applied for BHG 2023-B, primarily due
to the pool composition consisting of 100% consumer loans which
have limited performance history compared to previous pools
consisting predominantly commercial loans.
The stress multiples decline for lower rating levels according to
Fitch's Consumer ABS Rating Criteria. The default multiple reflects
the absolute value of the default assumption, the length of default
performance history for loan type (shorter for consumer loans),
high WA borrower FICO scores and income, and the WA original loan
term, which increases the portfolio's exposure to changing economic
conditions.
Counterparty Risks Addressed: BHG has a long operational history
and demonstrates adequate abilities as the originator, underwriter
and servicer, as evidenced by historical portfolio and previous
securitization performance. Fitch deems BHG as capable to service
this transaction. Other counterparty risks are mitigated through
the transaction structure and such provisions are in line with
Fitch's counterparty rating criteria.
True Lender Uncertainty for Partner Bank Loan Origination
Continues: BHG, similar to peers, purchases consumer loans
originated by partner banks, in this case Pinnacle Bank, a
Tennessee state-chartered bank (Pinnacle Bank) and County Bank, a
Delaware state-chartered bank (County Bank). Uncertainty regarding
who is the true lender of the loans remains a risk inherent to this
transaction, particularly for consumer loans originated at an
interest rate higher than a borrower state's usury rate.
If there are challenges to the true lender status, and if such
challenges are successful, the consumer loans and certain
commercial loans could be found to be unenforceable, or subject to
reduction of the interest rate, paid or to be paid. If any such
challenges are successful trust performance could be negatively
affected, which would increase negative rating pressure. For this
risk, Fitch views as positive Pinnacle Bank's 49% ownership of BHG
and BHG 2024-1CON's consumer loans originated at interest rates
below borrower state's usury rate, while the longer WA loan term of
91 months is viewed as negative.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults or charge-offs
could produce loss levels higher than the base case and would
likely result in declines of CE and remaining net loss coverage
levels available to the notes. Decreased CE may make certain
ratings on the notes susceptible to potential negative rating
actions, depending on the extent of the decline in coverage.
Fitch conducts sensitivity analysis by stressing a transaction's
initial base case default assumption by an additional 10%, 25% and
50% and examining the rating implications. These increases of the
base case default rate are intended to provide an indication of the
rating sensitivity of the notes to unexpected deterioration of a
trusts performance. As additional sensitivity run of lowering
recoveries by 10%, 25% and 50% is also conducted.
During the sensitivity analysis, Fitch examines the magnitude of
the multiplier compression by projecting the expected cash flows
and loss coverage levels over the life of investments under higher
than the initial base case default assumptions. Fitch models cash
flows with the revised default estimates while holding constant all
other modeling assumptions.
Current Ratings: 'AAAsf'/'AA-sf'/'A-sf'/'BBB-sf'/'BBsf'.
Increased default base case by
10%:'AA+sf'/'Asf'/'BBB+sf'/'BBB-sf'/'BB';
Increased default base case by
25%:'AAsf'/'A-sf'/'BBBsf'/'BB+sf'/'BB-sf';
Increased default base case by
50%:'A+sf'/'BBB+sf'/'BBB-sf'/'BBsf'/'Bsf';
Reduced recovery base case by 10%:
'AA+sf'/'A+sf'/'A-sf'/'BBB-sf'/'BBsf';
Reduced recovery base case by 25%:
'AA+sf'/'A+sf'/'BBB+sf'/'BBB-sf'/'BBsf';
Reduced recovery base case by 50%:
'AA+sf'/'A+sf'/'BBB+sf'/'BB+sf'/'BBsf';
Increased default base case by 10% and reduced recovery base case
by 10%: 'AA+sf'/'Asf'/'BBB+sf'/'BB+sf'/'BBsf';
Increased default base case by 25% and reduced recovery base case
by 25%: 'AA-sf'/'A-sf'/'BBBsf'/'BBsf'/'B+sf';
Increased default base case by 50% and reduced recovery base case
by 50%: 'Asf'/'BBBsf'/'BB+sf'/'B+sf'/'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
would lead to increasing CE levels and consideration for potential
upgrades. If defaults are 20% less than the projected base case
default rate, the expected ratings for the class B, C and D notes
could be upgraded by up to two notches.
Rating sensitivity from decreased defaults (class A/class B/class
C/class D/class E):
Current Ratings: 'AAAsf'/'AA-sf'/'A-sf'/'BBB-sf'/'BBsf'.
Decreased default base case by 20%:
'AAAsf'/'AA+sf'/'A+sf'/'BBB+sf'/'BBB-sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by KPMG. The third-party due diligence described in Form
15E focused on a comparison and recalculation of certain
characteristics with respect to 160 randomly selected statistical
receivables. Fitch considered this information in its analysis, and
the findings did not have an impact on its analysis.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BMO 2024-C8: S&P Assigns Prelim BB- (sf) Rating on Cl. XGRR Certs
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BMO 2024-C8
Mortgage Trust's commercial mortgage pass-through certificates.
The certificate issuance is a U.S. CMBS transaction backed by 52
commercial mortgage loans with an aggregate principal balance of
$683.434 million ($616.323 million of offered certificates),
secured by the fee-simple interests in 65 properties across 19 U.S.
states.
The preliminary ratings are based on information as of March 11,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The credit support provided by the transaction's structure,
-- S&P's view of the underlying collateral's economics,
-- The trustee-provided liquidity,
-- The collateral pool's relative diversity, and
-- S&P's overall qualitative assessment of the transaction.
Preliminary Ratings Assigned
BMO 2024-C8 Mortgage Trust
Class A-1, $3,431,000: AAA (sf)
Class A-2, $23,712,000: AAA (sf)
Class A-4(i), $200,000,000): AAA (sf)
Class A-5(i), $244,341,000: AAA (sf)
Class A-SB, $6,921,000: AAA (sf)
Class X-A(ii), $478,404,000: AAA (sf)
Class X-B(ii), $137,918,000: A- (sf)
Class A-S, $83,721,000: AA+ (sf)
Class B, $28,192,000: AA- (sf)
Class C, $26,005,000: A- (sf)
Class D-RR(iii), $16,710,000: BBB (sf)
Class XDRR(ii)(iii), $16,710,000: BBB (sf)
Class E-RR(iii), $7,689,000: BBB- (sf)
Class XERR(ii)(iii), $7,689,000: BBB- (sf)
Class F-RR(iii), $13,668,000: BB (sf)
Class XFRR(ii)(iii), $13,668,000: BB (sf)
Class G-RR(iii), $6,835,000: BB- (sf)
Class XGRR(ii)(iii), $6,835,000: BB- (sf)
Class J-RR(iii), $22,211,933: NR
Class XJRR(ii)(iii), $22,211,933: NR
(i)The final balances of the class A-4 and A-5 certificates will be
determined at final pricing. The certificates in aggregate will
have a total balance of $444.341 million. The class A-4
certificates are expected to have a balance between $0 million and
$200.0 million, and the A-5 certificates are expected to have a
balance between $244.341 million and $444.341 million.
(ii)Notional balance. The notional amount of the class X-A
certificates will be equal to the aggregate certificate balance of
the class A-1, A-2, A-4, A-5, and A-SB certificates. The notional
amount of the class X-B certificates will be equal to the aggregate
certificate balance of the class A-S, B, and C certificates. The
notional amount of classes XDRR, XERR, XFRR, XGRR, and XJRR will be
equal to certificate balance of classes D-RR, E-RR, F-RR, G-RR, and
J-RR, respectively.
(iii)Non-offered horizontal risk retention certificates.
NR--Not rated.
BRAVO RESIDENTIAL 2024-NQM2: Fitch Gives B Rating on Cl. B-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to BRAVO Residential
Funding Trust 2024-NQM2 (BRAVO 2024-NQM2).
Entity/Debt Rating Prior
----------- ------ -----
BRAVO 2024-NQM2
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
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
SA LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the RMBS to be issued by BRAVO
Residential Funding Trust 2024-NQM2 (BRAVO 2024-NQM2) as indicated.
The notes are supported by 906 loans with a balance of $373.13
million as of the cutoff date. This represents the second
Fitch-rated BRAVO transaction in 2024.
The notes are secured by mortgage loans mainly originated by OCMBC,
Inc. and Citadel, with all other originators making up less than
10% of the pool. Of the loans, 60.8% are designated as
non-qualified mortgage (non-QM) loans, 0.2% are safe-harbor
qualified mortgage (APOR) loans, 0.1% are higher-priced qualified
mortgage (APOR) loans and 38.9% are investment properties not
subject to the Ability to Repay (ATR) Rule.
There is no LIBOR exposure in this transaction. Approximately 0.4%
of the pool loans represent ARM loans, none of which reference
LIBOR. The notes do not have LIBOR exposure. Class A-1, A-2 and A-3
notes are fixed-rate, are capped at the net weighted average coupon
(WAC), and have a step-up feature.
Class M-1 and B-1 note rates will be the lesser of the applicable
fixed rate for such class and the net WAC. The B-2 and B-3 note
rates are based on the net WAC.
In addition, beginning on the payment date on March 2028, current
interest and interest carryforward amounts otherwise payable to
class B-3 notes will be used first to fund the cap carryover
reserve account to pay any unpaid cap carryover amounts to class A
notes prior to paying any such amounts to class B-3 notes. Class
B-3 notes will not be entitled to be reimbursed for any amounts
that were paid to class A notes as cap carryover amounts.
After the presale was published the transaction priced and due to
market conditions, the coupons increased from the coupons used in
the pre-pricing analysis. Fitch ran the post pricing CDI with the
Fitch base cash flow scenario and rate modification cash flow
scenario (additional analysis). All Fitch-rated classes passed
their assigned ratings in the base case cash flow scenario. In the
rate modification scenario the A-3 took a very small loss in period
119 in the back loaded benchmark 'Asf' rating stress and would have
needed 0.07% more CE in order to pass that stress. Per Fitch's
criteria, a class does not have to pass all the rating stress
scenarios in order to be assigned that rating. Due to the fact that
the loss was very small (less than 0.10%), occurred late in the
life of the transaction, and only occurred in the backloaded bench
mark stress (this stress is a very stressful scenario that is not
likely to occur) in Fitch's additional analysis scenario, the
committee decided to assign the A-3 class a final rating of 'Asf'.
All other Fitch-rated classes passed their assigned rating stress
in the rate modification scenario. As a result, there are no
changes to the final ratings from the previously assigned expected
ratings.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, it views the home price values of
this pool as 8.9% above a long-term sustainable level, versus 9.42%
on a national level as of 2Q23, up 1.82% since last quarter.
Housing affordability is the worst it has been in decades, driven
by high interest rates and elevated home prices. Home prices
increased 1.87% yoy nationally as of October 2023, despite modest
regional declines, but are still being supported by limited
inventory.
Non-QM Credit Quality (Mixed): The collateral consists of 906 loans
totaling $373.13 million and seasoned at about four months in
aggregate, according to Fitch, and two months, per the transaction
documents. The borrowers have a relatively strong credit profile,
with a 728 non-zero FICO and a 44.0% debt-to-income (DTI) ratio, as
determined by Fitch. They have relatively moderate leverage, with
an original combined loan-to-value (CLTV) ratio of 72.1%, as
determined by Fitch and per the transaction documents, which
translates to a Fitch-calculated sustainable LTV (sLTV) of 79.1%.
Per Fitch's analysis, of the pool loans, 58.7% represent those
which the borrower maintains a primary or secondary residence,
while the remaining 41.3% comprise investor properties. Fitch
determined that 4.6% of the loans were originated via a retail
channel.
Additionally, of the loans, 60.8% are designated as non-QM loans,
0.2% are safe-harbor qualified mortgage (APOR) loans, 0.1% are
higher-priced qualified mortgage (APOR) loans and 38.9% are exempt
from QM status, as they are investor loans. The pool contains 47
loans over $1.00 million, with the largest amounting to $2.98
million. Loans on investor properties, 11.0% underwritten to the
borrower's credit profile and 30.3% constituting investor cash flow
and no-ratio loans, represent 41.3% of the pool, as determined by
Fitch. Per the transaction documents, one of the loans (0.1%) has a
junior lien, in addition to the first lien mortgage in the pool.
There are no second lien loans in the pool, as 100% of the pool
consists of first lien mortgages.
Furthermore, only 1.5% of the borrowers were viewed by Fitch as
having a prior credit event in the past seven years. In Fitch's
analysis, it considers loans with deferred balances as having
subordinate financing. In this transaction, none of the loans have
a deferred balance; therefore, Fitch views 0.1% of the loans in the
pool as having subordinate financing. Fitch viewed the limited
subordinate financing as a positive aspect of the transaction.
Fitch determined that eight of the loans in the pool are to foreign
nationals. Fitch treats loans to foreign nationals as investor
occupied, coded as no documentation, for employment and income
documentation, and removed the liquid reserves. If a credit score
is not available, Fitch uses a credit score of 650 for such
borrowers. Although the borrowers' credit quality is higher than
that of BRAVO transactions securitized in 2023 and 2022, the pool's
characteristics resemble those of nonprime collateral, and,
therefore, the pool was analyzed using Fitch's nonprime model.
Geographic Concentration (Negative): The largest concentration of
loans is in California (37.3%), followed by Florida and Texas. The
largest MSA is Los Angeles, which includes Los Angeles-Long
Beach-Santa Ana, CA (21.4%). The next largest MSAs are Miami (7.9%)
and Riverside (5.4%). The top three MSAs account for 34.7% of the
pool. As a result, a 1.01x penalty was applied for geographic
concentration, which increased the 'AAAsf' loss by 14bps.
Loan Documentation (Negative): Fitch determined 92.8% of the loans
in the pool were underwritten to borrowers with less than full
documentation. Per the transaction documents, 91.8% of the loans in
the pool were underwritten to borrowers with less than full
documentation. Fitch may consider a loan to be less than a full
documentation loan, based on its review of the loan program and the
documentation details provided in the loan tape, which may explain
any discrepancy between Fitch's percentage and figures in the
transaction documents.
Of the loans underwritten to borrowers with less than full
documentation, Fitch determined that 53.3% were underwritten to
mainly 12- or 24-month business or personal bank statement programs
for verifying income, which is not consistent with the previously
applicable Appendix Q standards and Fitch's view of a full
documentation program.
To reflect the additional risk, Fitch increases the probability of
default (PD) by 1.5x on bank statement loans. In addition to loans
underwritten to a bank statement program, 29.9% constitute a debt
service coverage ratio (DSCR) product, 1.6% are an asset qualifier
product and 0.3% are a no-ratio product.
Four of the loans in the pool are no-ratio DSCR loans. For no-ratio
loans, employment and income are considered to be no documentation
in Fitch's analysis, and the agency assumes a DTI ratio of 100%.
This is in addition to the loans being treated as investor
occupied.
No P&I Advancing (Mixed): The servicers will not be advancing
delinquent monthly payments of P&I. As P&I advances made on behalf
of loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level loss severities
(LS) are less for this transaction than for those where the
servicer is obligated to advance P&I.
The downside to this is the additional stress on the structure, as
liquidity is limited in the event of large and extended
delinquencies. The structure has enough internal liquidity through
the use of principal to pay interest, excess spread and credit
enhancement (CE) for the timely payment of interest to senior notes
during stressed delinquency and cash flow periods.
Modified Sequential-Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A notes,
while excluding the mezzanine and subordinate notes from principal
until all three A classes are reduced to zero. To the extent that
either a cumulative loss trigger event or a DQ trigger event occurs
in a given period, principal will be distributed sequentially to
class A-1, A-2 and A-3 notes until they are reduced to zero. There
is 200bps of excess spread as of the cutoff date in the transaction
available to reimburse for losses or interest shortfalls should
they occur.
However, excess spread will be reduced on and after the payment
date in March 2028, since the class A notes have a step-up coupon
feature, whereby the coupon rate will be the lesser of (i) the
applicable fixed rate plus 1.000% and (ii) the net WAC rate.
Additionally, on or after March 2028, the unrated class B-3
interest allocation will redirect toward the senior cap carryover
amount for as long as there is an unpaid cap carryover amount. This
increases the P&I allocation for the senior classes as long as
class B-3 is not written down and helps ensure payment of the
100-bp step up. These features are supportive of classes A-1 being
paid timely interest at the step-up coupon rate and classes A-2 and
A-3 being paid ultimate interest at the step-up coupon rate.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 40.8% at 'AAAsf'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Consolidated Analytics, Selene, Clayton, Evolve, and
Covius. The third-party due diligence described in Form 15E focused
on three areas: compliance review, credit review and valuation
review. Fitch considered this information in its analysis and, as a
result, did not make any adjustments to its analysis due to the due
diligence findings. Based on the results of the 100% due diligence
performed on the pool, the 'AAAsf' expected loss was reduced by
0.55%.
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
engaged Consolidated Analytics, Selene, Clayton, Evolve, and Covius
to perform the review. Loans reviewed under these engagements were
given compliance, credit and valuation grades and assigned initial
grades for each subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences.
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
BRAVO 2024-NQM2 has an ESG Relevance Score of '4' for Transaction
Parties and Operational Risk. While operational risk is well
controlled for this transaction, the Tier 2 R&W framework with an
unrated counterparty resulted in an increase in the expected
losses. Additionally, the originator, aggregator and servicing
parties received a neutral treatment in its analysis and had no
impact on the expected losses.
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.
BX TRUST 2024-CNYN: Moody's Assigns (P)B1 Rating to Cl. HRR Certs
-----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to six classes of
CMBS securities, to be issued by BX Trust 2024-CNYN, Commercial
Mortgage Pass-Through Certificates, Series 2024-CNYN:
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa2 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba3 (sf)
Cl. HRR, Assigned (P)B1 (sf)
RATINGS RATIONALE
The certificates are collateralized by a single loan backed by a
first lien mortgage on the borrower's fee simple interests in in a
portfolio of 134 primarily industrial properties encompassing
approximately 19,877,285 SF. Moody's ratings are based on the
credit quality of the loan and the strength of the securitization
structure.
The collateral portfolio consists of 134 industrial properties
located across seventeen states and 22 markets. The largest
concentrations are in Chicago (16.8% of UW NOI), Dallas-Fort Worth
(13.5% of underwritten NOI), and California's Inland Empire (8.5%
of underwritten NOI). The portfolio is highly diverse, with no with
no single asset contributing more than 4.2% of underwritten NOI.
The portfolio's property-level Herfindahl score is 90.6 based on
allocated loan amount (the "ALA"). The properties are leased to
over 300 unique tenants, none of which comprises more than 3.4% of
underwritten gross rent.
The collateral properties contain a total of 19,877,285 SF of NRA
and includes warehouse 50.8% of NRA, 53.9% of UW NOI), light
industrial (19.7% of NRA, 25.4% of underwritten NOI), and bulk
warehouse (29.5% of NRA, 20.6% of underwritten NOI) properties.
Property size ranges between 22,710 SF and 1,001,344 SF, and
averages 148,338 SF. Clear heights for properties range between 16
feet and 45 feet, and average approximately 28 feet. The properties
were built between 1970 and 2021 with an average year built of
1997.
Moody's approach to rating this transaction involved the
application of Moody's Large Loan and Single Asset/Single Borrower
Commercial Mortgage-Backed Securitizations 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 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 actual DSCR is 0.94x and Moody's first
mortgage actual stressed DSCR is 0.69x. Moody's DSCR is based on
Moody's stabilized net cash flow.
The loan first mortgage balance of $1,700,000,00 represents a
Moody's LTV ratio of 121.4% based on Moody's value. Adjusted
Moody's LTV ratio for the first mortgage balance is 108.7% based on
Moody's Value using a cap rate adjusted for the current interest
rate environment.
With respect to loan level diversity, the pool's loan level
Herfindahl score is 90.6. The ten largest loans represent 20.35% of
the pool balance.
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 pool's quality
grade is 0.75.
Notable strengths of the transaction include: proximity to global
gateway markets, infill locations, strong occupancy with rent
growth, geographic diversity, tenant granularity, multiple property
pooling and experienced sponsorship.
Notable concerns of the transaction include: high Moody's LTV,
rollover risk, property age, floating-rate interest-only loan
profile, non-sequential prepayment provision, and credit negative
legal features.
Moody's rating approach considers sequential pay in connection with
a collateral release as a credit neutral benchmark. Although the
loans' release premium mitigates the risk of a ratings downgrade
due to adverse selection, the pro rata payment structure limits
ratings upgrade potential as mezzanine classes are prevented from
building enhancement. The benefit received from pooling through
cross-collateralization is also reduced.
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.
CARVAL CLO II: Moody's Cuts Rating on $7MM Cl. F-R Notes to Caa1
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by CarVal CLO II Ltd.:
US$76,500,000 Class B-R Senior Secured Floating Rate Notes Due 2032
(the "Class B-R Notes"), Upgraded to Aa1 (sf); previously on March
12, 2021 Assigned Aa2 (sf)
US$37,500,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes Due 2032 (the "Class C-R Notes"), Upgraded to A1 (sf);
previously on March 12, 2021 Assigned A2 (sf)
Moody's has also downgraded the rating on the following notes:
US$7,000,000 Class F-R Junior Secured Deferrable Floating Rate
Notes Due 2032 (the "Class F-R Notes"), Downgraded to Caa1 (sf);
previously on March 12, 2021 Assigned B3 (sf)
CarVal CLO II Ltd., originally issued in March 2019 and refinanced
in March 2021 is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in March 2024.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating actions on the Class B-R and Class C-R notes
reflect the benefit of the end of the deal's reinvestment period in
March 2024. In light of the reinvestment restrictions during the
amortization period which limit the ability of the manager to
effect significant changes to the current collateral pool, Moody's
analyzed the deal assuming a higher likelihood that the collateral
pool characteristics will be maintained and continue to satisfy
certain covenant requirements. In particular, Moody's assumed that
the deal will benefit from lower weighted average rating factor
(WARF), higher weighted average spread (WAS) compared to their
respective covenant levels. Moody's modeled a WARF of 2786 and a
WAS of 3.53% compared to its current covenant levels of 3131 and
3.30% respectively.
The downgrade rating action on the Class F-R notes reflects the
specific risks to the junior notes posed by par loss observed in
the underlying CLO portfolio. Based on the Moody's calculation, the
total collateral par balance, including recoveries from defaulted
securities, is $713.2 million, or $11.7 million less than the
$725.0 million initial par amount targeted during the deal's
ramp-up.
No actions were taken on the Class A loans, and the Class A-N-R,
Class D-R, and Class E-R notes because their expected losses
remain commensurate with their current ratings, after taking into
account the CLO's latest portfolio information, its relevant
structural features and its actual over-collateralization and
interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations".
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $712,598,281
Defaulted par: $5,872,756
Diversity Score: 77
Weighted Average Rating Factor (WARF): 2786
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.37%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 4.1 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS and recoveries on
defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
CHASE HOME 2024-2: Fitch Assigns Bsf Final Rating on Cl. B-5 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Chase Home Lending
Mortgage Trust 2024-2 (Chase 2024-2).
Entity/Debt Rating Prior
----------- ------ -----
Chase 2024-2
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-X LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-A LT AAAsf New Rating AAA(EXP)sf
A-4-X LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-A LT AAAsf New Rating AAA(EXP)sf
A-5-X LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-A LT AAAsf New Rating AAA(EXP)sf
A-6-X LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-A LT AAAsf New Rating AAA(EXP)sf
A-7-X LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-A LT AAAsf New Rating AAA(EXP)sf
A-8-X LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-A LT AAAsf New Rating AAA(EXP)sf
A-9-X LT AAAsf New Rating AAA(EXP)sf
A-X-1 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X 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 Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the residential mortgage-backed
certificates issued by Chase Home Lending Mortgage Trust 2024-2
(Chase 2024-2) as indicated above. The certificates are supported
by 723 loans with a total balance of approximately $754.96 million
as of the cutoff date. The scheduled balance as of the cutoff date
is $754.96 million.
The pool consists of prime-quality fixed-rate mortgages (FRMs)
solely originated by JPMorgan Chase Bank, National Association
(JPMCB). The loan-level representations and warranties (R&Ws) are
provided by the originator, JPMCB. All of the mortgage loans in the
pool will be serviced by JPMCB.
The collateral quality of the pool is extremely strong, with a
large percentage of loans over $1.0 million.
Of the loans, 100% qualify as safe-harbor qualified mortgage (SHQM)
average prime offer rate (APOR). There is no exposure to LIBOR in
this transaction. The collateral comprises 100% fixed-rate loans,
and the certificates are fixed rate and capped at the net weighted
average coupon (WAC) or based on the net WAC.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.0% above a long-term sustainable level (versus
9.42% on a national level as of 2Q23, up 1.82% 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 1.87% YoY nationally as of October 2023 despite modest
regional declines, but are still being supported by limited
inventory.
High Quality Prime Mortgage Pool (Positive): The pool consists of
high quality, fixed-rate, fully amortizing loans with maturities of
up to 30 years. 100% of the loans qualify as SHQM APOR. The loans
were made to borrowers with strong credit profiles, relatively low
leverage and large liquid reserves.
The loans are seasoned at an average of 7.9 months, according to
Fitch (six months per the transaction documents). The pool has a WA
original FICO score of 773, as determined by Fitch, which is
indicative of very high credit quality borrowers. A large
percentage of the loans have borrower with an original FICO score
equal to or above 750, Fitch determined 80.7%, of the loans have a
borrower with an original FICO score equal to or above 750. In
addition, the original WA combined loan-to-value (CLTV) ratio of
74.3%, translating to a sustainable loan-to-value (sLTV) ratio of
79.3%, represents moderate borrower equity in the property and
reduced default risk compared with a borrower with a CLTV over
80%.
100% of the pool comprises nonconforming loans. All of the loans
are designated as qualified mortgage (QM) loans.
Of the pool, 100% comprises loans where the borrower maintains a
primary or secondary residence. Single-family homes, planned unit
developments (PUDs), and townhouses constitute 88.7% of the pool;
condominiums make up 8.3%; Co-ops make up 2.1%; and multifamily
homes make up 0.9%. The pool consists of loans with the following
loan purposes, as determined by Fitch: purchases (94.3%), cashout
refinances (2.3%) and rate-term refinances (3.4%). Fitch views the
fact that there are no loans to investment properties and the
majority of the mortgages are purchases favorably.
Of the pool, 22.4% is concentrated in Texas and 22.0% is
concentrated in Florida. The largest MSA concentration is in the
New York-Northern New Jersey-Long Island, NY-NJ-PA MSA (16.0%),
followed by the Dallas-Fort Worth-Arlington, TX MSA (8.7%) and the
Miami-Fort Lauderdale-Miami Beach, FL MSA (7.4%). The top three
MSAs account for 32.1% of the pool. As a result, there was no
probability of default (PD) penalty applied for geographic
concentration.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the
transaction. The applicable credit support percentage feature
redirects subordinate principal to classes of higher seniority if
specified credit enhancement (CE) levels are not maintained.
The servicer, JPMCB, is obligated to advance delinquent P&I until
deemed non-recoverable; the servicer is expected to advance
delinquent P&I on loans that enter into a coronavirus
pandemic-related forbearance plan. Although full P&I advancing will
provide liquidity to the certificates, it will also increase the
loan-level loss severity (LS) since the servicer looks to recoup
P&I advances from liquidation proceeds, which results in less
recoveries.
There is no master servicer for this transaction. U.S. Bank Trust
National Association is the trustee who will advance as needed
until a replacement servicer can be found. The trustee is the
ultimate advancing party.
CE Floor (Positive): A CE or senior subordination floor of 1.00%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 0.70% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 41.5% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Digital Risk and AMC. The third-party due diligence
described in Form 15E focused on four areas: compliance review,
credit review, valuation review and data integrity. Fitch
considered this information in its analysis and, as a result, Fitch
decreased its loss expectations by 0.12% at the 'AAAsf' stress due
to 62.5% due diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 62.5% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
Digital Risk and AMC was engaged to perform the review. Loans
reviewed under this engagement were given compliance, credit and
valuation grades and assigned initial grades for each subcategory.
Minimal exceptions and waivers were noted in the due diligence
reports. Refer to the "Third-Party Due Diligence" section for more
detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
provided was considered comprehensive. The data contained in the
ResiPLS layout data tape were reviewed by the due diligence
companies, and no material discrepancies were noted.
ESG CONSIDERATIONS
Chase 2024-2 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in Chase 2024-2, including strong transaction due diligence, the
entirety of the pool is originated by an 'Above Average'
originator, and the entirety of the pool is serviced by an 'RPS1-'
servicer. All of these attributes result in a reduction in expected
losses. This has a positive impact on the transaction's credit
profile and is relevant to the ratings in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CIFC FUNDING 2017-I: Fitch Assigns 'BB-sf' Rating on Cl. E-RR Notes
-------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to CIFC
Funding 2017-I, Ltd. Reset Transaction.
Entity/Debt Rating
----------- ------
CIFC Funding 2017-I,
Ltd. - Reset
A-RR LT AAAsf New Rating
B-RR LT AAsf New Rating
C-RR LT Asf New Rating
D-RR LT BBB-sf New Rating
E-RR LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
CIFC Funding 2017-I, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by CIFC
CLO Management LLC originally closed in March 9, 2017. The secured
notes will be refinanced in whole on Feb. 26, 2024 from proceeds of
the new secured notes. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $475 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 24.45, 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
96.74% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.4% versus a
minimum covenant, in accordance with the initial expected matrix
point of 75.2%.
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 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.
When modeling the indicative portfolio, there was some shortfall
for the class E-RR notes that stems from the fixed rated assets
maturities having a longer maturity horizon compared to the
floating rate assets, which Fitch considers an unrealistic scenario
for a managed transaction with a 5.2-year reinvestment period.
Model-implied ratings (MIRs) are determined by Fitch Stressed
Portfolio per the CLOs and Corporate CDOs Rating Criteria. The MIR
for the class E-RR notes is passing the 'BB-sf' PCM hurdle rate in
all Fitch Stressed scenarios, which is in line with its assigned
rating.
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-RR, between
'BB+sf' and 'A+sf' for class B-RR, between 'B+sf' and 'BBB+sf' for
class C-RR, between less than 'B-sf' and 'BB+sf' for class D-RR,
and between less than 'B-sf' and 'B+sf' for class E-RR.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-RR 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-RR, 'AA+sf' for class C-RR,
'A+sf' for class D-RR, and 'BBB+sf' for class E-RR.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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.
CIFC FUNDING 2022-II: Fitch Affirms 'BBsf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has affirmed the ratings for the class B, C and D
notes of CIFC Funding 2022-II, Ltd. (CIFC 2022-II) and the class
A-1, A-2, B, C, D and E notes of CIFC Funding 2022-IV, Ltd. (CIFC
2022-IV). In addition, Fitch revised the Rating Outlooks to
Positive from Stable on the class B, C and D notes in CIFC 2022-II
and the class C notes in CIFC 2022-IV. The Outlook remains Stable
for all other rated tranches.
Entity/Debt Rating Prior
----------- ------ -----
CIFC Funding
2022-II, Ltd.
B 12567MAE1 LT AAsf Affirmed AAsf
C 12567MAG6 LT Asf Affirmed Asf
D 12567MAJ0 LT BBB-sf Affirmed BBB-sf
CIFC Funding
2022-IV, Ltd.
A-1 12567WAA7 LT AAAsf Affirmed AAAsf
A-2 12567WAC3 LT AAAsf Affirmed AAAsf
B 12567WAE9 LT AAsf Affirmed AAsf
C 12567WAG4 LT Asf Affirmed Asf
D 12567WAJ8 LT BBB-sf Affirmed BBB-sf
E 12567XAA5 LT BBsf Affirmed BBsf
TRANSACTION SUMMARY
CIFC 2022-II and CIFC 2022-IV are broadly syndicated collateralized
loan obligations (CLOs) managed by CIFC Asset Management LLC. CIFC
2022-II closed in March 2022 and will exit its reinvestment period
in April 2027. CIFC 2022-IV closed in June 2022 and will exit its
reinvestment period in July 2027. Both CLOs are secured primarily
by first-lien, senior secured leveraged loans.
KEY RATING DRIVERS
Improved Break-Even Default Rate Cushions and Stable Collateral
Performance
The Positive Outlooks reflect improved modelling results in Fitch's
updated Stressed Portfolio (FSP) analysis driven by shorter risk
horizon, with weighted average life (WAL) stepping down from 8.25
to 7.25 years in CIFC 2022-II, and 8.5 to 7.5 years in CIFC
2022-IV. The portfolios remain stable since last review in March
2023. The Fitch weighted average rating factor (WARF) of CIFC
2022-II is 25.2, a decrease from 25.6 at last review. The Fitch
WARF of CIFC 2022-IV also improved to 25.2 from 25.7. Average
exposure to issuers with a Negative Outlook and Fitch's watchlist
remains generally stable. Assets with a Negative Outlook comprise
on average 16.1% of the current portfolios compared with 16.2% at
last review, while average exposure to issuers on Fitch's watchlist
stands at 6.0% compared with 5.1% at last review.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for both transactions.
Defaults remain subdued with only one Fitch classified defaulted
issuer comprising 0.4% and 0.3% of the total portfolio notional as
defaulted in CIFC 2022-II and CIFC 2022-IV, respectively. Portfolio
diversity improved from an average obligor count of 317 at last
review to 415 obligors currently.
The Stable Outlooks on the remaining notes reflect Fitch's
expectation that the notes have sufficient levels of credit
enhancement to withstand potential deterioration in the credit
quality of the portfolios in stress scenarios commensurate with
each class' rating.
The rating actions on the notes are generally in line with their
respective model-implied ratings (MIRs), as defined in Fitch's
"CLOs and Corporate CDOs Rating Criteria," except for class B, C,
and D notes in CIFC 2022-II and class C notes in CIFC 2022-IV that
were affirmed below their MIRs due to limited cushions at higher
rating levels.
Fitch analyzed each CLO based on the current portfolio and an
updated Fitch Stressed Portfolio (FSP) cash flow analysis. The FSP
analysis stressed the current portfolios as of the latest trustee
reporting to account for permissible concentration and collateral
quality test (CQT) limits of each transaction.
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 anticipated.
A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to no rating impact for the class
A-1, A-2 and B notes in CIFC 2022-IV, and up to a two rating notch
downgrade for the other classes in both transactions, based on the
MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Except for the tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
A 25% reduction of the mean default rate across all ratings, along
with a 25% increase of the recovery rate at all rating levels for
the current portfolio, would lead to upgrades of up to five rating
notches in both transactions, based on the MIRs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DK TRUST 2024-SPBX: Fitch Assigns B+(EXP) Rating on Cl. HRR Certs
-----------------------------------------------------------------
Fitch Ratings has assigned the following expected ratings and
Ratings Outlooks to DK Trust 2024-SPBX, Commercial Mortgage
Pass-Through Certificates, Series 2024-SPBX:
- $265,600,000a class A 'AAAsf'; Outlook Stable;
- $129,100,000a, b class X-CP 'BBB-sf'; Outlook Stable;
- $129,100,000a, b class X-NCP 'BBB-sf'; Outlook Stable;
- $44,600,000a class B 'AA-sf'; Outlook Stable;
- $35,100,000a class C 'A-sf'; Outlook Stable;
- $49,400,000a class D 'BBB-sf'; Outlook Stable;
- $65,950,000a class E 'BB-sf'; Outlook Stable;
- $24,350,000a, c class HRR 'B+sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only (IO).
(c) Horizontal risk retention interest, estimated to be
approximately 5% of the aggregate certificate balance.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in a
trust that will hold a $485.0 million, two-year, floating-rate, IO
commercial mortgage loan with three one-year extension options. The
mortgage will be secured by the borrower's fee simple and leasehold
interest in a portfolio of 108 self-storage facilities totaling
approximately 7.4 million sf and comprising 38,998 self-storage
units, 4,319 parking spaces and 111 other units located in nine
states.
Loan proceeds in combination with $4.7 million of sponsor equity
were used to refinance approximately $462.5 million of existing
balance sheet debt, fund $1.3 million of upfront reserves and pay
$25.9 million of closing costs. The certificates will follow a
standard senior sequential-pay structure, including voluntary
prepayments.
The loan was originated by Bank of America, N.A. and JPMorgan Chase
Bank, N.A., which will act as trust loan sellers. KeyBank National
Association will be the master servicer and special servicer.
Computershare Trust Company, N.A. will act as trustee and
certificate administrator. Park Bridge Lender Services LLC will act
as operating advisor. The transaction is scheduled to close on
March 15, 2024.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch's net cash flow (NCF) for the portfolio
is estimated at $38.3 million; this is 6.0% lower than the issuer's
NCF and 7.4% lower than the YE 2023 NCF. Fitch applied an 8.0% cap
rate to derive a Fitch value of $478.4 million for the portfolio.
Fitch Leverage: The $485 million trust loan equates to debt of
approximately $66 psf with a Fitch stressed debt service coverage
ratio (DSCR), loan-to-value ratio (LTV) and debt yield (DY) of
0.88x, 101.4% and 7.9%, respectively. Based on the total rated debt
and a blend of the Fitch and market cap rates, the transaction's
Fitch base case LTV is 59.2%. Fitch expects the Fitch base case LTV
for non-investment grade tranches to not exceed 100%.
Geographic Diversity: The portfolio exhibits geographic diversity,
with 108 self-storage properties located across nine states
encompassing 59 markets and 29 distinct MSAs. The largest three
state concentrations account for 67.1% of the portfolio by
allocated loan amount (ALA). This includes Texas (29 properties;
37.4% of ALA), Michigan (19 properties; 18.3% of ALA) and Arkansas
(eight properties; 11.4% of ALA). No other state accounts for more
than 7.3% of the ALA.
Thirteen properties representing 10.9% of the ALA are located in
the Amarillo, TX MSA, followed by six properties representing 9.9%
of the ALA in the Waco, TX MSA. All other MSAs represent less than
4.0% of the ALA. The portfolio's effective MSA count is 16.1.
Portfolios with lower effective MSA counts are more concentrated
than those with higher counts.
Sponsorship: The loan is sponsored by a joint venture between
Davidson Kempner Capital Management LP and SpareBox. Founded in
1983, Davidson Kempner is a global institutional alternative asset
management firm with over $35 billion in assets under management.
SpareBox is an owner and operator of self-storage assets and the
properties in this transaction comprise the company's entire
portfolio. SpareBox was founded in 2020 with a business model
predicated on a completely contactless system in which renters can
check availability, sign leases, make payments and access their
units through a computer, smartphone or kiosk. SpareBox relies upon
proprietary technology to implement its business model and achieve
asset management efficiencies.
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 (MIR) sensitivity to changes in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AA-sf' / 'A-sf' / 'BBB-sf' / 'BB-sf' /
'B+sf';
- 10% NCF Decline: 'AA-sf' / 'A-sf' / 'BBB-sf' / 'BBsf' / 'Bsf' /
'B-sf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
MIR sensitivity to changes to in one variable, Fitch NCF:
- Original Rating: 'AAAsf' / AA-sf' / 'A-sf' / 'BBB-sf' / 'BB-sf' /
'B+sf';
- 10% NCF Increase: 'AAAsf' / 'AA+sf' / 'A+sf' / 'BBBsf' / 'BBsf' /
'BBsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
ELMWOOD CLO 16: S&P Assigns B- (sf) Rating on Class F-R Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement debt and new class F-R debt from Elmwood
CLO 16 Ltd./Elmwood CLO 16 LLC, a CLO originally issued in May 2022
that is managed by Elmwood Asset Management LLC. At the same time,
S&P withdrew its ratings on the original class A, B, C, D, and E
debt following payment in full on the March 12, 2024, refinancing
date.
The replacement debt were issued via a supplemental indenture,
which outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The replacement class A-R, B-R, C-R, and D-R debt were issued
at a higher spread over three-month CME term SOFR than the original
notes.
-- The replacement class E-R debt was issued at a lower spread
over three-month CME term SOFR than the original notes.
-- A new class of debt, class F-R, was issued.
-- The stated maturity was extended by three years, and the
reinvestment period was extended by four years.
-- The noncall period was extended until March 2026.
-- Of the identified underlying collateral obligations, 99.40%
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, 94.84%
have recovery ratings (which may include confidential and private
ratings) assigned by S&P Global Ratings.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $480.00 million: Three-month CME term SOFR + 1.53%
-- Class B-R, $90.00 million: Three-month CME term SOFR + 2.00%
-- Class C-R (deferrable), $45.00 million: Three-month CME term
SOFR + 2.50%
-- Class D-R (deferrable), $45.00 million: Three-month CME term
SOFR + 3.80%
-- Class E-R (deferrable), $30.00 million: Three-month CME term
SOFR + 6.75%
-- Class F-R (deferrable), $11.25 million: Three-month CME term
SOFR + 8.00%
-- Subordinated notes, $61.15 million: Residual
Original debt
-- Class A, $480.00 million: Three-month CME term SOFR + 1.41%
-- Class B, $90.00 million: Three-month CME term SOFR + 1.95%
-- Class C, $45.00 million: Three-month CME term SOFR + 2.45%
-- Class D, $45.00 million: Three-month CME term SOFR + 3.60%
-- Class E, $28.88 million: Three-month CME term SOFR + 7.22%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Elmwood CLO 16 Ltd./Elmwood CLO 16 LLC
Class A-R, $480.00 million: AAA (sf)
Class B-R, $90.00 million: AA (sf)
Class C-R (deferrable), $45.00 million: A (sf)
Class D-R (deferrable), $45.00 million: BBB- (sf)
Class E-R (deferrable), $30.00 million: BB- (sf)
Class F-R (deferrable), $11.25 million: B- (sf)
Subordinated notes, $61.15 million: Not rated
Ratings Withdrawn
Elmwood CLO 16 Ltd./Elmwood CLO 16 LLC
Class A 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.
ELMWOOD CLO 26: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
26 Ltd./Elmwood CLO 26 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The preliminary ratings are based on information as of March 13,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO 26 Ltd./Elmwood CLO 26 LLC
Class A-1, $372.00 million: AAA (sf)
Class A-2, $12.00 million: AAA (sf)
Class B, $72.00 million: AA (sf)
Class C (deferrable), $36.00 million: A (sf)
Class D (deferrable), $36.00 million: BBB- (sf)
Class E (deferrable), $21.00 million: BB- (sf)
Subordinated notes, $59.20 million: Not rated
FANNIE MAE 2024-R02: S&P Assigns 'B+(sf)' Rating on Cl. 1B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Fannie Mae Connecticut
Avenue Securities Trust 2024-R02's notes.
The note issuance is an RMBS transaction 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.
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; and
-- The potential impact that current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "On Oct. 13, 2023, we updated our market
outlook as it relates to the 'B' projected archetypal loss level;
and therefore, we 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 2024-R02
Class 1A-H(i), $17,631,199,551: NR
Class 1M-1, $256,326,000: A (sf)
Class 1M-1H(i), $13,491,830: NR
Class 1M-2A(ii), $76,603,000: A- (sf)
Class 1M-AH(i), $4,032,213: NR
Class 1M-2B(ii), $76,603,000: BBB+(sf)
Class 1M-BH(i), $4,032,213: NR
Class 1M-2C(ii), $76,603,000: BBB+ (sf)
Class 1M-CH(i), $4,032,213: NR
Class 1M-2(ii), $229,809,000: BBB+ (sf)
Class 1B-1A(ii), $88,388,000: BBB (sf)
Class 1B-AH(i), $4,652,631: NR
Class 1B-1B(ii), $88,388,000: BB+ (sf)
Class 1B-BH(i), $4,652,631: NR
Class 1B-1(ii), $176,776,000: BB+ (sf)
Class 1B-2(ii), $88,388,000: B+ (sf)
Class 1B-2H(i), $4,652,631: NR
Class 1B-3H(i), $186,081,263: NR
Related combinable and recombinable notes exchangeable
classes(iii)
Class 1E-A1, $76,603,000: A- (sf)
Class 1A-I1, $76,603,000(iv): A- (sf)
Class 1E-A2, $76,603,000: A- (sf)
Class 1A-I2, $76,603,000(iv): A- (sf)
Class 1E-A3, $76,603,000: A- (sf)
Class 1A-I3, $76,603,000(iv): A- (sf)
Class 1E-A4, $76,603,000: A- (sf)
Class 1A-I4, $76,603,000(iv): A- (sf)
Class 1E-B1, $76,603,000: BBB+ (sf)
Class 1B-I1, $76,603,000(iv): BBB+ (sf)
Class 1E-B2, $76,603,000: BBB+ (sf)
Class 1B-I2, $76,603,000(iv): BBB+ (sf)
Class 1E-B3, $76,603,000: BBB+ (sf)
Class 1B-I3, $76,603,000(iv): BBB+ (sf)
Class 1E-B4, $76,603,000: BBB+ (sf)
Class 1B-I4, $76,603,000(iv): BBB+ (sf)
Class 1E-C1, $76,603,000: BBB+ (sf)
Class 1C-I1, $76,603,000(iv): BBB+ (sf)
Class 1E-C2, $76,603,000: BBB+ (sf)
Class 1C-I2, $76,603,000(iv): BBB+ (sf)
Class 1E-C3, $76,603,000: BBB+ (sf)
Class 1C-I3, $76,603,000(iv): BBB+ (sf)
Class 1E-C4, $76,603,000: BBB+ (sf)
Class 1C-I4, $76,603,000(iv): BBB+ (sf)
Class 1E-D1, $153,206,000: BBB+ (sf)
Class 1E-D2, $153,206,000: BBB+ (sf)
Class 1E-D3, $153,206,000: BBB+ (sf)
Class 1E-D4, $153,206,000: BBB+ (sf)
Class 1E-D5, $153,206,000: BBB+ (sf)
Class 1E-F1, $153,206,000: BBB+ (sf)
Class 1E-F2, $153,206,000: BBB+ (sf)
Class 1E-F3, $153,206,000: BBB+ (sf)
Class 1E-F4, $153,206,000: BBB+ (sf)
Class 1E-F5, $153,206,000: BBB+ (sf)
Class 1-X1, $153,206,000(iv): BBB+ (sf)
Class 1-X2, $153,206,000(iv): BBB+ (sf)
Class 1-X3, $153,206,000(iv): BBB+ (sf)
Class 1-X4, $153,206,000(iv): BBB+ (sf)
Class 1-Y1, $153,206,000(iv): BBB+ (sf)
Class 1-Y2, $153,206,000(iv): BBB+ (sf)
Class 1-Y3, $153,206,000(iv): BBB+ (sf)
Class 1-Y4, $153,206,000(iv): BBB+ (sf)
Class 1-J1, $76,603,000: BBB+ (sf)
Class 1-J2, $76,603,000: BBB+ (sf)
Class 1-J3, $76,603,000: BBB+ (sf)
Class 1-J4, $76,603,000: BBB+ (sf)
Class 1-K1, $153,206,000: BBB+ (sf)
Class 1-K2, $153,206,000: BBB+ (sf)
Class 1-K3, $153,206,000: BBB+ (sf)
Class 1-K4, $153,206,000: BBB+ (sf)
Class 1M-2Y, $229,809,000: BBB+ (sf)
Class 1M-2X, $229,809,000(iv): BBB+ (sf)
Class 1B-1Y, $176,776,000: BB+ (sf)
Class 1B-1X, $176,776,000(iv): BB+ (sf)
Class 1B-2Y, $88,388,000: B+ (sf)
Class 1B-2X, $88,388,000(iv): B+ (sf)
(i)Reference tranche only and will not have corresponding notes.
Fannie Mae retains the risk of these tranches.
(ii)The class 1M-2 noteholders may exchange all or part of that
class for proportionate interests in the class 1M-2A, 1M-2B, and
1M-2C notes and vice versa. The class 1B-1 noteholders may exchange
all or part of that class for proportionate interests in the class
1B-1A and 1B-1B notes and vice versa. The class 1M-2A, 1M-2B,
1M-2C, 1B-1A, 1B-1B, and 1B-2 noteholders may exchange all or part
of those classes for proportionate interests in the classes of RCR
notes as specified in the offering documents.
(iii)See the offering documents for more detail on possible
combinations.
(iv)Notional amount.
RCR--Related combinable and recombinable.
NR--Not rated.
FREDDIE MAC 2024-HQA1: Moody's Gives '(P)Ba1' Rating to 10 Tranches
-------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to 24 classes of
credit risk transfer (CRT) residential mortgage-backed securities
(RMBS) to be issued by Freddie Mac STACR REMIC Trust 2024-HQA1, and
sponsored by Federal Home Loan Mortgage Corp ("Freddie Mac").
The securities reference a pool of mortgage loans acquired by
Freddie Mac and originated and serviced by multiple entities.
The complete rating actions are as follows:
Issuer: Freddie Mac STACR REMIC Trust 2024-HQA1
Cl. A-1, Assigned (P)A1 (sf)
Cl. M-1, Assigned (P)A3 (sf)
Cl. M-2, Assigned (P)Baa3 (sf)
Cl. M-2A, Assigned (P)Baa3 (sf)
Cl. M-2AI*, Assigned (P)Baa3 (sf)
Cl. M-2AR, Assigned (P)Baa3 (sf)
Cl. M-2AS, Assigned (P)Baa3 (sf)
Cl. M-2AT, Assigned (P)Baa3 (sf)
Cl. M-2AU, Assigned (P)Baa3 (sf)
Cl. M-2B, Assigned (P)Ba1 (sf)
Cl. M-2BI*, Assigned (P)Ba1 (sf)
Cl. M-2BR, Assigned (P)Ba1 (sf)
Cl. M-2BS, Assigned (P)Ba1 (sf)
Cl. M-2BT, Assigned (P)Ba1 (sf)
Cl. M-2BU, Assigned (P)Ba1 (sf)
Cl. M-2I*, Assigned (P)Baa3 (sf)
Cl. M-2R, Assigned (P)Baa3 (sf)
Cl. M-2RB, Assigned (P)Ba1 (sf)
Cl. M-2S, Assigned (P)Baa3 (sf)
Cl. M-2SB, Assigned (P)Ba1 (sf)
Cl. M-2T, Assigned (P)Baa3 (sf)
Cl. M-2TB, Assigned (P)Ba1 (sf)
Cl. M-2U, Assigned (P)Baa3 (sf)
Cl. M-2UB, Assigned (P)Ba1 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the GSE's oversight of
originators and servicers, and the third-party review.
Moody's expected loss for this pool in a baseline scenario-mean is
1.16%, in a baseline scenario-median is 0.92% and reaches 5.40% at
a stress level consistent with Moody's Aaa ratings.
Moody's made a qualitative adjustment to the model output based on
analysis on historical performance and benchmarking against
comparable portfolios to arrive at the final EL.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
GALAXY CLO XXIV: Moody's Assigns B3 Rating to $200,000 F-R Notes
----------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the "Refinancing Notes") issued by Galaxy XXIV
CLO, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$256,000,000 Class A-R Senior Floating Rate Notes due 2037,
Assigned Aaa (sf)
US$200,000 Class F-R Deferrable Junior Floating Rate Notes due
2037, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the rating is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans, cash or eligible principal investments, and up to 10.0% of
the portfolio may consist of second-lien loans, senior unsecured
loans and bonds, provided that no more than 5.0% of the portfolio
consist of bonds and no more than 2.5% of the portfolio consist of
unsecured bonds.
PineBridge Galaxy LLC (the "Manager") will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, the other
five classes of secured notes and subordinated notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: reinstatement and extension of the
reinvestment period; extensions of the stated maturity and non-call
period; changes to certain collateral quality tests; and changes to
the overcollateralization test levels; additions to the CLO's
ability to hold workout and restructured assets; and changes to the
base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $400,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3111
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.1 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
GALAXY XXIV: Fitch Assigns 'BBsf' Rating on Class E-R Notes
-----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the
Galaxy XXIV CLO, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Galaxy XXIV CLO, Ltd.
A 36321BAA9 LT PIFsf Paid In Full AAAsf
A-R LT AAAsf New Rating
B-R LT AAsf New Rating
C-R LT Asf New Rating
D-R LT BBB-sf New Rating
E-R LT BBsf New Rating
F-R LT NRsf New Rating
X-R LT AAAsf New Rating
TRANSACTION SUMMARY
Galaxy XXIV CLO, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Pinebridge Galaxy
LLC that originally closed in December 2017. The CLO's secured
notes were refinanced on March 7, 2024 from the proceeds of the new
secured notes. Net proceeds from the issuance of the secured and
additional subordinated notes will provide financing on a portfolio
of approximately $400 million of primarily first lien senior
secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.21% first-lien senior secured loans and has a weighted average
recovery assumption of 75.58%. 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 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 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 'AAAsf' for class X-R, between 'BBB+sf' and 'AA+sf' for
class A-R, between 'BB+sf' and 'A+sf' for class B-R, between 'B+sf'
and 'BBB+sf' for class C-R, between less than 'B-sf' and 'BB+sf'
for class D-R, and between less than 'B-sf' and 'B+sf' for class
E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X-R and class A-R
notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, 'Asf'
for class D-R, and 'BBB+sf' for class E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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 2021-GR3: Moody's Ups Rating on Cl. B-5 Certs to Ba3
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 44 bonds from four US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo and agency eligible mortgage loans.
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2021-GR3
Cl. A-3, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-3*, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-6*, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B, Upgraded to A2 (sf); previously on Nov 30, 2021 Definitive
Rating Assigned Baa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Upgraded to Aa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-X*, Upgraded to Aa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Nov 30, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2-A, Upgraded to A1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-2-X*, Upgraded to A1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-3-A, Upgraded to Baa1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-3-X*, Upgraded to Baa1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Nov 30, 2021
Definitive Rating Assigned B3 (sf)
Cl. B-X*, Upgraded to A2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Baa1 (sf)
Issuer: GS Mortgage-Backed Securities Trust 2021-PJ11
Cl. A-3, Upgraded to Aaa (sf); previously on Dec 14, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on Dec 14, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-21, Upgraded to Aaa (sf); previously on Dec 14, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Dec 14, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-3*, Upgraded to Aaa (sf); previously on Dec 14, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Dec 14, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Dec 14, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Dec 14, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Dec 14, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Dec 14, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Dec 14, 2021 Definitive
Rating Assigned B3 (sf)
Issuer: GS Mortgage-Backed Securities Trust 2022-GR1
Cl. B-1, Upgraded to Aa2 (sf); previously on Jan 31, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Jan 31, 2022 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Jan 31, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba2 (sf); previously on Jan 31, 2022
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B2 (sf); previously on Jan 31, 2022 Definitive
Rating Assigned B3 (sf)
Issuer: GS Mortgage-Backed Securities Trust 2022-PJ1
Cl. A-3, Upgraded to Aaa (sf); previously on Jan 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on Jan 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-21, Upgraded to Aaa (sf); previously on Jan 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Jan 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-3*, Upgraded to Aaa (sf); previously on Jan 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Jan 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Jan 16, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Jan 16, 2022 Definitive
Rating Assigned A3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool.
In Moody's analysis Moody's considered the additional risk of
default on modified loans. Generally, Moody's apply a 7x multiple
to the Probability of Default (PD) for private label modified
mortgage loans and an 8x multiple to the PD for agency-eligible
modified mortgage loans. However, Moody's may apply a lower
multiple to the PD for loans that were granted short-term payment
relief as long as there were no other changes to the loan terms,
such as a reduced interest rate or an extended loan term, which can
be used to lower the monthly payment on the loan. For loans granted
short-term payment relief, servicers will generally defer the
missed payments, which could be added as a non-interest-bearing
balloon payment due at the end of the loan term. Alternatively,
servicers could extend the maturity on the loan to match the number
of missed payments.
Moody's updated loss expectations on the pools incorporate, amongst
other factors, Moody's assessment of the representations and
warranties frameworks of the transactions, the due diligence
findings of the third-party reviews received at the time of
issuance, and the strength of the transaction's originators and
servicer.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. These include the potential impact of
collateral performance volatility on ratings and interest risk from
current or potential missed interest that remain unreimbursed.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings 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.
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 and/or pools.
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.
GS MORTGAGE 2024-PJ2: Fitch Assigns 'B-sf' Rating on Cl. B-5 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates issued by GS Mortgage-Backed
Securities Trust 2024-PJ2 (GSMBS 2024-PJ2).
Entity/Debt Rating Prior
----------- ------ -----
GSMBS 2024-PJ2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1-X 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-11-X 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-13-X 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-15-X 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-17-X 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-19-X LT AAAsf New Rating AAA(EXP)sf
A-2 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-21-X 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-23-X LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-A LT AAAsf New Rating AAA(EXP)sf
A-3-X LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4A LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-X 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-7-X 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-9-X LT AAAsf New Rating AAA(EXP)sf
A-R LT NRsf New Rating NR(EXP)sf
A-X LT AAAsf New Rating AAA(EXP)sf
A16L LT WDsf Withdrawn AAA(EXP)sf
A22L LT WDsf Withdrawn AAA(EXP)sf
A3L LT WDsf Withdrawn AAA(EXP)sf
A4L LT WDsf Withdrawn AAA(EXP)sf
B LT BBB-sf New Rating BBB-(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-3-A LT BBB-sf New Rating BBB-(EXP)sf
B-3-X LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT B-sf New Rating B-(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
B-X LT BBB-sf New Rating BBB-(EXP)sf
TRANSACTION SUMMARY
The transaction is expected to close on Feb. 29, 2024. The notes
are supported by 358 prime loans with a total balance of
approximately $334 million as of the cutoff date.
Classes A-3L, A-4L, A-16L and A-22L have been cancelled by the
issuer as they are not being funded at close and will not be funded
at any point in the future. Therefore, Fitch has withdrawn the
ratings for those classes.
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 10.3% above a long-term sustainable level (versus
9.42% on a national level as of 2Q23, up 1.8% 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 4.7% yoy nationally as of October 2023 despite
modest regional declines but are still being supported by limited
inventory.
High-Quality Mortgage Pool (Positive): The collateral consists of
30-year, fixed-rate mortgage (FRM) fully amortizing loans seasoned
at approximately 10 months in aggregate (calculated by Fitch as the
difference between the cutoff date and origination date). The
average loan balance is $931,966. The collateral comprises
primarily prime-jumbo loans and 126 agency-conforming loans.
Borrowers in this pool have strong credit profiles (a 761 model
FICO) but lower than Fitch has observed for earlier vintage
prime-jumbo securitizations. The sustainable loan to value ratio
(sLTV) is 77%, and the mark-to-market (MTM) combined LTV ratio
(CLTV) is 69.1%. Fitch treated 100% of the loans as full
documentation collateral, and 99% of the loans are qualified
mortgages (QMs). Of the pool, 83.2% are loans for which the
borrower maintains a primary residence, while 16.8% are for second
homes. Additionally, 73.7% of the loans were originated through a
retail channel.
Expected losses in the 'AAAsf' stress amount to 7.75%, similar to
those of prior issuances and other prime-jumbo shelves.
Shifting-Interest Deal Structure (Mixed): The mortgage cash flow
and loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained. Due to the
leakage to the subordinate bonds, the shifting-interest structure
requires more CE. While there is only minimal leakage to the
subordinate bonds early in the life of the transaction, the
structure is more vulnerable to defaults at a later stage compared
with a sequential or modified-sequential structure.
To help mitigate tail risk, which arises as the pool seasons and
fewer loans are outstanding, a subordination floor of 2.80% of the
original balance will be maintained for the senior notes and a
subordination floor of 1.90% of the original balance will be
maintained for the subordinate notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0%, in addition to the model projected 41.7% 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 being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by situsAMC, Canopy, Clayton, Consolidated Analytics, and
Covius. The third-party due diligence described in Form 15E focused
on a review of credit, regulatory compliance and property valuation
for each loan and is consistent with Fitch criteria for RMBS
loans.
Fitch considered this information in its analysis and, as a result,
made the following adjustment to its analysis:
- A 5% reduction to each loan's probability of default.
This adjustment resulted in a 30bps 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.
GS MORTGAGE 2024-RPL2: Fitch Gives B(EXP)sf Rating on Cl. B-2 Certs
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by GS Mortgage-Backed Securities Trust
2024-RPL2 (GSMBS 2024-RPL2).
Entity/Debt Rating
----------- ------
GSMBS 2024-RPL2
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT AA(EXP)sf Expected Rating
A-4 LT A(EXP)sf Expected Rating
A-5 LT BBB(EXP)sf Expected Rating
B LT NR(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
M-1 LT A(EXP)sf Expected Rating
M-2 LT BBB(EXP)sf Expected Rating
PT LT NR(EXP)sf Expected Rating
RISKRETEN LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The transaction is expected to close on March 8, 2024. The notes
are supported by 2,265 reperforming loans with a total balance of
$373 million as of the cutoff date.
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 11.7% above a long-term sustainable level versus
11.1% on a national level as of 3Q23, up 1.82% since the prior
quarter. Housing affordability is at its worst level in decades,
driven by high interest rates and elevated home prices.
RPL Credit Quality (Negative): The collateral pool consists
primarily of peak-vintage RPLs. As of the cutoff date, the pool was
83.7% current. Approximately 43.2% of the loans were treated as
having clean payment histories for the past two years or more
(clean current) or have been clean since origination if seasoned
less than two years. Additionally, 96.3% of loans have a prior
modification. The borrowers have a weak credit profile (626 FICO
and 45% debt-to-income ratio [DTI]) and relatively low leverage
(64% sustainable LTV ratio [sLTV]).
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. The credit enhancement consists of subordinated
notes, the distributions of which will be subordinated to P&I
payments due to senior noteholders. In addition, excess cash flow
resulting from the difference between the interest earned on the
mortgage collateral and that paid on the notes may be available to
pay down the bonds sequentially (after prioritizing fees to
transaction parties, Net WAC shortfalls and to the breach reserve
account).
No Servicer P&I Advances (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduce liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' and 'AAsf' rated
classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 42.6% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by situsAMC. The third-party due diligence described in
Form 15E focused on a regulatory compliance review that covered
applicable federal, state and local high-cost loan and/or
anti-predatory laws, as well as the Truth In Lending Act (TILA) and
Real Estate Settlement Procedures Act (RESPA). The scope was
consistent with published Fitch criteria for due diligence on RPL
RMBS. Fitch considered this information in its analysis and, as a
result, Fitch made the following adjustments to its analysis:
Loans with an indeterminate HUD1 located in states that fall under
Freddie Mac's "Do Not Purchase List" received a 100% LS over-ride.
Loans with an indeterminate HUD1 but not located in states that
fall under Freddie Mac's "Do Not Purchase List" received a
five-point LS increase.
Loans with a missing modification agreement received a three-month
liquidation timeline extension.
Unpaid taxes and lien amounts were added to the LS.
In total, these adjustments increased the 'AAAsf' loss by
approximately 50bps.
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.
HINNT LLC 2024-A: Moody's Assigns (P)B3 Rating to Class E Notes
---------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to the notes to be
issued by HINNT 2024-A LLC. HINNT 2024-A LLC is backed by a pool of
timeshare loans originated by Holiday Inn Club Vacations
Incorporated (HICV) who also serviced the transaction. HICV began
operations in 1982 and is an experienced sponsor and servicer of
timeshare loans. Computershare Trust Company, N.A. (Computershare;
Baa2) will serve as the backup servicer and Indenture trustee for
the transaction.
The complete rating actions are as follows:
Issuer: HINNT 2024-A LLC
Timeshare Loan-Backed Notes, Series 2024-A, Class A, Assigned
(P)Aaa (sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class B, Assigned (P)A2
(sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class C, Assigned
(P)Baa3 (sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class D, Assigned
(P)Ba2 (sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class E, Assigned (P)B3
(sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the capital structure, and the
experience and expertise of HICV as servicer and the back-up
servicing arrangement with Computershare.
Moody's expected median cumulative net loss expectation for HINNT
2024-A LLC is 21.8% and the loss at a Aaa stress is 62%. Moody's
based its net loss expectations on an analysis of the credit
quality of the underlying collateral; the historical performance of
similar collateral, including securitization performance and
managed portfolio performance; the ability of HIVC to perform the
servicing functions and Computershare to perform the backup
servicing functions; and current expectations for the macroeconomic
environment during the life of the transaction.
At closing, the Class A notes, Class B notes, Class C notes, Class
D notes and Class E notes are expected to benefit from 64%, 41%,
18%, 10.5%, and 4% of hard credit enhancement, respectively. Hard
credit enhancement for the notes consists of a combination of
overcollateralization, a reserve account and subordination. For the
purpose of calculating initial hard credit enhancement, Moody's use
a reserve of 2.50. The notes may also benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "US Vacation
Timeshare Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, C, D, and E notes if, given
current expectations of portfolio losses, levels of credit
enhancement are consistent with higher ratings. This transaction
has a pro-rata structure with sequential pay triggers. Moody's
expectation of pool losses could decline as a result of better than
expected improvements in the economy, changes to servicing
practices that enhance collections or refinancing opportunities
that result in prepayments.
Down
Moody's could downgrade the ratings of the notes if pool losses
exceed its expectations and levels of credit enhancement are
consistent with lower ratings. Credit enhancement could decline if
excess spread is not sufficient to cover losses in a given month.
Moody's expectation of pool losses may increase, for example, due
to performance deterioration stemming from a downturn in the US
economy, deficient servicing, errors on the part of transaction
parties, inadequate transaction governance or fraud.
HPS PRIVATE 2024-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to HPS Private
Credit CLO 2024-2 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 HPS Investment Partners LLC.
The preliminary ratings are based on information as of March 13,
2024. 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
HPS Private Credit CLO 2024-2 LLC
Class A, $232.00 million: AAA (sf)
Class B, $40.00 million: AA (sf)
Class C (deferrable), $32.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $24.00 million: BB- (sf)
Subordinated notes, $42.29 million: Not rated
JP MORGAN 2024-HE1: Fitch Assigns 'Bsf' Rating on Class B-2 Certs
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings to J.P. Morgan Mortgage
Trust 2024-HE1 (JPMMT 2024-HE1).
Entity/Debt Rating Prior
----------- ------ -----
JPMMT 2024-HE1
A-1 LT AAAsf New Rating AAA(EXP)sf
M-1 LT AAsf New Rating AA(EXP)sf
M-2 LT Asf New Rating A(EXP)sf
M-3 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
B-4 LT NRsf New Rating NR(EXP)sf
BX LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the RMBS certificates backed by
second lien, prime, open home equity lines of credit (HELOC) on
residential properties to be issued by JPMMT 2024-HE1 as indicated
above. This is the fourth transaction to be rated by Fitch that
includes prime-quality second lien HELOCs with open draws off the
JPMMT shelf and the fourth second lien HELOC transaction off the
JPMMT shelf.
The loans associated with the draws allocated to the participation
certificate are 2,800 nonseasoned, performing, prime-quality second
lien HELOC loans with a current outstanding balance (as of the
cutoff date) of $209.96 million. The collateral balance based on
the maximum draw amount is $277.67 million, as determined by Fitch.
As of the cutoff date, 100% of the HELOC lines are open or on a
temporary freeze and may be opened in the future. The aggregate
available credit line amount, as of the cutoff date, is expected to
be $37.99 million, per transaction documents. As of the cutoff
date, weighted average (WA) utilization of the HELOCs is 90.5%, per
the transaction documents.
The main originators in the transaction are loanDepot.com, LLC and
United Wholesale Mortgage. All other originators make up less than
10% of the pool. The loans are serviced by Specialized Loan
Servicing, LLC and loanDepot.com, LLC.
Distributions of principal are based on a modified sequential
structure, subject to the transaction's performance triggers.
Interest payments are made sequentially to all classes except B-4,
which is a principal-only class, while losses are allocated reverse
sequentially once excess spread is depleted.
Draws will be funded by JPMorgan Mortgage Acquisitions Corp.
(JPMMAC). This transaction will not use a variable funding note
(VFN) structure; rather, it will use participation certificates.
JPMMT 2024-HE1 is only entitled to cash flows based on the amount
drawn as of the cutoff date. The remaining available draws will be
allocated to the JPMorgan participation certificate (JPM PC) if
they are drawn in the future. See the Highlights section in the
presale report for a description.
In Fitch's analysis, Fitch assumes 100% of the HELOCs are 100%
drawn on day one. As a result, all Fitch-determined percentages are
based off the maximum HELOC draw amount.
The servicers, Specialized Loan Servicing, LLC and loanDepot.com,
LLC, will not be advancing delinquent (DQ) monthly payments of
principal and interest (P&I).
The collateral comprises 100% adjustable-rate loans. These loans
are adjusted based on the prime rate, none of which reference
LIBOR. The class A-1, M-1, M-2 and M-3 certificates are floating
rate and use SOFR as the index; they are capped at the net WA
coupon (WAC). The annual rate on class B-1, B-2 and B-3
certificates with respect to any distribution date (and the related
accrual period) will be equal to the net WAC for such distribution
date. The B-4 certificates are entitled to distributions of
principal only and will not receive any distributions of interest.
There is no exposure to LIBOR in this transaction.
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 10.0% above a long-term sustainable level (versus
9.42% on a national level as of 2Q23, up 1.82% 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 1.87% yoy nationally as of October 2023, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
High Quality Prime Mortgage Pool (Positive): The participation
interest is in a fixed pool of draws related to 2,800
prime-quality, performing, adjustable-rate open-ended HELOCs that
have five- or 10-year IO periods and maturities of up to 30 years.
The open-ended HELOCs are secured by second liens on primarily one-
to four-family residential properties (including planned unit
developments), condominiums, and a townhouse, totaling $277.67
million (includes the maximum HELOC draw amount). The loans were
made to borrowers with strong credit profiles and relatively low
leverage.
The loans are seasoned at an average of five months, according to
Fitch, and two months, per the transaction documents. The pool has
a WA original FICO score of 742, as determined by Fitch, indicative
of very high credit quality borrowers. About 40.1% of the loans, as
determined by Fitch, have a borrower with an original FICO score
equal to or above 750. The original WA combined loan-to-value
(CLTV) ratio of 67.3%, as determined by Fitch, translates to a
sustainable loan-to-value (sLTV) ratio of 74.8%.
The transaction documents stated a WA drawn LTV of 16.8% and a WA
drawn CLTV of 65.8%. The LTVs represent moderate borrower equity in
the property and reduced default risk, compared with a borrower
CLTV of over 80%. Of the pool loans, 49.5% were originated by a
retail or correspondent channel with the remaining 50.5% originated
by a broker channel. Of the loans, 100% are underwritten to full
documentation. Based on Fitch's documentation review, it considered
99.0% of the loans to be fully documented.
Of the pool, 97.3% comprise loans where the borrower maintains a
primary or secondary residence, and the remaining 2.7% are investor
loans. Single-family homes, planned unit developments (PUDs), a
townhouse and single-family attached dwellings constitute 95.9% of
the pool (or 95.7% per the transaction documents). Condominiums
make up 2.6% (2.7% per the transaction documents), while
multifamily homes make up 1.5% (1.6% per the transaction
documents). The pool consists of loans with the following loan
purposes, according to Fitch: cashout refinances (98.1%), purchases
(1.7%) and rate-term refinances (0.2%). The transaction documents
show 98.0% of the pool to be cashouts. Fitch considers a loan to be
a rate term refinance if the cashout amount is less than $5,000,
which explains the difference in the cashout amount percentages.
None of the loans in the pool are over $1.0 million, and the
maximum draw amount is $500,000.
Of the pool loans, 34.8% (34.6% per the transaction documents) are
concentrated in California. The largest MSA concentration is in the
Los Angeles-Long Beach-Santa Ana, CA MSA (12.2%), followed by the
New York-Northern New Jersey-Long Island, NY-NJ-PA MSA (5.2%) and
the Miami-Fort Lauderdale-Miami Beach, FL MSA (5.1%). The top three
MSAs account for 23% of the pool. As a result, no probability of
default (PD) penalty was applied for geographic concentration.
Second Lien HELOC Collateral (Negative): The entirety of the
collateral pool consists of second lien HELOC loans originated by
loanDepot.com LLC, United Wholesale Mortgage and other originators.
Fitch assumed no recovery and 100% loss severity (LS) on second
lien loans, based on the historical behavior of the 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.
Modified Sequential Structure with No Advancing of Delinquent P&I
(Mixed): The proposed structure is a modified-sequential structure
in which principal is distributed pro rata to the A-1, M-1, M-2 and
M-3 classes to the extent the performance triggers are passing. To
the extent the triggers are failing, principal is paid
sequentially. The transaction also benefits from excess spread that
can be used to reimburse for realized and cumulative losses, as
well as cap carryover amounts.
The transaction has a lockout feature benefiting more senior
classes if performance deteriorates. If the applicable credit
support percentage of the M-1, M-2 or M-3 classes is less than the
sum of (i) 150% of the original applicable credit support
percentage for that class plus (ii) 50% of the NPL percentage plus
(iii) the charged off loan percentage, then that class is locked
out of receiving principal payments and the principal payments are
redirected toward the most senior class. To the extent any class of
certificates is a locked out class, each class of certificates
subordinate to such locked out class will also be a locked out
class. Due to this lockout feature, the M classes will be locked
out starting on day one.
The A-1 and M classes are floating-rate classes based on the SOFR
index and are capped at the net WAC. The annual rate on the B-1,
B-2 and B-3 certificates with respect to any distribution date (and
the related accrual period) will be equal to the net WAC for such
distribution date. Class B-4 is a principal-only class and is not
entitled to receive interest. If no excess spread is available to
absorb losses, losses will be allocated to all classes reverse
sequentially, starting with class B-4. The servicer will not
advance delinquent monthly payments of P&I.
180-Day Chargeoff Feature (Positive): Loans that become 180 days
delinquent based on the Mortgage Bankers Association (MBA)
delinquency method, except for those in a forbearance plan, will be
charged off. The 180-day chargeoff feature will result in losses
being incurred sooner, while a larger amount of excess interest is
available to protect against losses. This compares favorably to a
delayed liquidation scenario whereby the loss occurs later in the
life of the transaction and less excess is available.
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 41.5% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence described in
Form 15E focused on four areas: compliance review, credit review,
valuation review and data integrity. Fitch considered this
information in its analysis and, as a result, Fitch decreased its
loss expectations by 0.99% at the 'AAAsf' stress due to 100% due
diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC was engaged to perform the review. Loans reviewed under
this engagement were given compliance, credit and valuation grades
and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
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.
JP MORGAN 2024-HE1: Fitch Assigns B(EXP)sf Rating on Cl. B-2 Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to J.P. Morgan Mortgage
Trust 2024-HE1 (JPMMT 2024-HE1).
Entity/Debt Rating
----------- ------
JPMMT 2024-HE1
A-1 LT AAA(EXP)sf Expected Rating
M-1 LT AA(EXP)sf Expected Rating
M-2 LT A(EXP)sf Expected Rating
M-3 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
BX LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
backed by a second lien, prime, open home equity line of credit
(HELOC) on residential properties to be issued by JPMMT 2024-HE1 as
indicated above. This is the fourth transaction to be rated by
Fitch that includes prime-quality second lien HELOCs with open
draws off the JPMMT shelf and the fourth second lien HELOC
transaction off the JPMMT shelf.
The loans associated with the draws allocated to the participation
certificate are 2,800 nonseasoned, performing, prime-quality second
lien HELOC loans with a current outstanding balance (as of the
cutoff date) of $209.96 million. The collateral balance based on
the maximum draw amount is $277.67 million, as determined by Fitch.
As of the cutoff date, 100% of the HELOC lines are open or on a
temporary freeze and may be opened in the future. The aggregate
available credit line amount, as of the cutoff date, is expected to
be $37.99 million, per transaction documents. As of the cutoff
date, weighted average (WA) utilization of the HELOCs is 90.5%, per
the transaction documents.
The main originators in the transaction are loanDepot.com, LLC and
United Wholesale Mortgage. All other originators make up less than
10% of the pool. The loans are serviced by Specialized Loan
Servicing, LLC and loanDepot.com, LLC.
Distributions of principal are based on a modified sequential
structure, subject to the transaction's performance triggers.
Interest payments are made sequentially to all classes except B-4,
which is a principal-only class, while losses are allocated reverse
sequentially once excess spread is depleted.
Draws will be funded by JPMorgan Mortgage Acquisitions Corp.
(JPMMAC). This transaction will not use a variable funding note
(VFN) structure; rather, it will use participation certificates.
JPMMT 2024-HE1 is only entitled to cash flows based on the amount
drawn as of the cutoff date. The remaining available draws will be
allocated to the JPMorgan participation certificate (JPM PC) if
they are drawn in the future. See the Highlights section for a
description.
In Fitch's analysis, Fitch assumes 100% of the HELOCs are 100%
drawn on day one. As a result, all Fitch-determined percentages are
based off the maximum HELOC draw amount.
The servicers, Specialized Loan Servicing, LLC and loanDepot.com,
LLC, will not be advancing delinquent (DQ) monthly payments of
principal and interest (P&I).
The collateral comprises 100% adjustable-rate loans. These loans
are adjusted based on the prime rate, none of which reference
Libor. The class A-1, M-1, M-2 and M-3 certificates are floating
rate and use SOFR as the index; they are capped at the net WA
coupon (WAC). The annual rate on class B-1, B-2 and B-3
certificates with respect to any distribution date (and the related
accrual period) will be equal to the net WAC for such distribution
date. The B-4 certificates are entitled to distributions of
principal only and will not receive any distributions of interest.
There is no exposure to Libor in this transaction.
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 10.0% above a long-term sustainable level (versus
9.42% on a national level as of 2Q23, up 1.82% 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 1.87% yoy nationally as of October 2023, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
High Quality Prime Mortgage Pool (Positive): The participation
interest is in a fixed pool of draws related to 2,800
prime-quality, performing, adjustable-rate open-ended HELOCs that
have five- or 10-year IO periods and maturities of up to 30 years.
The open-ended HELOCs are secured by second liens on primarily one-
to four-family residential properties (including planned unit
developments), condominiums, and a townhouse, totaling $277.67
million (includes the maximum HELOC draw amount). The loans were
made to borrowers with strong credit profiles and relatively low
leverage.
The loans are seasoned at an average of five months, according to
Fitch, and two months, per the transaction documents. The pool has
a WA original FICO score of 742, as determined by Fitch, indicative
of very high credit quality borrowers. About 40.1% of the loans, as
determined by Fitch, have a borrower with an original FICO score
equal to or above 750. The original WA combined loan-to-value
(CLTV) ratio of 67.3%, as determined by Fitch, translates to a
sustainable loan-to-value (sLTV) ratio of 74.8%.
The transaction documents stated a WA drawn LTV of 16.8% and a WA
drawn CLTV of 65.8%. The LTVs represent moderate borrower equity in
the property and reduced default risk, compared with a borrower
CLTV of over 80%. Of the pool loans, 49.5% were originated by a
retail or correspondent channel with the remaining 50.5% originated
by a broker channel. Of the loans, 100% are underwritten to full
documentation. Based on Fitch's documentation review, it considered
99.0% of the loans to be fully documented.
Of the pool, 97.3% comprise loans where the borrower maintains a
primary or secondary residence, and the remaining 2.7% are investor
loans. Single-family homes, planned unit developments (PUDs), a
townhouse and single-family attached dwellings constitute 95.9% of
the pool (or 95.7% per the transaction documents). Condominiums
make up 2.6% (2.7% per the transaction documents), while
multifamily homes make up 1.5% (1.6% per the transaction
documents). The pool consists of loans with the following loan
purposes, according to Fitch: cashout refinances (98.1%), purchases
(1.7%) and rate-term refinances (0.2%). The transaction documents
show 98.0% of the pool to be cashouts. Fitch considers a loan to be
a rate term refinance if the cashout amount is less than $5,000,
which explains the difference in the cashout amount percentages.
None of the loans in the pool are over $1.0 million, and the
maximum draw amount is $500,000.
Of the pool loans, 34.8% (34.6% per the transaction documents) are
concentrated in California. The largest MSA concentration is in the
Los Angeles-Long Beach-Santa Ana, CA MSA (12.2%), followed by the
New York-Northern New Jersey-Long Island, NY-NJ-PA MSA (5.2%) and
the Miami-Fort Lauderdale-Miami Beach, FL MSA (5.1%). The top three
MSAs account for 23% of the pool. As a result, no probability of
default (PD) penalty was applied for geographic concentration.
Second Lien HELOC Collateral (Negative): The entirety of the
collateral pool consists of second lien HELOC loans originated by
loanDepot.com LLC, United Wholesale Mortgage and other originators.
Fitch assumed no recovery and 100% loss severity (LS) on second
lien loans, based on the historical behavior of the 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.
Modified Sequential Structure with No Advancing of Delinquent P&I
(Mixed): The proposed structure is a modified-sequential structure
in which principal is distributed pro rata to the A-1, M-1, M-2 and
M-3 classes to the extent the performance triggers are passing. To
the extent the triggers are failing, principal is paid
sequentially. The transaction also benefits from excess spread that
can be used to reimburse for realized and cumulative losses, as
well as cap carryover amounts.
The transaction has a lockout feature benefiting more senior
classes if performance deteriorates. If the applicable credit
support percentage of the M-1, M-2 or M-3 classes is less than the
sum of (i) 150% of the original applicable credit support
percentage for that class plus (ii) 50% of the NPL percentage plus
(iii) the charged off loan percentage, then that class is locked
out of receiving principal payments and the principal payments are
redirected toward the most senior class. To the extent any class of
certificates is a locked out class, each class of certificates
subordinate to such locked out class will also be a locked out
class. Due to this lockout feature, the M classes will be locked
out starting on day one.
The A-1 and M classes are floating-rate classes based on the SOFR
index and are capped at the net WAC. The annual rate on the B-1,
B-2 and B-3 certificates with respect to any distribution date (and
the related accrual period) will be equal to the net WAC for such
distribution date. Class B-4 is a principal-only class and is not
entitled to receive interest. If no excess spread is available to
absorb losses, losses will be allocated to all classes reverse
sequentially, starting with class B-4. The servicer will not
advance delinquent monthly payments of P&I.
180-Day Chargeoff Feature (Positive): Loans that become 180 days
delinquent based on the Mortgage Bankers Association (MBA)
delinquency method, except for those in a forbearance plan, will be
charged off. The 180-day chargeoff feature will result in losses
being incurred sooner, while a larger amount of excess interest is
available to protect against losses. This compares favorably to a
delayed liquidation scenario whereby the loss occurs later in the
life of the transaction and less excess is available.
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 41.5% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence described in
Form 15E focused on four areas: compliance review, credit review,
valuation review and data integrity. Fitch considered this
information in its analysis and, as a result, Fitch decreased its
loss expectations by 0.99% at the 'AAAsf' stress due to 100% due
diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC was engaged to perform the review. Loans reviewed under
this engagement were given compliance, credit and valuation grades
and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
KATAYMA CLO II: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Katayma CLO
II Ltd./Katayma CLO II LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by KLM, a subsidiary of Kuvare.
The preliminary ratings are based on information as of March 11,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Katayma CLO II Ltd./Katayma CLO II LLC
Class A-1, $256.000 million: AAA (sf)
Class A-2, $4.000 million: AAA (sf)
Class B, $44.000 million: AA (sf)
Class C (deferrable), $24.000 million: A (sf)
Class D (deferrable), $24.000 million: BBB- (sf)
Class E (deferrable), $14.000 million: BB- (sf)
Subordinated notes, $37.925 million: Not rated
MADISON PARK XLII: S&P Affirms B+ (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its rating to the class A-R replacement
debt from Madison Park Funding XLII Ltd./Madison Park Funding XLII
LLC, a CLO originally issued in 2017 that is managed by Credit
Suisse Asset Management LLC. At the same time, S&P withdrew its
rating on the original class A-1 debt following payment in full on
the March 13. 2024, refinancing date (S&P did not rate the original
class A-2 debt). S&P also affirmed its ratings on the class B, C,
D, and E debt, which were not refinanced.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The original class A-1 and A-2 debt were combined into the
replacement class A-R debt.
-- The replacement class A-R debt was issued at lower spread than
the weighted average cost of debt of the original class A-1 and A-2
debt.
-- The noncall period for the replacement class A-R debt was
established at six months from the refinancing date.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $516.75 million: Three-month CME term SOFR + 1.15%
Original debt
-- Class A-1, $497.67 million(i): Three-month CME term SOFR +
1.18% + CSA(ii)
-- Class A-2, $19.08 million(i): Three-month CME term SOFR + 1.25%
+ CSA(ii)
(i)The class's outstanding balance according to the February 2024
trustee report.
(ii)A credit spread adjustment (CSA) of 0.26161%.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Madison Park Funding XLII Ltd./Madison Park Funding XLII LLC
Class A-R, $516.75 million: AAA (sf)
Ratings Affirmed
Madison Park Funding XLII Ltd./Madison Park Funding XLII LLC
Class B: AA (sf)
Class C (deferrable): A (sf)
Class D (deferrable): BBB-(sf)
Class E (deferrable): B+ (sf)
Ratings Withdrawn
Madison Park Funding XLII Ltd./Madison Park Funding XLII LLC
Class A-1 to NR from 'AAA (sf)'
Other Outstanding Ratings
Madison Park Funding XLII Ltd./Madison Park Funding XLII LLC
Subordinated notes: NR
NR--Not rated.
MARBLE POINT XIV: Moody's Ups Rating on $24.9MM D Notes From Ba1
----------------------------------------------------------------
Moody's Ratings has assigned a rating to one class of refinancing
notes (the "Refinancing Notes") issued by Marble Point CLO XIV Ltd.
(the "Issuer").
Moody's rating action is as follows:
US$236,000,000 Class A-1-2R Senior Floating Rate Notes due 2032
(the "Class A-1-2R Notes"), Assigned Aaa (sf)
Additionally, Moody's has taken rating actions on the following
outstanding notes:
US$43,500,000 Class B-R Senior Floating Rate Notes due 2032 (the
"Class B-R Notes"), Upgraded to Aa1 (sf); previously on January 21,
2021 (the "First Refinancing Date") Assigned Aa2 (sf)
US$19,500,000 Class C Mezzanine Deferrable Floating Rate Notes due
2032 (the "Class C Notes"), Upgraded to A1 (sf); previously on
December 31, 2018 (the "Original Closing Date") Assigned A2 (sf)
US$24,900,000 Class D Mezzanine Deferrable Floating Rate Notes due
2032 (the "Class D Notes"), Upgraded to Baa3 (sf); previously on
August 14, 2020 Downgraded to Ba1 (sf)
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Marble Point Credit Management, LLC (the "Manager") will continue
to direct the selection, acquisition and disposition of certain
collateral assets, on behalf of the Issuer, after the end of the
deal's reinvestment period in January 2024.
The Issuer previously issued five other classes of secured notes
and two classes of subordinated notes, which will remain
outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the non-call period;
changes to the definitions of "Reference Rate" and "Caa Collateral
Obligation".
Moody's rating actions on the Class B-R Notes, Class C Notes, and
Class D Notes are primarily a result of the refinancing, which
increases excess spread available as credit enhancement to the
rated notes. No actions were taken on the Class A-2-R and Class E
notes because their expected losses remain commensurate with their
current ratings, after taking into account the CLO's latest
portfolio information, its relevant structural features and its
actual over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $381,883,135
Defaulted par: $4,650,394
Diversity Score: 67
Weighted Average Rating Factor (WARF): 2838
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.75%
Weighted Average Recovery Rate (WARR): 46.48%
Weighted Average Life (WAL): 4.24 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
MORGAN STANLEY 2024-INV1: Fitch Assigns Bsf Rating on Cl. B-5 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Morgan Stanley
Residential Mortgage Loan Trust 2024-INV1 (MSRM 2024-INV1).
Entity/Debt Rating Prior
----------- ------ -----
MSRM 2024-INV1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1-IO LT AAAsf New Rating AAA(EXP)sf
A-X-IO1 LT AA+sf New Rating AA+(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-2-IO LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-IO LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-IO LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-IO LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-IO LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-IO LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-IO LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-IO LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-10-IO LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-11-IO LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-12-IO LT AAAsf New Rating AAA(EXP)sf
A-13 LT AA+sf New Rating AA+(EXP)sf
A-13-IO LT AA+sf New Rating AA+(EXP)sf
A-14 LT AA+sf New Rating AA+(EXP)sf
A-14-IO LT AA+sf New Rating AA+(EXP)sf
A-15 LT AA+sf New Rating AA+(EXP)sf
A-15-IO LT AA+sf New Rating AA+(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
PT LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the residential mortgage-backed
certificates issued by Morgan Stanley Residential Mortgage Loan
Trust 2024-INV1 (MSRM 2024-INV1), as indicated.
MSRM 2024-INV1 is the 17th post-financial-crisis transaction off
the Morgan Stanley Residential Mortgage Loan Trust shelf; the first
transaction was issued in 2014. This is the third 100%
non-owner-occupied MSRM transaction and the 15th MSRM transaction
that comprises loans from various sellers and is acquired by Morgan
Stanley in its prime-jumbo aggregation process.
The certificates are supported by 1,004 prime-quality loans with a
total balance of approximately $361.55 million as of the cut-off
date. The pool consists of 100% fixed-rate mortgages (FRMs) from
various mortgage originators. The servicers for this transaction
are Specialized Loan Servicing, LLC (SLS), PennyMac Loan Services,
LLC, PennyMac Corp, Newrez LLC/ Shellpoint Mortgage, and First
National Bank of Pennsylvania (FNB). Nationstar Mortgage LLC
(Nationstar) will be the master servicer.
Of the loans, 2.9% qualify as either Safe Harbor Qualified Mortgage
(QM), Safe Harbor QM Average Prime Offer Rate (APOR) or Higher
Priced QM APOR loans. The remaining 97.1% of loans are exempt from
the QM rule.
There is no exposure to LIBOR in this transaction. The collateral
comprises 100% fixed-rate loans, and the certificates are
fixed-rate and capped at the net weighted average coupon (WAC).
Like other prime transactions, this transaction utilizes a
senior-subordinate, shifting-interest structure with subordination
floors to protect against tail risk.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, it views the home price values of
this pool as 10.6% above a long-term sustainable level (versus
9.42% on a national level as of 2Q23, up 1.82% 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 1.87% YoY nationally as of October 2023 despite modest
regional declines, but are still being supported by limited
inventory.
Prime Credit Quality (Positive): The collateral consists of 1,004
loans totaling $361.55 million and seasoned at approximately eight
months in aggregate. The borrowers have a strong credit profile,
with a 766 FICO and a 36% debt-to-income ratio (DTI), coupled with
high leverage, as reflected by a 77.9% sustainable loan-to-value
ratio (sLTV).
Fitch considered higher priced QM (HPQM) government-sponsored
entity (GSE)-eligible loans to be nonconforming; as a result, Fitch
viewed the pool as having 7.3% nonconforming loans while the
remaining 92.7% are agency conforming loans according to Fitch (per
the transaction documents, 92.8% are agency conforming loans and
7.2% are nonconforming). The majority of the loans (97.1%) are
exempt from QM rule standards, as they are loans on investor
occupied homes that serve business purposes. The remaining 2.9%
qualify as Higher Priced (APOR), SHQM, or SHQMQM Safe Harbor (APOR)
loans. Roughly 44.4% of the pool is originated by a retail
channel.
The pool consists of 100% investor properties. Single-family homes
make up 69.8% of the pool, condos make up 11.9% and multifamily
homes make up 18.4%. Cash-outs comprise only 10.2% of the pool
while purchases comprise 84.4%, and rate refinances comprise 5.4%
(as determined by Fitch). Based on the information provided, there
are no foreign nationals in the pool. Sixteen loans in the pool are
over $1.0 million, and the largest loan is $1.72 million.
Approximately 21% of the pool is concentrated in California. The
largest MSA concentration is in the New York-Northern New
Jersey-Long Island, NY-NJ-PA MSA (7.0%), followed by the Los
Angeles-Long Beach-Santa Ana, CA MSA (6.8%) and the San
Francisco-Oakland-Fremont, CA MSA (3.0%). The top three MSAs
account for 17% of the pool. As a result, there was no probability
of default (PD) penalty for geographic concentration.
Non-Owner-Occupied Loans (Negative): Of the pool, 100% of loans
were made to investors and 92.7% are conforming loans, which were
underwritten to Fannie Mae and Freddie Mac guidelines and approved
per Desktop Underwriter (DU) or Loan Product Advisor (LPA), the
automated underwriting systems for Fannie Mae and Freddie Mac,
respectively.
The remaining 7.3% of loans were underwritten to the underlying
sellers' guidelines and were full documentation loans. All loans
were underwritten to the borrower's credit risk; this differs from
investor cash flow loans, which are underwritten to the property's
income. Fitch applies a 1.25x PD penalty for agency investor loans
and a 1.60x PD penalty for investor loans underwritten to the
borrower's credit risk.
For the loss analysis of this pool, Fitch used a customized version
of the U.S. RMBS Loan Loss model that has a 1.25x PD penalty for
agency investor loans and a 1.60x PD penalty for investor loans
underwritten to the borrower's credit risk. The 1.25x PD penalty
was used only for agency eligible loans (92.7%), with the remaining
loans receiving a 1.60x PD penalty for being investor occupied.
Post-crisis performance indicates that loans underwritten to DU/LPA
guidelines have relatively lower default rates compared with normal
investor loans used in regression data with all other attributes
controlled. The implied penalty has been reduced to approximately
25% for agency investor loans in the customized model, down from
approximately 60% for regular investor loans in the production
model.
Multifamily Loans (Negative): Of the pool, 18.4% of loans are for
multifamily homes. Fitch views these as riskier than single-family
homes since the borrower may be relying upon rental income to fund
mortgage payment on the property. To account for this risk, Fitch
adjusts the PD upward by 25% from the baseline for multifamily
homes.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. This lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the
transaction. The applicable credit support percentage feature
redirects subordinate principal to classes of higher seniority if
specified credit enhancement (CE) levels are not maintained. Due to
the leakage to the subordinate bonds, the shifting-interest
structure requires more CE.
The servicers will provide full advancing (until deemed
non-recoverable) for the life of the transaction. While this helps
the liquidity of the structure, it also increases the expected loss
due to unpaid servicer advances. If the servicers are unable to
advance, the master servicer will provide advancing. If the master
servicer is unable to advance, the securities administrator will
ultimately be responsible for advancing.
Subordination Floor (Positive): A CE or senior subordination floor
of 1.80% has been considered to mitigate potential tail end risk
and loss exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 1.10% has been considered to mitigate
potential tail end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses were conducted at
the state and national levels to assess the effect of higher MVDs
for the subject pool as well as lower MVDs, illustrated by a gain
in home prices.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20% and 30%, in addition to the model
projected MVD, which is 41.9% in the 'AAAsf' stress. The analysis
indicates that there is some potential rating migration with higher
MVDs, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modelling process uses the modification
of these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC and Consolidated Analytics. The third-party
due diligence described in Form 15E focused on four areas:
compliance review, credit review, valuation review and data
integrity. Fitch considered this information in its analysis and,
as a result, Fitch did not make any adjustments to its analysis
based on the findings. Due to the fact that there was 100% due
diligence provided and there were no material findings, Fitch
reduced the 'AAAsf' expected loss by 0.52%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC and Consolidated Analytics were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades, and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for more detail.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
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.
MP CLO VII: Fitch Lowers Rating on Class F-RR Notes to 'CCCsf'
--------------------------------------------------------------
Fitch Ratings has downgraded the class F-RR notes in MP CLO VII,
Ltd. (MP CLO VII) to 'CCCsf' from 'B-sf'.
Entity/Debt Rating Prior
----------- ------ -----
MP CLO VII, Ltd. (f/k/a
ACAS CLO 2015-1, Ltd.)
F-RR 55320TAD5 LT CCCsf Downgrade B-sf
TRANSACTION SUMMARY
MP CLO VII, Ltd (MP CLO VII) is a broadly syndicated collateralized
loan obligation (CLO) managed by MP CLO Management LLC. The
transaction originally closed in May 2015 and was reset in
September 2018. The transaction exited its reinvestment period in
October 2020 and refinanced its senior-most tranche in June 2021.
The notes are secured primarily by first-lien, senior secured
leveraged loans.
KEY RATING DRIVERS
Portfolio Losses and Decreased Credit Enhancement
Fitch believes that there is a real possibility of default for the
class F-RR notes, as a result of decreased credit enhancement (CE)
levels from portfolio losses. The issuer has incurred an additional
$5 million of par losses since the last review in July 2023,
further eroding CE levels, and the class E overcollateralization
(OC) test had started to fail in October 2023. The issuer was able
to cure the failing class E OC test with available interest and
principal proceeds on the January 2024 payment date, though $374K
of interest payments were deferred on the class F-RR notes.
CE remains limited from asset coverage and excess spread. As of the
February 2024 trustee report, the total par balance of portfolio
assets was $330.5 million, which includes $24.1 million in
principal proceeds, against $329.8 million notional balance of
notes, including the class F-RR deferred interest amount. The
portfolio weighted average spread level increased to 3.52% from
3.44% at last review.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades may occur if portfolio losses continue and notes' CE
further deteriorates or become undercollateralized to render
default more probable or imminent.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades may generally occur in the event of better-than-expected
portfolio credit quality and transaction performance;
- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating levels
for the current portfolio, would lead to no rating change, based on
the model-implied rating.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
NATIONAL COLLEGIATE 2007-A: Fitch Affirms Bsf Rating on Cl. C Notes
-------------------------------------------------------------------
Fitch Ratings has affirmed all ratings assigned to the outstanding
notes of National Collegiate Trust 2006-A (NCT 2006-A) and National
Collegiate Trust 2007-A (NCT 2007-A) and the Rating Outlooks remain
at Stable.
Entity/Debt Rating Prior
----------- ------ -----
The National Collegiate
Trust 2006-A
A-2 63544JAB5 LT AAAsf Affirmed AAAsf
B 63544JAC3 LT Asf Affirmed Asf
The National Collegiate
Trust 2007-A
A 63543YAA5 LT AAAsf Affirmed AAAsf
B 63543YAB3 LT BBBsf Affirmed BBBsf
C 63543YAC1 LT Bsf Affirmed Bsf
TRANSACTION SUMMARY
The affirmation of NCT 2006-A's class A-2 and B bonds and NCT
2007-A's class A, B and C bonds reflects credit enhancement (CE)
levels commensurate to Fitch's stresses at the relevant rating
scenarios and stable asset performance since the last review.
KEY RATING DRIVERS
Collateral Performance:
NCT 2006-A and 2007-A are collateralized by private student loans
originated by Bank of America (AA/F1+/Stable) under First
Marblehead Corp.'s GATE Program, including originations by CHELA
Funding II, LLC.
Fitch has maintained its assumption of a constant default rate
(CDR) at 3.50%. A base-case recovery rate of 30% was assumed for
both transactions, which was determined to be appropriate based on
historical transaction performance.
Payment Structure:
CE is provided by overcollateralization (OC; the excess of the
trust's asset balance over the bond balance) and excess spread. For
NCT 2006-A and NCT 2007-A, there is currently no cash released from
the trust, due to a Turbo Trigger currently in effect.
Liquidity support is provided to NCT 2006-A and NCT 2007-A by a
reserve account sized at about USD one million.
Operational Capabilities:
Pennsylvania Higher Education Assistance Agency (PHEAA) services
100% of NCT 2007-A, and 88% of NCT 2006-A. FirstMark services the
remaining 12% of NCT 2006-A. Fitch believes all servicers are
acceptable servicers of private student loans given their track
record.
Criteria Variation
Under the 'U.S. Private Student Loan ABS Rating Criteria', dated
March 14, 2023, assigned ratings differing from model-implied
ratings (MIRs) by more than three notches constitutes a criteria
variation.
The MIR for NCT 2006-A's class B is 'AAAsf'. Fitch assigned a
rating of 'Asf' to class B, which is five notches below the MIR.
The criteria variation and the difference between the MIR and the
assigned rating reflect an expected decrease in available excess
spread to the bonds, mainly as a consequence of transaction fees
representing an increasingly high share of transaction payments,
and increased asset concentration with collateral balance amounting
to about USD 6.3 million, as of January 2024 distribution date.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
NCT 2006-A
Current Ratings: 'AAAsf'/'Asf'
Expected impact on the note rating of increased defaults (class
A-2/B):
- Increase base case defaults by 10%: 'AAAsf'/'AAAsf';
- Increase base case defaults by 25%: 'AAAsf'/'AAAsf';
- Increase base case defaults by 50%: 'AAAsf'/'AAAsf'.
Expected impact on the note rating of reduced recoveries (class
A-2/B):
- Reduce base case recoveries by 10%: 'AAAsf'/'AAAsf';
- Reduce base case recoveries by 20%: 'AAAsf'/'AAAsf';
- Reduce base case recoveries by 30%: 'AAAsf'/'AAAsf'.
Expected impact on the note rating of increased defaults and
reduced recoveries (class A-2/B):
- Increase base case defaults and reduce base case recoveries each
by 10%: 'AAAsf'/'AAAsf';
- Increase base case defaults and reduce base case recoveries each
by 25%: 'AAAsf'/'AAAsf';
- Increase base case defaults and reduce base case recoveries each
by 50%: 'AAAsf'/'AAAsf'.
NCT 2007-A
Current Ratings: 'AAAsf'/'BBBsf'/'Bsf'
Expected impact on the note rating of increased defaults (class
A/B/C):
- Increase base case defaults by 10%: 'AAAsf'/'A-sf'/'CCCsf';
- Increase base case defaults by 25%: 'AAAsf'/'BBB+sf'/'CCCsf';
- Increase base case defaults by 50%: 'AAAsf'/'BBB-sf'/'CCCsf'.
Expected impact on the note rating of reduced recoveries (class
A/B/C):
- Reduce base case recoveries by 10%: 'AAAsf'/'Asf'/'CCCsf';
- Reduce base case recoveries by 20%: 'AAAsf'/'A-sf'/'CCCsf';
- Reduce base case recoveries by 30%: 'AAAsf'/'A-sf'/'CCCsf'.
Expected impact on the note rating of increased defaults and
reduced recoveries (class A/B/C):
- Increase base case defaults and reduce base case recoveries each
by 10%: 'AAAsf'/'A-sf'/'CCCsf';
- Increase base case defaults and reduce base case recoveries each
by 25%: 'AAAsf'/'BBBsf'/'CCCsf';
- Increase base case defaults and reduce base case recoveries each
by 50%: 'AA+sf'/'BB+sf'/'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
NCT 2006-A
Current Ratings: 'AAAsf'/'Asf'
- Decrease base case defaults by 50%: 'AAAsf'/'AAAsf';
- Increase base case recoveries by 30%: 'AAAsf'/'AAAsf';
- Decrease base case defaults and increase base case recoveries
each by 50%: 'AAAsf'/'AAAsf'.
NCT 2007-A
Current Ratings: 'AAAsf'/'BBBsf'/'Bsf'
- Decrease base case defaults by 50%: 'AAAsf'/'AAAsf'/'BBBsf';
- Increase base case recoveries by 30%: 'AAAsf'/'A+sf'/'Bsf';
- Decrease base case defaults and increase base case recoveries
each by 50%: 'AAAsf'/'AAAsf'/'A-sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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 36: S&P Assigns BB- (sf) Rating on Cl. E-R2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1R2, B-R2,
C-R2, and E-R2 replacement debt and the new class A-1L loans from
Neuberger Berman Loan Advisers CLO 36 Ltd./Neuberger Berman Loan
Advisers CLO 3 LLC, a CLO originally issued in 2017 that is managed
by Neuberger Berman Loan Advisers LLC. At the same time, we
withdrew our ratings on the original class A-1R. B-R, C-R, E-R, and
F debt following payment in full on the March 11, 2024, refinancing
date. We also affirmed our ratings on the class A-2R and D-R debt,
which were not refinanced.
The replacement debt were issued via a supplemental indenture,
which outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period will be extended Jan. 20, 2025.
-- No additional subordinated notes will be issued on the
refinancing date.
-- Class A-1R were broken out into the new A-1R2 debt and A-1L
loans.
-- Class E-R and F were combined into the new class E-R2.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1R2, $76.75 million: Three-month SOFR + 1.30%
-- Class A-1L loans, $205.75 million: Three-month SOFR + 1.30%(i)
-- Class A-2R, $37.50 million: 1.803%(ii)
-- Class B-R2, 60.00 million: Three-month SOFR + 1.80%
-- Class C-R2, $32.50 million: Three-month SOFR + 2.50%
-- Class D-R, $27.50 million: Three-month SOFR + 3.45%(ii)
-- Class E-R2, $22.50 million: Three-month SOFR + 7.30%
-- Subordinated notes, $44.375 million: Not applicable(ii)
(i) The class A-1L loans may not be converted or exchanged into
notes.
(ii)Tranche was not refinanced.
Original debt
-- Class A-1R, $282.50 million: Three-month SOFR + 1.25%+
CSA(iii)
-- Class A-2R, $37.50 million: 1.803%
-- Class B-R, $60.00 million: Three-month SOFR + 1.55%+ CSA (iii)
-- Class C-R, $32.50 million: Three-month SOFR + 2.15%+ CSA (iii)
-- Class D-R, $27.50 million: Three-month SOFR + 3.45%+ CSA (iii)
-- Class E-R, $17.50 million: Three-month SOFR + 6.75%+ CSA (iii)
-- Class F, $5.00 million: Three-month SOFR + 8.50%+ CSA (iii)
-- Subordinated notes, $44.375 million: Not applicable
(iii)The credit spread adjustment (CSA) is 0.26161%.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Neuberger Berman Loan Advisers CLO 36 Ltd./
Neuberger Berman Loan Advisers CLO 36 LLC
Class A-1R2, $76.75 million: AAA (sf)
Class A-1L loans, $205.75 million: AAA (sf)
Class B-R2, $60.00 million: AA (sf)
Class C-R2(deferrable), $32.50 million: A (sf)
Class E-R2(deferrable), $22.50 million: BB- (sf)
Ratings Affirmed
Neuberger Berman Loan Advisers CLO 36 Ltd./
Neuberger Berman Loan Advisers CLO 36 LLC
Class A-2R: 'AAA (sf)'
Class D-R: 'BBB- (sf)'
Ratings Withdrawn
Neuberger Berman Loan Advisers CLO 36 Ltd./
Neuberger Berman Loan Advisers CLO 36 LLC
Class A-1R to NR from 'AAA (sf)'
Class B-R to NR from 'AA (sf)'
Class C-R to NR from 'A (sf)'
Class E-R to NR from 'BB- (sf)'
Class F to NR from 'B (sf)'
Other Outstanding Rating
Neuberger Berman Loan Advisers CLO 36, Ltd./
Neuberger Berman Loan Advisers CLO 36 LLC
Subordinated notes: NR
NR--Not rated.
NEUBERGER BERMAN 54: Fitch Assigns BB-(EXP)sf Rating on Cl. E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Neuberger Berman Loan Advisers CLO 54, Ltd.
Entity/Debt Rating
----------- ------
Neuberger Berman
Loan Advisers
CLO 54, Ltd.
A LT NR(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Neuberger Berman Loan Advisers CLO 54, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that will
be managed by Neuberger Berman Loan Advisers IV LLC. Net proceeds
from the issuance of the secured and subordinated notes will
provide financing on a portfolio of approximately $500 million of
primarily first lien senior secured 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 24.38, versus a maximum covenant, in accordance with
the initial expected matrix point of 25.75. 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
94.55% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.82% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.0%.
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 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 'BB+sf' and 'A+sf' for class B, between 'B+sf'
and 'BBB+sf' for class C, between less than 'B-sf' and 'BB+sf' for
class D; and between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'Asf' for
class D; and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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 assesses the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the rating
agency's rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
NEUBERGER BERMAN 55: Fitch Assigns BB(EXP)sf Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Neuberger Berman Loan Advisers CLO 55, Ltd.
Entity/Debt Rating
----------- ------
Neuberger Berman
Loan Advisers
CLO 55, Ltd.
A-1 LT AAA(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
F LT NR(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Neuberger Berman Loan Advisers CLO 55, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that will
be managed by Neuberger Berman Loan Advisers IV LLC. Net proceeds
from the issuance of the secured and subordinated notes will
provide financing on a portfolio of approximately $500 million of
primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
95.95% first-lien senior secured loans and has a weighted average
recovery assumption of 73.97%. 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 five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'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-1 and 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, 'AA+sf' for class C, 'A+sf' for
class D, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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.
NEUBERGER BERMAN 55: Moody's Assigns (P)B3 Rating to Class F Notes
------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to two classes of
notes to be issued by Neuberger Berman Loan Advisers CLO 55, Ltd.
(the "Issuer").
Moody's rating action is as follows:
US$310,000,000 Class A-1 Senior Secured Floating Rate Notes due
2036, Assigned (P)Aaa (sf)
US$100,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2038, Assigned (P)B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Neuberger Berman Loan Advisers CLO 55, Ltd. is a managed cash flow
CLO. The issued notes will be collateralized primarily by broadly
syndicated senior secured corporate loans. At least 92.5% of the
portfolio must consist of first lien senior secured loans, cash,
and eligible investments, and up to 7.5% of the portfolio may
consist of second lien loans and unsecured loans. Moody's expect
the portfolio to be approximately 80% ramped as of the closing
date.
Neuberger Berman Loan Advisers IV LLC (the "Manager") will direct
the selection, acquisition and disposition of the assets on behalf
of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer will issue five other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 3085
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
NYMT LOAN 2024-CP1: Fitch Gives 'B(EXP)sf' Rating on Cl. B-2 Notes
------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed notes
to be issued by NYMT Loan Trust 2024-CP1 (NYMT 2024-CP1) as
follows:
Entity/Debt Rating
----------- ------
NYMT Loan Trust 2024-CP1
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
M-1 LT A(EXP)sf Expected Rating
M-2 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The transaction is expected to close on March 12, 2024. The notes
are supported by one collateral group that consists of 1,670
seasoned performing loans (SPLs) and reperforming loans (RPLs) in
either a senior or junior lien position with a total balance of
approximately $334 million, including $5.9 million in deferred
balances.
Distributions of principal and interest (P&I) and loss allocations
are based on a senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicers will not be advancing delinquent monthly payments of
P&I.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.8% above a long-term sustainable level versus
11.1% on a national level as of 3Q23, up 1.82% since the prior
quarter. Housing affordability is at its worst level in decades,
driven by high interest rates and elevated home prices.
RPL Credit Quality (Negative): The collateral pool consists
primarily of peak-vintage SPLs and RPLs. As of the cut-off date,
the pool was 100% current. Approximately 87.5% of the loans were
treated as having clean payment histories for the past two years or
more (clean current) or have been clean since origination if
seasoned less than two years. Additionally, 25.5% of loans have a
prior modification. The borrowers have a moderate credit profile
(714 FICO and 41% debt-to-income ratio [DTI]) and relatively low
leverage (60% sustainable LTV ratio [sLTV]).
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. The credit enhancement consists of subordinated
notes, the distributions of which will be subordinated to P&I
payments due to senior noteholders. In addition, excess cash flow
resulting from the difference between the interest earned on the
mortgage collateral and that paid on the notes may be available to
repay current or previously allocated realized losses, and to pay
coupon cap shortfalls.
No Servicer P&I Advances (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduce liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' and 'AAsf' rated
classes.
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 42.0%, 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 multiple third party review firms. The third-party due
diligence described in Form 15E focused on a regulatory compliance
review that covered applicable federal, state and local high-cost
loan and/or anti-predatory laws, as well as the Truth In Lending
Act (TILA) and Real Estate Settlement Procedures Act (RESPA). The
scope was consistent with published Fitch criteria for due
diligence on RPL RMBS. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment(s)
to its analysis:
- Loans with an indeterminate HUD1 located in states that fall
under Freddie Mac's "Do Not Purchase List" received a 100% LS
over-ride.
- Loans with an indeterminate HUD1 but not located in states that
fall under Freddie Mac's "Do Not Purchase List" received a
five-point LS increase.
- Loans with a missing modification agreement received a
three-month liquidation timeline extension.
- Unpaid taxes and lien amounts were added to the LS.
In total, these adjustments increased the 'AAAsf' loss by
approximately 50bps.
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.
OBX TRUST 2024-HYB2: Moody's Assigns (P)B2 Rating to Cl. B-2 Notes
------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to 7 classes of
residential mortgage-backed securities (RMBS) to be issued by OBX
2024-HYB2 Trust, and sponsored by Onslow Bay Financial LLC.
The securities are backed by a pool of seasoned and newly
originated Hybrid ARM (100% by balance) residential mortgages
originated by Associated Bank, N.A. and serviced by NewRez LLC
d/b/a Shellpoint Mortgage Servicing (Shellpoint).
The complete rating actions are as follows:
Issuer: OBX 2024-HYB2 Trust
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aa2 (sf)
Cl. M-1, Assigned (P)A2 (sf)
Cl. M-2, Assigned (P)Baa2 (sf)
Cl. B-1, Assigned (P)Ba2 (sf)
Cl. B-2, Assigned (P)B2 (sf)
Cl. A-1A Loans, Assigned (P)Aaa (sf)
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
1.17%, in a baseline scenario-median is 0.70% and reaches 17.07% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
OCP CLO 2016-11: S&P Affirms BB (sf) Rating on Class E-R2 Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R2,
A-2-R2, B-1-R2, B-2-R2, C-R2, and D-R2 replacement debt and the new
class X and E-R2 debt from OCP CLO 2016-11 Ltd./OCP CLO 2016-11
LLC, a CLO managed by Onex Credit Partners LLC, a subsidiary of
Onex Corp. OCP CLO 2016-11 Ltd. was originally issued in May 2016
and reset in August 2017.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
proposed supplemental indenture:
-- The replacement class A-1-R2, A-2-R2, B-1-R2, C-R2, and D-R2
debt, and the new class X and E-R2 debt, was issued at a floating
spread; and the replacement class B-2-R2 debt was issued at a fixed
coupon, replacing the previous floating spreads.
-- The class A-1L-R, A-1a-R, and A-1b-R debt was consolidated into
a single class A-1-R2 tranche.
-- The class B-R debt was split into a class B-1-R2 floating
tranche and a class B-2-R2 fixed tranche.
-- A new class E-R2 tranche was issued at a floating spread.
-- The stated maturity was extended approximately 5.5 years.
-- The reinvestment period was extended approximately 5.0 years.
-- The new class X notes were issued in connection with this
reset. These notes are expected to be paid down using interest
proceeds during the first 10 payment dates beginning with the
payment date in October 2024.
Replacement And Original Debt Issuances
Replacement debt
-- Class X, $2.00 million: Three-month term SOFR + 1.00%
-- Class A-1-R2, $256.00 million: Three-month term SOFR + 1.42%
-- Class A-2-R2, $12.00 million: Three-month term SOFR + 1.70%
-- Class B-1-R2, $28.50 million: Three-month term SOFR + 1.95%
-- Class B-2-R2, $7.50 million: 5.905%
-- Class C-R2 (deferrable), $24.00 million: Three-month term SOFR
+ 2.35%
-- Class D-R2 (deferrable), $24.00 million: Three-month term SOFR
+ 3.70%
-- Class E-R2 (deferrable), $16.00 million: Three-month term SOFR
+ 6.82%
-- Subordinated notes, $51.60 million: Not applicable
Previous debt
-- Class A-1L-R, $145.22 million: Three-month term SOFR + 1.27% +
CSA
-- Class A-1a-R, $66.99 million: Three-month term SOFR + 1.27% +
CSA
-- Class A-1b-R, $0.00 million: Three-month term SOFR + 1.27% +
CSA
-- Class A-2-R, $75.50 million: Three-month term SOFR + 1.75% +
CSA
-- Class B-R (deferrable), $32.00 million: Three-month term SOFR +
2.45% + CSA
-- Class C-R (deferrable), $30.00 million: Three-month term SOFR +
3.65% + CSA
-- Class D-R (deferrable), $17.30 million Three-month term SOFR +
6.50% + CSA
-- Subordinated notes, $45.10 million: Not applicable
CSA--Credit spread adjustment of 26.161 basis points.
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
OCP CLO 2016-11 Ltd./OCP CLO 2016-11 LLC
Class X, $2.00 million: AAA (sf)
Class A-1-R2, $256.00 million: AAA (sf)
Class A-2-R2, $12.00 million: AAA (sf)
Class B-1-R2, $28.50 million: AA+ (sf)
Class B-2-R2, $7.50 million: AA+ (sf)
Class C-R2 (deferrable), $24.00 million: A+ (sf)
Class D-R2 (deferrable), $24.00 million: BBB+ (sf)
Class E-R2 (deferrable), $16.00 million: BB (sf)
Ratings Withdrawn
OCP CLO 2016-11 Ltd./OCP CLO 2016-11 LLC
Class A-1L-R to NR from 'AAA (sf)'
Class A-1a-R to NR from 'AAA (sf)'
Class A-1b-R to NR from 'AAA (sf)'
Class A-2-R to NR from 'AA (sf)'
Class B-R (deferrable) to NR from 'A (sf)'
Class C-R (deferrable) to NR from 'BBB (sf)'
Class D-R (deferrable) to NR from 'BB- (sf)'
Other Outstanding Debt
OCP CLO 2016-11 Ltd./OCP CLO 2016-11 LLC
Subordinated notes, $51.60 million: NR
NR--Not rated.
OCTAGON INVESTMENT 31: Moody's Cuts Rating on $11MM F Notes to Caa1
-------------------------------------------------------------------
Moody's Ratings has assigned ratings to four classes of CLO
refinancing notes (the "Refinancing Notes") issued by Octagon
Investment Partners 31, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$261,348,613 Class A-RR Senior Secured Floating Rate Notes due
2030 (the "Class A-RR Notes"), Assigned Aaa (sf)
US$44,550,000 Class B-1-RR Senior Secured Floating Rate Notes due
2030 (the "Class B-1-RR Notes"), Assigned Aaa (sf)
US$38,500,000 Class C-RR Secured Deferrable Fixed Rate Notes due
2030 (the "Class C-RR Notes"), Assigned Aa2 (sf)
US$31,350,000 Class D-RR Secured Deferrable Floating Rate Notes due
2030 (the "Class D-RR Notes"), Assigned Baa2 (sf)
Additionally, Moody's has taken rating action on the following
outstanding notes originally issued by the Issuer on June 29, 2017
(the "Original Closing Date"):
US$11,000,000 Class F Secured Deferrable Floating Rate Notes due
2030 (the "Class F Notes"), Downgraded to Caa1 (sf); previously on
October 5, 2020 Confirmed at B3 (sf)
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Octagon Credit Investors, LLC (the "Manager") will continue to
direct the acquisition and disposition of assets on behalf of the
Issuer.
The Issuer previously issued three other classes of secured notes
and one class of subordinated notes, which will remain
outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing, including extension of the non-call period for the
Refinancing Notes, and updates to the definition of "Benchmark" to
adopt Term SOFR rate as the initial benchmark interest rate for the
Refinancing Notes.
The downgrade rating action on the Class F notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the trustee's February 2024 report[1], the OC ratio for the Class F
notes is reported at 103.94%, versus February 2021[2] level of
104.78%. In addition, the weighted average rating factor (WARF) has
been deteriorating by over 140 points since June 2023, and the
current trustee-reported[3] level is 2808, compared to 2661 in June
2023[4], failing the trigger of 2704.
No actions were taken on the Class B-2R and Class E notes because
their expected losses remain commensurate with their current
ratings, after taking into account the CLO's latest portfolio
information, its relevant structural features and its actual
over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $439,872,992
Defaulted par: $899,679
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2823
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.61%
Weighted Average Coupon (WAC): 7.87%
Weighted Average Recovery Rate (WARR): 46.72%
Weighted Average Life (WAL): 3.6 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
PALMER SQUARE 2018-1: Fitch Assigns 'BBsf' Rating on Cl. D-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Palmer
Square CLO 2018-1, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Palmer Square
CLO 2018-1 Ltd.
A-1 69703PAA7 LT PIFsf Paid In Full AAAsf
X LT NRsf New Rating
A-1-R LT AAAsf New Rating
A-2-R LT AAsf New Rating
B-R LT Asf New Rating
C-R LT BBB-sf New Rating
D-R LT BBsf New Rating
E-R LT NRsf New Rating
TRANSACTION SUMMARY
Palmer Square CLO 2018-1, Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) managed by Palmer Square
Capital Management LLC that originally closed in March 2018. The
CLO's secured notes will be refinanced in whole on March 5, 2024
(the first refinancing date) from proceeds of new secured notes.
The secured and subordinated notes will provide financing on a
portfolio of approximately $475 million of primarily first-lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
95.19% first-lien senior secured loans and has a weighted average
recovery assumption of 75.84%. 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 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 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-1-R, between
'BB+sf' and 'A+sf' for class A-2-R, between 'Bsf' and 'BBB+sf' for
class B-R, between less than 'B-sf' and 'BB+sf' for class C-R; and
between less than 'B-sf' and 'B+sf' for class D-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class A-2-R, 'AA+sf' for class B-R,
'A-sf' for class C-R, and 'BBB+sf' for class D-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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.
PALMER SQUARE 2022-3: Moody's Gives Ba2 Rating to $40MM D-R Notes
-----------------------------------------------------------------
Moody's Ratings has assigned ratings to six classes of CLO
refinancing notes (the "Refinancing Notes") issued by Palmer Square
Loan Funding 2022-3, Ltd. (the "Issuer").
Moody's rating actions are as follows:
US$483,500,314 Class A-1a-R Senior Secured Floating Rate Notes due
2031, Assigned Aaa (sf)
US$140,000,000 Class A-1b-R Senior Secured Floating Rate Notes due
2031, Assigned Aaa (sf)
US$40,000,000 Class A-2-R Senior Secured Floating Rate Notes due
2031, Assigned Aaa (sf)
US$45,000,000 Class B-R Senior Secured Deferrable Floating Rate
Notes due 2031, Assigned Aa3 (sf)
US$45,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2031, Assigned Baa2 (sf)
US$40,000,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2031, Assigned Ba2 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Palmer Square Capital Management LLC (the "Manager") will continue
to direct the acquisition and disposition of assets on behalf of
the Issuer.
The Issuer previously issued one class of subordinated notes, which
will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing, including extension of the Refinancing Notes'
non-call period.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $863,138,853
Defaulted par: $497,605
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2500
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.32%
Weighted Average Recovery Rate (WARR): 47.68%
Weighted Average Life (WAL): 4.18 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
POST CLO 2024-1: Fitch Assigns 'BB-(EXP)' Rating on Class E Notes
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Post CLO 2024-1 Ltd.
Entity/Debt Rating
----------- ------
Post CLO 2024-1 Ltd.
A-1 LT NR(EXP)sf Expected Rating
A-1 Loans LT NR(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Post CLO 2024-1 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Post
Advisory Group, 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 22.72, 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
96.84% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.06% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.9%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 43.5% 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 5.1-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 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 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, 'AAsf' for class C, 'Asf' for
class D; and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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.
PRET TRUST 2024-RPL1: Fitch Assigns B(EXP) Rating on Cl. B-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to the residential
mortgage-backed notes to be issued by PRET 2024-RPL1 Trust (PRET
2024-RPL1).
Entity/Debt Rating
----------- ------
PRET 2024-RPL1
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT AA(EXP)sf Expected Rating
A-4 LT A(EXP)sf Expected Rating
A-5 LT BBB(EXP)sf Expected Rating
M-1 LT A(EXP)sf Expected Rating
M-2 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
B LT NR(EXP)sf Expected Rating
PT LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The PRET 2024-RPL1 notes are supported by 1,851 seasoned performing
and reperforming loans that have a balance of $383.48 million as of
the Jan. 31, 2024 cutoff date.
The notes are secured by a pool of fixed, step-rate 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 30 years. The loans are secured by first liens
primarily on single-family residential properties, townhouses
condominiums, co-ops, manufactured housing, multi-family homes,
mobile homes and raw land.
In the pool, 100% of the loans are seasoned performing and
re-performing loans.
According to Fitch, 18.2% of the loans are nonqualified mortgages
(non-QM, or NQM) as defined by the ability to repay (ATR) rule (the
Rule), and the remaining 81.8% are exempt from the QM rule as they
are investment properties or were originated prior to the ATR rule
taking effect in January 2014.
Selene Finance LP (Selene) will service 100.0% of the loans in the
pool; Fitch rates Selene 'RPS3+'.
There is London Interbank Offered Rate (LIBOR) exposure in this
transaction. The majority of the loans in the collateral pool
comprise fixed-rate mortgages, though 11.7% of the pool comprises
STEP loans or loans with an adjustable rate. Of the pool, 8.3%
consists of ARM loans that reference the one-month, three-month,
six-month and one-year LIBOR index.
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 11.5% above a long-term sustainable level (vs.
11.1% on a national level as of 3Q23, up 1.68% 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 5.5% YoY nationally as of December 2023 despite modest
regional declines, but are still being supported by limited
inventory.
Seasoned and Reperforming Credit Quality (Mixed): The collateral
consists of 1,851 loans, totaling $383.48 million which includes
deferred amounts. The loans are seasoned approximately 179 months
in aggregate according to Fitch, as calculated from origination
date (176 months per the transaction documents). Specifically, the
pool comprises 88.3% fully amortizing fixed-rate loans, 9.2% fully
amortizing ARM loans, and 2.6% STEP loans that were treated as ARM
loans.
The borrowers have a moderate credit profile, with a 665 Fitch
model FICO score (667 FICO per the transaction documents) and 45%
debt to income (DTI) ratios, as determined by Fitch after applying
default values for missing data. The transaction has a weighted
average (WA) sustainable loan to value (sLTV) ratio of 61.4%. The
pool consists of 94.6% of loans where the borrower maintains a
primary residence, while 5.4% is an investor property or second
home. According to Fitch, 18.2% of the loans are designated as
non-QM loans and 0.0% are safe-harbor QM loans, while the remaining
81.8% are exempt from QM status. In its analysis, Fitch considered
loans originated after January 2014 to be non-QM since they are no
longer eligible to be in GSE pools.
In Fitch's analysis 81.3% of the loans are to single-family homes
and planned unit developments (PUDs), 9.5% are to condos or coops,
8.6% are to manufactured housing or multifamily homes, and the
remaining 0.5% are to land or mobile homes. In the analysis, Fitch
treated manufactured properties as multifamily and the probability
of default (PD) was increased for these loans as a result.
The pool contains 27 loans over $1.0 million, with the largest loan
at $3.59 million. Fitch considered 0.2% loans have subordinate
financing. Fitch viewed all the loans in the pool to be in the
first lien position based on data provided in the tape and
confirmation from the servicer on the lien position.
97.6% of the pool is current as of Jan. 31, 2024. Overall, the pool
characteristics resemble reperforming (RPL) collateral; therefore,
the pool was analyzed using Fitch's RPL model and Fitch extended
liquidation timelines as it typically does for RPL pools.
Geographic Concentration (Negative): Approximately 20.5% of the
pool is concentrated in New York. The largest metropolitan
statistical area (MSA) concentration is in the New York MSA at
23.9%, followed by the Los Angeles MSA at 8.5% and the Chicago MSA
at 4.5%. The top three MSAs account for 36.9% of the pool. As a
result, there was a 1.02x penalty applied for geographic
concentration which increased the 'AAAsf' loss by 24bps.
Sequential Deal Structure (Positive): The transaction utilizes a
sequential payment structure with no advancing of delinquent
principal and interest payments. The transaction is structured with
subordination to protect more senior classes from losses and has a
minimal amount of excess interest which can be used to repay
current or previously allocated realized losses and cap carryover
shortfall amounts.
The interest and principal waterfall prioritize the payment of
interest to the A-1 and A-2 classes. Which is supportive of the A-1
receiving timely interest and the A-2 receiving ultimate if not
timely interest. Fitch rates to timely interest for 'AAAsf' rated
classes and to ultimate interest for 'AAsf' to 'Bsf' category rated
classes.
The A-1 notes have a coupon based on a fixed rate that is capped at
the net weighted average coupon (WAC) and the A-2, M and B notes
have a coupon based on the net WAC. All expenses are coming out of
the net WAC.
Losses are allocated to classes reverse sequentially starting with
the B-5 class. Classes will be written down if the transaction is
under-collateralized.
No Advancing (Mixed): The servicer will not be advancing delinquent
monthly payments of principal and interest (P&I). Because P&I
advances made on behalf of loans that become delinquent and
eventually liquidate reduce liquidation proceeds to the trust, the
loan-level loss severities (LS) are less for this transaction than
for those where the servicer is obligated to advance P&I.
To provide liquidity and ensure timely interest will be paid to the
'AAA' and 'AA' rated classes and ultimate interest on the remaining
rated classes, principal will need to be used to pay for interest
accrued on delinquent loans. This will result in stress on the
structure and the need for additional credit enhancement (CE)
compared with a pool with limited advancing. These structural
provisions and cash flow priorities, together with increased
subordination, provide for timely payments of interest to the
'AAAsf' and 'AAsf' rated classes.
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 42.5%, 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 Opus, ProTitle, Service Link, Recovco, Selene and AMC.
The third-party due diligence described in Form 15E focused on the
following areas: compliance review, data integrity, servicing
review and title review. The scope of the review was consistent
with Fitch's criteria. 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.
A large portion of the loans received 'C' and 'D' grades mainly due
to missing documentation that resulted in the ability to test for
certain compliance issues. As a result, Fitch applied negative loan
level adjustments, which increased the 'AAAsf' losses by 2.50% and
are further detailed in the Third-Party Due Diligence section of
the presale.
Fitch determined there were 35 loans with material TRID issues; a
$15,500 loss severity penalty was given to loans with material TRID
issues, though this did not have any impact on the rounded losses.
A ProTitle search found outstanding liens that pre-date the
mortgage. It was confirmed the majority of these liens are retired
and nothing is owed. There are 37 loans that have delinquent taxes
owed in the amount of $78,853 that were identified in the due
diligence that if not advanced on could supersede the lien status
of the mortgage in the pool. Additionally, there were superior
HOA/COA and municipal judgments/liens found that are active in the
amount of $344,807. The trust will be responsible for these
amounts. As a result, Fitch increased the loss severity by this
amount since the trust would be responsible for reimbursing the
servicer this amount. This did not have any impact on the rounded
losses.
Fitch received confirmation from the servicer on the current lien
status of the loans in the pool. The servicer regularly orders
these searches as part of its normal business practice and resolves
issues as they arise. No additional adjustment was made as a
result. The title report did show loans in the pool to not be in a
first lien position, but the servicer confirmed that they are in a
first lien status and that they will follow standard servicing
practices to maintain the lien position disclosed in the tape. As a
result of the valid title policy and the servicer monitoring the
lien status, Fitch treated 100% of the pool as first liens.
The custodian is actively tracking down missing documents. In the
event a missing document materially delays or prevents a
foreclosure, the sponsor will have 90 days to find the document or
cure the issue. If the loan seller cannot cure the issue or find
the missing documents, they will repurchase the loan at the
repurchase price. Due to this, Fitch only extended timelines for
missing documents.
A pay history review was conducted on a sample set of loans by AMC.
The review confirmed the pay strings are accurate, and the servicer
confirmed the payment history was accurate for all the loans. As a
result, 100% of the pool's payment history was confirmed.
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
engaged Opus, ProTitle, Service Link, Recovco, Selene and AMC to
perform the review. Loans reviewed under this engagement were given
initial and final compliance grades. A portion of the loans in the
pool received a credit or valuation review.
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 the exceptions and waivers do
materially affect the overall credit risk of the loans; refer to
the Third-Party Due Diligence section of the presale report for
more details.
Fitch also received confirmation from the servicer that the lien
status and payment history provided in the tape is accurate per its
records. Fitch took this information into consideration in its
analysis.
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 was populated by the due
diligence company, and no material discrepancies were noted.
ESG CONSIDERATIONS
PRET 2024-RPL1 has an ESG Relevance Score of '4' for Transaction
Parties and Operational Risk due to elevated operational risk,
which resulted in an increase in expected losses. The Tier 2
representations and warranties (R&W) framework with an unrated
counterparty resulted in an increase in expected losses. This has a
negative impact on the credit profile and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
PROVIDENT FUNDING 2021-INV2: Moody's Ups Rating on B-5 Certs to B2
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 14 bonds from three US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo and agency eligible mortgage loans.
The complete rating actions are as follows:
Issuer: Provident Funding Mortgage Trust 2019-1
Cl. B-4, Upgraded to Aaa (sf); previously on May 30, 2023 Upgraded
to Aa3 (sf)
Cl. B-5, Upgraded to Aa3 (sf); previously on May 30, 2023 Upgraded
to Baa2 (sf)
Issuer: Provident Funding Mortgage Trust 2020-1
Cl. B-3, Upgraded to Aa1 (sf); previously on Sep 9, 2022 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to Aa3 (sf); previously on Sep 9, 2022 Upgraded
to A3 (sf)
Cl. B-5, Upgraded to Baa1 (sf); previously on Sep 9, 2022 Upgraded
to Ba1 (sf)
Issuer: Provident Funding Mortgage Trust 2021-INV2
Cl. 1-A-14, Upgraded to Aaa (sf); previously on Dec 9, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. 1-A-15, Upgraded to Aaa (sf); previously on Dec 9, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. 1-A-X-1*, Upgraded to Aaa (sf); previously on Dec 9, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. 1-A-X-15*, Upgraded to Aaa (sf); previously on Dec 9, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Dec 9, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Dec 9, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Dec 9, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Dec 9, 2021 Definitive
Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to B2 (sf); previously on Dec 9, 2021 Definitive
Rating Assigned B3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool.
In Moody's analysis Moody's considered the additional risk of
default on modified loans. Generally, Moody's apply a 7x multiple
to the Probability of Default (PD) for private label modified
mortgage loans and an 8x multiple to the PD for agency-eligible
modified mortgage loans. However, Moody's may apply a lower
multiple to the PD for loans that were granted short-term payment
relief as long as there were no other changes to the loan terms,
such as a reduced interest rate or an extended loan term, which can
be used to lower the monthly payment on the loan. For loans granted
short-term payment relief, servicers will generally defer the
missed payments, which could be added as a non-interest-bearing
balloon payment due at the end of the loan term. Alternatively,
servicers could extend the maturity on the loan to match the number
of missed payments.
Moody's updated loss expectations on the pools incorporate, amongst
other factors, Moody's assessment of the representations and
warranties frameworks of the transactions, the due diligence
findings of the third-party reviews received at the time of
issuance, and the strength of the transaction's originators and
servicer.
No actions were taken on the remaining rated classes in these deals
as those classes are already at the highest achievable levels
within Moody's rating scale.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings 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.
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 and/or pools.
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.
RAD CLO 23: Fitch Assigns 'BB-sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to RAD CLO
23 Ltd.
Entity/Debt Rating Prior
----------- ------ -----
RAD CLO 23
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-2 LT AAsf New Rating AA(EXP)sf
C-1 LT Asf New Rating A(EXP)sf
C-2 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
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
RAD CLO 23, 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', which is in line with that of recent
CLOs. The indicative portfolio's weighted average rating factor
(WARF) is 24.03, 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
91.5% first-lien senior secured loans. The indicative portfolio's
weighted average recovery rate (WARR) is 74.27%, versus a minimum
covenant, in accordance with the initial expected matrix point of
72.2%.
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 5.1-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-1, between
'BBB+sf' 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-1, between less than 'B-sf' and
'BB+sf' for class D-2; and between less than 'B-sf' and 'B+sf' for
class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1 and 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, 'AAsf' for class C, 'A+sf' for
class D-1, 'Asf' for class D-2; and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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 2021-1: Moody's Ups Rating on Cl. B-4 Certs to Ba2
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 61 bonds from six US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo and agency eligible mortgage loans.
The complete rating actions are as follows:
Issuer: RCKT Mortgage Trust 2019-1
Cl. B-3, Upgraded to Aaa (sf); previously on May 30, 2023 Upgraded
to Aa1 (sf)
Cl. B-4, Upgraded to Aa1 (sf); previously on May 30, 2023 Upgraded
to A3 (sf)
Cl. B-5, Upgraded to Baa1 (sf); previously on May 30, 2023 Upgraded
to Ba3 (sf)
Issuer: RCKT Mortgage Trust 2020-1
Cl. B-3, Upgraded to Aaa (sf); previously on May 30, 2023 Upgraded
to Aa3 (sf)
Cl. B-4, Upgraded to Aa2 (sf); previously on May 30, 2023 Upgraded
to A3 (sf)
Cl. B-5, Upgraded to Baa3 (sf); previously on May 30, 2023 Upgraded
to B1 (sf)
Issuer: RCKT Mortgage Trust 2021-1
Cl. A-13, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-14, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-16, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-10*, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1A*, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1B*, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-8*, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-9*, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Mar 18, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2A, Upgraded to A1 (sf); previously on Mar 18, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Mar 18, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba2 (sf); previously on Mar 18, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-X-1*, Upgraded to Aaa (sf); previously on Mar 18, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to A1 (sf); previously on Mar 18, 2021
Definitive Rating Assigned A3 (sf)
Issuer: RCKT Mortgage Trust 2021-2
Cl. B-1, Upgraded to Aa1 (sf); previously on Jun 25, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa1 (sf); previously on Jun 25, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Jun 25, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2A, Upgraded to A2 (sf); previously on Jun 25, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Jun 25, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-X-1*, Upgraded to Aa1 (sf); previously on Jun 25, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to A2 (sf); previously on Jun 25, 2021
Definitive Rating Assigned A3 (sf)
Issuer: RCKT Mortgage Trust 2021-3
Cl. A-24, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-25, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-26, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-28, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-12*, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-13*, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jul 29, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to A1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Jul 29, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Ba2 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B2 (sf); previously on Jul 29, 2021 Definitive
Rating Assigned B3 (sf)
Cl. B-X-1*, Upgraded to Aa1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to A1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned A2 (sf)
Issuer: RCKT Mortgage Trust 2021-5
Cl. A-24, Upgraded to Aaa (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-25, Upgraded to Aaa (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-26, Upgraded to Aaa (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-28, Upgraded to Aaa (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-12*, Upgraded to Aaa (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-13*, Upgraded to Aaa (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa1 (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Nov 16, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2A, Upgraded to A2 (sf); previously on Nov 16, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Nov 16, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-X-1*, Upgraded to Aa1 (sf); previously on Nov 16, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to A2 (sf); previously on Nov 16, 2021
Definitive Rating Assigned A3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool.
In Moody's analysis Moody's considered the additional risk of
default on modified loans. Generally, Moody's apply a 7x multiple
to the Probability of Default (PD) for private label modified
mortgage loans and an 8x multiple to the PD for agency-eligible
modified mortgage loans. However, Moody's may apply a lower
multiple to the PD for loans that were granted short-term payment
relief as long as there were no other changes to the loan terms,
such as a reduced interest rate or an extended loan term, which can
be used to lower the monthly payment on the loan. For loans granted
short-term payment relief, servicers will generally defer the
missed payments, which could be added as a non-interest-bearing
balloon payment due at the end of the loan term. Alternatively,
servicers could extend the maturity on the loan to match the number
of missed payments.
These transactions feature a structural deal mechanism that the
servicer and paying agent will not advance principal and interest
to loans that are 120 days or more delinquent. The interest
distribution amount will be reduced by the interest accrued on the
stop advance mortgage loans (SAML) and this interest reduction will
be allocated reverse sequentially first to the subordinate bonds,
then to the senior support bond, and then pro-rata among senior
bonds. Once a SAML is liquidated, the net recovery from that loan's
liquidation is included in available funds and thus follows the
transaction's priority of payment. The recovered accrued interest
on the loan is used to repay the interest reduction incurred by the
bonds that resulted from that SAML. The delinquency levels in some
of these transactions have increased the risk of interest
shortfalls due to stop advancing.
Moody's updated loss expectations on the pools incorporate, amongst
other factors, Moody's assessment of the representations and
warranties frameworks of the transactions, the due diligence
findings of the third-party reviews received at the time of
issuance, and the strength of the transaction's originators and
servicer.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. These include structural features
impacting bond paydown speed and potential risk of missed
interest.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings 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.
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 and/or pools.
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.
REGATTA XXVII: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Regatta XXVII Funding Ltd.
Entity/Debt Rating
----------- ------
Regatta XXVII
Funding Ltd.
A-1 LT NR(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Regatta XXVII Funding Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Napier
Park Global Capital (US) 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 25.05, 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
98.88% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.76% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.4%.
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 11.5% 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 5.1-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 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, 'AAsf' for class C, 'Asf' for
class D, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
RR 25 LTD: Fitch Assigns 'BB+(EXP)sf' Rating on Class D-R Notes
---------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
RR 25 LTD reset transaction.
Entity/Debt Rating
----------- ------
RR 25 LTD
A-1-R LT NR(EXP)sf Expected Rating
A-2-R LT AA(EXP)sf Expected Rating
B-R LT A(EXP)sf Expected Rating
C-1-R LT BBB+(EXP)sf Expected Rating
C-2-R LT BBB-(EXP)sf Expected Rating
D-R LT BB+(EXP)sf Expected Rating
E-R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
RR 25 LTD (the issuer) is an arbitrage cash flow collateralized
loan obligation (CLO) that will be managed by Redding Ridge Asset
Management LLC which originally closed on March 8, 2023. The
secured notes will be refinanced in whole on March 8, 2024 from
proceeds of the new secured notes. Net proceeds from the issuance
of 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'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.89% first-lien senior secured loans and has a weighted average
recovery assumption of 74.93%. 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 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 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 A-2-R, between
'B+sf' and 'BBB+sf' for class B-R, between less than 'B-sf' and
'BBB-sf' for class C-1-R, between less than 'B-sf' and 'BB+sf' for
class C-2-R, and between less than 'B-sf' and 'B+sf' for class
D-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class A-2-R, 'AAsf' for class B-R, 'A+sf'
for class C-1-R, 'Asf' for class C-2-R, and 'BBB+sf' for class
D-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
RR 25 LTD: Moody's Assigns B3 Rating to $800,000 Class E-R Notes
----------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the "Refinancing Notes") issued by RR 25 LTD
(the "Issuer").
Moody's rating action is as follows:
US$352,000,000 Class A-1-R Senior Secured Floating Rate Notes Due
2037, Definitive Rating Assigned Aaa (sf)
US$800,000 Class E-R Secured Deferrable Floating Rate Notes Due
2037, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
92.5% of the portfolio must consist of first lien senior secured
loans and eligible investments, and up to 7.5% of the portfolio may
consist of second lien loans, unsecured loans and permitted
non-loan assets.
Redding Ridge Asset Management LLC (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes and additional
subordinated notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test levels
and changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $550,000,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 3056
Weighted Average Spread (WAS): 3.35%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 47%
Weighted Average Life (WAL): 8.1 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
SEQUOIA MORTGAGE 2024-3: Fitch Gives 'BB(EXP)sf' Rating on B4 Certs
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates to be issued by Sequoia Mortgage Trust 2024-3 (SEMT
2024-3) as follows:
Entity/Debt Rating
----------- ------
SEMT 2024-3
A1 LT AAA(EXP)sf Expected Rating
A2 LT AAA(EXP)sf Expected Rating
A3 LT AAA(EXP)sf Expected Rating
A4 LT AAA(EXP)sf Expected Rating
A5 LT AAA(EXP)sf Expected Rating
A6 LT AAA(EXP)sf Expected Rating
A7 LT AAA(EXP)sf Expected Rating
A8 LT AAA(EXP)sf Expected Rating
A9 LT AAA(EXP)sf Expected Rating
SEMT 2024-3
A1 LT AAA(EXP)sf Expected Rating
A2 LT AAA(EXP)sf Expected Rating
A3 LT AAA(EXP)sf Expected Rating
A4 LT AAA(EXP)sf Expected Rating
A5 LT AAA(EXP)sf Expected Rating
A6 LT AAA(EXP)sf Expected Rating
A7 LT AAA(EXP)sf Expected Rating
A8 LT AAA(EXP)sf Expected Rating
A9 LT AAA(EXP)sf Expected Rating
A20 LT AAA(EXP)sf Expected Rating
A21 LT AAA(EXP)sf Expected Rating
A22 LT AAA(EXP)sf Expected Rating
A23 LT AAA(EXP)sf Expected Rating
A24 LT AAA(EXP)sf Expected Rating
A25 LT AAA(EXP)sf Expected Rating
AIO1 LT AAA(EXP)sf Expected Rating
AIO2 LT AAA(EXP)sf Expected Rating
AIO3 LT AAA(EXP)sf Expected Rating
AIO4 LT AAA(EXP)sf Expected Rating
AIO5 LT AAA(EXP)sf Expected Rating
AIO6 LT AAA(EXP)sf Expected Rating
AIO7 LT AAA(EXP)sf Expected Rating
AIO8 LT AAA(EXP)sf Expected Rating
AIO9 LT AAA(EXP)sf Expected Rating
AIO10 LT AAA(EXP)sf Expected Rating
AIO11 LT AAA(EXP)sf Expected Rating
AIO12 LT AAA(EXP)sf Expected Rating
AIO13 LT AAA(EXP)sf Expected Rating
AIO14 LT AAA(EXP)sf Expected Rating
AIO15 LT AAA(EXP)sf Expected Rating
AIO16 LT AAA(EXP)sf Expected Rating
AIO17 LT AAA(EXP)sf Expected Rating
AIO18 LT AAA(EXP)sf Expected Rating
AIO19 LT AAA(EXP)sf Expected Rating
AIO20 LT AAA(EXP)sf Expected Rating
AIO21 LT AAA(EXP)sf Expected Rating
AIO22 LT AAA(EXP)sf Expected Rating
AIO23 LT AAA(EXP)sf Expected Rating
AIO24 LT AAA(EXP)sf Expected Rating
AIO25 LT AAA(EXP)sf Expected Rating
AIO26 LT AAA(EXP)sf Expected Rating
B1 LT AA-(EXP)sf Expected Rating
B2 LT A-(EXP)sf Expected Rating
B3 LT BBB-(EXP)sf Expected Rating
B4 LT BB(EXP)sf Expected Rating
B5 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 360 loans with a total balance of
approximately $389.8 million as of the statistical information of
the cut-off 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
360 loans totaling approximately $389.8 million and seasoned at
approximately eight months in aggregate, as determined by Fitch.
The borrowers have a strong credit profile, with a weighted-average
Fitch model FICO score of 774 and 34.2% debt-to-income (DTI) ratio,
and moderate leverage, with a 78.6% sustainable loan-to-value
(sLTV) ratio and 70.1% mark-to-market combined loan-to-value (cLTV)
ratio.
Overall, the pool consists of 88.2% in loans where the borrower
maintains a primary residence, while 11.8% are of a second home;
67.0% of the loans were originated through a retail channel.
Additionally, 100.0% of the loans are designated as qualified
mortgage (QM) loans.
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 10.4% above a long-term sustainable level (versus
11.1% on a national level as of 3Q23, which was up 1.7% since the
prior quarter). Home prices increased 5.5% yoy nationally as of
December 2023, despite modest 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 transaction. 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 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%, 20% and 30%, in addition to the
model-projected 41.8% at 'AAAsf'. The analysis indicates there is
some potential rating migration with higher MVDs compared to 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 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.
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 and Consolidated Analytics. 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 to its analysis: a 5% reduction in its loss
analysis. This adjustment resulted in a 16bps reduction to the
'AAA' expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 95.6% of the pool. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." Clayton, AMC, and Consolidated Analytics were
engaged to perform the review. Loans reviewed under this engagement
were given credit, compliance and valuation grades and assigned
initial grades for each subcategory. Minimal exceptions and waivers
were noted in the due diligence reports. Refer to the Third-Party
Due Diligence section of the presale report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
SEMT 2024-3 has an ESG Relevance Score of '4'[+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in SEMT 2024-3 and includes strong R&W and transaction due
diligence as well as a strong aggregator, which resulted in a
reduction in the expected losses. This 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.
SIERRA TIMESHARE 2024-1: Fitch Assigns BB-(EXP)sf Rating on D Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
notes issued by Sierra Timeshare 2024-1 Receivables Funding LLC
(2024-1).
The notes are backed by a pool of fixed-rate timeshare loans
originated by Wyndham Vacation Resorts, Inc. (WVRI) and Wyndham
Resort Development Corporation (WRDC). Both entities are indirect,
wholly owned operating subsidiaries of Travel + Leisure Co. (T+L,
formerly Wyndham Destinations, Inc.) This is T+L's 48th public
Sierra transaction.
Entity/Debt Rating
----------- ------
Sierra Timeshare
2024-1 Receivables
Funding LLC
A LT AAA(EXP)sf Expected Rating
B LT A(EXP)sf Expected Rating
C LT BBB(EXP)sf Expected Rating
D LT BB-(EXP)sf Expected Rating
KEY RATING DRIVERS
Borrower Risk — Consistent Credit Quality: Approximately 67.5% of
Sierra 2024-1 consists of WVRI-originated loans. The remainder of
the pool comprises WRDC loans. Fitch has determined that, on a
like-for-like FICO basis, WRDC's receivables perform better than
WVRI's. The weighted average (WA) original FICO score of the pool
is 738, slightly higher than 737 in Sierra 2023-3 and the highest
for the platform to date. Additionally, compared with the prior
transaction, the 2024-1 pool has slightly stronger FICO
distribution.
Forward-Looking Approach on CGD Proxy — Increasing CGDs: Similar
to other timeshare originators, T+L's delinquency and default
performance exhibited notable increases in the 2007-2008 vintages
and stabilized in 2009 and thereafter. However, more recent
vintages, from 2014 through 2019, have begun to show increasing
gross defaults, surpassing levels experienced in 2008, partially
driven by increased paid product exits (PPEs).
The 2020-2022 transactions are generally demonstrating improving
default trends relative to prior transactions. Fitch's cumulative
gross default (CGD) proxy for the pool is 22.00%, consistent with
2023-3. Given the current economic environment, Fitch used proxy
vintages reflecting a recessionary period, along with more recent
vintage performance, specifically of 2007-2009 and 2016-2019
vintages.
Structural Analysis — Lower CE: The initial hard credit
enhancement (CE) for class A, B, C and D notes is 63.50%, 39.00%,
16.00% and 7.25%, respectively. CE is lower for classes A, B, C and
D relative to 2023-3, mainly due to lower overcollateralization
(OC) compared with the prior transaction. Hard CE comprises OC, a
reserve account and subordination. Soft CE is also provided by
excess spread and is expected to be 7.80% per annum. Loss coverage
for all notes is able to support default multiples of 3.25x, 2.25x,
1.50x and 1.17x for 'AAAsf', 'Asf', 'BBBsf' and 'BB-sf',
respectively.
Originator/Seller/Servicer Operational Review — Quality of
Origination/Servicing: T+L has demonstrated sufficient capabilities
as an originator and servicer of timeshare loans. This is shown by
the historical delinquency and loss performance of securitized
trusts and the managed portfolio.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CGD levels higher than the base case and would likely result in
declines of CE and remaining default coverage levels available to
the notes. Additionally, unanticipated increases in prepayment
activity could also result in a decline in coverage. Decreased
default coverage may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
Therefore, Fitch conducts sensitivity analyses by stressing both a
transaction's initial base case CGD and prepayment assumptions and
examining the rating implications on all classes of issued notes.
The CGD sensitivity stresses the CGD proxy to the level necessary
to reduce each rating by one full category, to non-investment grade
(BBsf) and to 'CCCsf' based on the break-even loss coverage
provided by the CE structure.
The CGD and prepayment sensitivities include 1.5x and 2.0x
increases to the prepayment assumptions, representing moderate and
severe stresses, respectively. These analyses are intended to
provide an indication of the rating sensitivity of the notes to
unexpected deterioration of a trust's performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. If CGD is 20% less than the projected
proxy, the expected ratings would be maintained for the class A
note at a stronger rating multiple. For class B, C and D notes, the
multiples would increase, resulting in potential upgrade of
approximately one rating category for each of the subordinate
classes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte & Touche LLP. The third party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to 155 sample loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SLM STUDENT 2004-10: Fitch Lowers Rating on B Notes to 'BBsf'
-------------------------------------------------------------
Fitch Ratings has affirmed the ratings on all outstanding classes
of SLM Student Loan Trust 2004-8 and 2005-3 and affirmed classes
A-7A and A-7B notes of SLM 2004-10. Fitch has downgraded the
classes A-8 and B notes of SLM 2004-10. Fitch has also revised the
Rating Outlooks on all outstanding notes of SLM 2004-8 and 2005-3
to Negative from Stable. The Outlooks for the class A-8 and B notes
of SLM 2004-10 are Negative following the downgrades.
Entity/Debt Rating Prior
----------- ------ -----
SLM Student Loan
Trust 2004-10
A-7A 78442GNJ1 LT AA+sf Affirmed AA+sf
A-7B 78442GNK8 LT AA+sf Affirmed AA+sf
A-8 78442GNL6 LT Asf Downgrade AAsf
B 78442GND4 LT BBsf Downgrade BBBsf
SLM Student Loan
Trust 2004-8
A-6 78442GMT0 LT AA+sf Affirmed AA+sf
B 78442GMR4 LT Asf Affirmed Asf
SLM Student Loan
Trust 2005-3
A-6 78442GPC4 LT AA+sf Affirmed AA+sf
B-1 78442GPD2 LT Asf Affirmed Asf
TRANSACTION SUMMARY
SLM 2004-8 and 2005-3: The class A and B notes pass credit and
maturity stresses in cashflow modeling for their respective ratings
with sufficient hard credit enhancement (CE) and performance was
stable for these two transactions compared to Fitch's sustainable
assumptions outlined below. Fitch has affirmed the class A notes at
'AA+sf' and the class B notes at 'Asf'.
The revision of the Outlooks to Negative from Stable for all
outstanding notes of SLM 2004-8 and 2005-3 is reflective of the
possibility of future negative rating pressure in the next one to
two years if remaining term continues to increase or declines at a
similar slow pace observed in 2023.
SLM 2004-10: The class A-7A and A-7B notes pass all credit and
maturity stresses in cashflow modeling with sufficient hard CE.
Fitch has affirmed the class A notes at 'AA+sf' and the Outlooks
remain at Stable.
The class A-8 and B notes face increased exposure to maturity risk
since the prior review as the weighted average remaining term
continues to increase. This is reflected in the downgrade of the
class A-8 notes to 'Asf' from 'AAsf' and the class B notes to
'BBsf' from 'BBBsf'. The maturity risk scenarios are constraining
the ratings on these classes, the model-implied rating of the class
B notes is one category lower than the assigned rating, as
described by Fitch's Federal Family Education Loan Program (FFELP)
rating criteria, which gives credit to the legal final maturity
date of the notes being over 15 years away in 2040.
The assignment of the Rating Outlooks at Negative for the class A-8
and B notes is reflective of the possibility of future negative
rating pressure in the next one to two years if remaining term
continues to increase.
For SLM 2004-10 and 2005-3, Fitch modelled transaction-specific
servicing fees instead of Fitch's criteria-defined assumption of
$3.25 per borrower, per month due to the higher contractual
servicing fees for these transactions.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% FFELP
loans with guaranties provided by eligible guarantors and
reinsurance provided by the U.S. Department of Education (ED) for
at least 97% of principal and accrued interest. The U.S. sovereign
rating is currently 'AA+'/Stable.
Collateral Performance: For all transactions, after applying the
default timing curve per criteria, the effective default rate is
unchanged from the cumulative default rate. Fitch applies the
standard default timing curve in its credit stress cash flow
analysis. Additionally, loan consolidation activity stemming from
the Public Service Loan Forgiveness Program waiver, which ended in
October 2022, drove the short-term inflation of the transactions'
actual constant prepayment rate (CPR) and voluntary prepayments are
expected to return to historical levels. The claim reject rate is
assumed to be 0.25% in the base case and 1.65% in the 'AA' case.
SLM 2004-8: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 15.75% under the base
case scenario and a default rate of 43.31% under the 'AA' credit
stress scenario. Fitch is maintaining the sustainable constant
default rate (sCDR) of 2.50% and the sustainable constant
prepayment rate (sCPR; voluntary and involuntary prepayments) of
8.00% in cash flow modeling. The TTM levels of deferment,
forbearance, and income-based repayment (IBR; prior to adjustment)
are 2.99% (2.81% at Dec. 31, 2022), 11.82% (11.23%) and 19.57%
(17.34%).These assumptions are used as the starting point in cash
flow modelling and subsequent declines or increases are modelled as
per criteria. The 31-60 DPD have increased and the 91-120 DPD have
declined and are currently 2.91% for 31 DPD and 1.11% for 91 DPD
compared to 2.84% and 1.20% one year ago for 31 DPD and 91 DPD,
respectively. The borrower benefit is approximately 0.14%, based on
information provided by the sponsor.
SLM 2004-10: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 17.50% under the base
case scenario and a default rate of 48.13% under the 'AA' credit
stress scenario. Fitch is maintaining the sCDR of 2.50% and the
sCPR of 7.50% in cash flow modeling. The TTM levels of deferment,
forbearance, and IBR are 2.22% (2.26% at Dec. 31, 2022), 10.19%
(9.58%) and 23.96% (21.04%).
These assumptions are used as the starting point in cash flow
modelling and subsequent declines or increases are modelled as per
criteria. The 31-60 DPD and the 91-120 DPD have increased and are
currently 2.88% for 31 DPD and 1.25% for 91 DPD compared to 2.20%
and 0.99% one year ago for 31 DPD and 91 DPD, respectively. The
borrower benefit is approximately 0.16%, based on information
provided by the sponsor.
SLM 2005-3: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 9.25% under the base
case scenario and a default rate of 25.44% under the 'AA' credit
stress scenario. Fitch is maintaining the sCDR of 1.50% and the
sCPR of 6.50% in cash flow modeling. The TTM levels of deferment,
forbearance, and IBR are 1.57% (1.01% at Dec. 31, 2022), 7.64%
(7.08%) and 14.32% (12.82%).
These assumptions are used as the starting point in cash flow
modelling and subsequent declines or increases are modelled as per
criteria. The 31-60 DPD have decreased and the 91-120 DPD have
increased from one year ago and are currently 1.76% for 31 DPD and
0.64% for 91 DPD compared to 2.24% and 0.56% one year ago for 31
DPD and 91 DPD, respectively. The borrower benefit is approximately
0.30%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. As of the most recent collection period, 94.36%,
87.02%, and 99.19% of the trust student loans for SLM 2004-8,
2004-10, and 2005-3 are indexed to SOFR, with the remainder indexed
to the 91-day T-bill rate. All notes are indexed to 90-day Average
SOFR plus the spread adjustment of 0.26161%, with the exception of
the class A-8 notes of SLM 2004-10, which are indexed to
three-month EURIBOR. Fitch applies its standard basis and interest
rate stresses to all transactions as per criteria.
Payment Structure: CE is provided by overcollateralization (OC),
excess spread and for the class A notes, subordination provided by
the class B notes. As of the most recent collection period,
reported total parity is 100.00% for all transactions. Liquidity
support is provided by reserve accounts currently sized at their
floors of $3,314,921, $5,850,157 and $2,260,922 for SLM 2004-8,
2004-10 and 2005-3. All transactions will continue to release cash
as long as 100.00% reported total parity (excluding the reserve
account) is maintained.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient to be an adequate
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
'AA+sf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the ED. Aside from the U.S. sovereign rating, defaults,
basis risk and loan extension risk account for the majority of the
risk embedded in FFELP student loan transactions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below should
only be considered as one potential outcome, as the transaction is
exposed to multiple dynamic risk factors and should not be used as
an indicator of possible future performance.
SLM Student Loan Trust 2004-8
Current Ratings: class A-6 'AA+sf'; class B 'Asf'
Current Model-Implied Ratings: class A-6 'AA+sf' (Credit and
Maturity Stress); class B 'Asf' (Credit and Maturity Stress)
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'AA+sf'; class B 'Asf';
- Default increase 50%: class A 'AA+sf'; class B 'BBBsf';
- Basis spread increase 0.25%: class A 'AA+sf'; class B 'BBBsf';
- Basis spread increase 0.50%: class A 'AA+sf; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'AA+sf'; class B 'Asf';
- CPR decrease 50%: class A 'Asf'; class B 'Asf';
- IBR usage increase 25%: class A 'AA+sf'; class B 'Asf';
- IBR usage increase 50%: class A 'Asf; class B 'Asf';
- Remaining Term increase 25%: class A 'BBBsf'; class B 'Bsf';
- Remaining Term increase 50%: class A 'Bsf'; class B 'CCCsf'.
SLM Student Loan Trust 2004-10
Current Ratings: class A-7 'AA+sf'; class A-8 'Asf'; class B
'BBsf'
Current Model-Implied Ratings: class A-7 'AA+sf' (Credit and
Maturity Stress); class A-8 'AA+sf' (Credit Stress) / 'Asf'
(Maturity Stress); class B 'Bsf' (Credit and Maturity Stress)
Credit Stress Rating Sensitivity
- Default increase 25%: class A-7 'AA+sf'; class A-8 'Asf'; class B
'Bsf';
- Default increase 50%: class A-7 'AA+sf'; class A-8 'Asf'; class B
'Bsf';
- Basis spread increase 0.25%: class A-7 'AA+sf'; class A-8 'Asf';
class B 'CCCsf';
- Basis spread increase 0.50%: class A-7 'AA+sf; class A-8 'CCCsf';
class B 'CCCsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A-7 'AA+sf'; class A-8 'Asf'; class B
'Bsf';
- CPR decrease 50%: class A-7 'AA+sf'; class A-8 'Bsf'; class B
'CCCsf';
- IBR usage increase 25%: class A-7 'AA+sf'; class A-8 'Asf'; class
B 'Bsf';
- IBR usage increase 50%: class A-7 'AA+sf; class A-8 'Bsf'; class
B 'CCCsf';
- Remaining Term increase 25%: class A-7 'AA+sf'; class A-8
'CCCsf'; class B 'CCCsf';
- Remaining Term increase 50%: class A-7 'AA+sf'; class A-8
'CCCsf'; class B 'CCCsf'.
SLM Student Loan Trust 2005-3
Current Ratings: class A-6 'AA+sf'; class B 'Asf'
Current Model-Implied Ratings: class A-6 'AA+sf' (Credit and
Maturity Stress); class B 'Asf' (Credit Stress) / 'AA+sf' (Maturity
Stress)
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'AA+sf'; class B 'Asf';
- Default increase 50%: class A 'AA+sf'; class B 'Asf';
- Basis spread increase 0.25%: class A 'AA+sf'; class B 'BBBsf';
- Basis spread increase 0.50%: class A 'AA+sf; class B 'Bsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'AA+sf'; class B 'Asf';
- CPR decrease 50%: class A 'AA+sf'; class B 'Asf';
- IBR usage increase 25%: class A 'AA+sf'; class B 'Asf';
- IBR usage increase 50%: class A 'AA+sf; class B 'Asf';
- Remaining Term increase 25%: class A 'BBBsf'; class B 'CCCsf';
- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
SLM Student Loan Trust 2004-8
No upgrade credit stress sensitivity or maturity stress sensitivity
is provided for the class A notes, as they are already at their
highest possible current and model-implied ratings.
Credit Stress Sensitivity
- Default decrease 25%: class B 'Asf';
- Basis Spread decrease 0.25%: class B 'AAsf'.
Maturity Stress Sensitivity
- CPR increase 25%: class B 'Asf';
- IBR usage decrease 25%: class B 'Asf';
- Remaining Term decrease 25%: class B 'AAsf'.
SLM Student Loan Trust 2004-10
No upgrade credit stress sensitivity or maturity stress sensitivity
is provided for the class A-7 notes, as they are already at their
highest possible current and model-implied ratings.
Credit Stress Sensitivity
- Default decrease 25%: class A-8 'AA+sf'; class B 'Bsf'
- Basis Spread decrease 0.25%: class A-8 'AA+sf'; class B 'BBBsf'
Maturity Stress Sensitivity
- CPR increase 25%: class A-8 'Asf'; class B 'BBsf'
- IBR usage decrease 25%: class A-8 'Asf'; class B 'Bsf'
- Remaining Term decrease 25%: class A-8 'AA+sf'; class B 'BBBsf'
SLM Student Loan Trust 2005-3
No upgrade credit stress sensitivity or maturity stress sensitivity
is provided for the class A notes, as they are already at their
highest possible current and model-implied ratings.
Credit Stress Sensitivity
- Default decrease 25%: class B 'AAsf';
- Basis Spread decrease 0.25%: class B 'AA+sf'.
Maturity Stress Sensitivity
- CPR increase 25%: class B 'AA+sf';
- IBR usage decrease 25%: class B 'AA+sf';
- Remaining Term decrease 25%: class B 'AA+sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
TELOS CLO 2013-3: Moody's Lowers Rating on $24.1MM E-R Notes to Ca
------------------------------------------------------------------
Moody's Ratings has upgraded the rating on the following notes
issued by Telos CLO 2013-3, Ltd.:
US$30,300,000 Class D-R Mezzanine Secured Deferrable Floating Rate
Notes Due July 2026 (the "Class D-R Notes") (current outstanding
balance of $20,912,614.80), Upgraded to Aa2 (sf); previously on
June 15, 2022 Upgraded to A1 (sf)
Moody's has also downgraded the rating on the following notes:
US$24,100,000 Class E-R Mezzanine Secured Deferrable Floating Rate
Notes Due July 2026 (the "Class E-R Notes") (current outstanding
balance of $26,508,640.75), Downgraded to Ca (sf); previously on
September 1, 2023 Downgraded to Caa3 (sf)
Telos CLO 2013-3, Ltd., originally issued in February 2013 and
refinanced in August 2017, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in July 2019.
RATINGS RATIONALE
The upgrade rating action is primarily a result of deleveraging of
the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since August 2023. The Class D-R
notes have been paid down by approximately 31.0% or $9.4 million
since August 2023. Based on the trustee's January 2024 report [1],
the OC ratios for the Class D-R notes is reported at 159.62%,
versus August 2023 [2] reported level of 122.82%.
The downgrade rating action on the Class E-R notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the trustee's January 2024 report [3], the OC ratio for the Class
E-R notes is reported at 70.39% versus August 2023 [4] reported
level of 76.10%. Furthermore, the trustee-reported weighted average
rating factor (WARF) have been deteriorating and the current level
is 3886, compared to 3650 in August 2023 [5].
The portfolio also includes a number of investments in securities
that mature after the notes do. Based on the trustee's January 2024
report [6], securities that mature after the notes do currently
make up approximately 6.92% of the portfolio. These investments
could expose the notes to market risk in the event of liquidation
when the notes mature.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations." In addition,
because of the collateral pool's low diversity, Moody's used
CDOROM(TM) to simulate a default distribution and then used it as
an input in the cash flow model.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $39,262,866
Defaulted par: $2,193,869
Diversity Score: 11
Weighted Average Rating Factor (WARF): 3715
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 4.34%
Weighted Average Recovery Rate (WARR): 47.71%
Weighted Average Life (WAL): 1.86 years
Par haircut in OC tests and interest diversion test: 8.3%
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income and lower recoveries on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
TEXAS DEBT 2024-I: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Texas Debt Capital CLO 2024-I, Ltd.
Entity/Debt Rating
----------- ------
Texas Debt Capital
CLO 2024-I, Ltd.
A-1 LT AA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Texas Debt Capital CLO 2024-I, Ltd. (the issuer) is an arbitrage
cash flow collateralized loan obligation (CLO) that will be managed
by CIFC Asset Management LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $600 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 24.04, versus a maximum covenant, in accordance with
the initial expected matrix point of 26.75. Issuers rated in the
'B' rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.75% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.35% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.9%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 50% 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 5.1-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 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-1, 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-1 and 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, 'AAsf' for class C, 'Asf' for
class D, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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.
VERUS SECURITIZATION 2024-INV1: S&P Assigns (P) B-(sf) on B-2 Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Verus
Securitization Trust 2024-INV1's mortgage-backed notes series
2024-INV1.
The preliminary ratings are based on information as of March 13,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable-rate (some with interest-only periods)
residential mortgage loans secured by single-family residences,
townhouses, planned-unit developments, two- to four-family
residential properties, condominiums, a cooperative, five– to
10-unit multifamily properties, mixed-use properties, and condotels
to both prime and non-prime borrowers. The pool has 1,000
residential mortgage loans, where one is a cross-collateralized
loan backed by six properties for a total property count of 1,005.
The loans in the pool are ATR-exempt loans.
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, a
transaction-specific review of the originator Hometown Equity
Mortgage, 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, the U.S.
economy has outperformed expectations following consecutive
quarters of contraction in the first half of 2022. We now expect
the U.S. economy to expand 1.5% in 2024 on an annual average basis
(up from 1.3% in our September forecast) and 1.4% in 2025
(unchanged from the September forecast), before converging to the
longer-run sustainable growth of 1.8% in 2026. Given the slight
improvement in growth projections, we maintain our current market
outlook as it relates to the 'B' projected archetypal foreclosure
frequency (which we updated to 2.50% from 3.25% in October 2023),
which 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."
Preliminary Ratings Assigned
Verus Securitization Trust 2024-INV1(i)
Class A-1, $235,911,000: AAA (sf)
Class A-2, $26,729,000: AA (sf)
Class A-3, $46,678,000: A (sf)
Class M-1, $33,315,000: BBB- (sf)
Class B-1, $20,337,000: BB- (sf)
Class B-2, $14,720,000: B- (sf)
Class B-3, $9,684,856: Not rated
Class A-IO-S, $387,374,856 (ii): Not rated
Class XS, $387,374,856 (ii): Not rated
Class R, not applicable: Not rated
(i)The collateral and structural information reflect the term sheet
dated March 11, 2024; the preliminary ratings address the ultimate
payment of interest and principal.
(ii)The notional amount equals the aggregate stated principal
balance of loans in the pool as of the cutoff date.
[*] Fitch Affirms 13 Classes on Three 2014 Canadian CMBS Deals
--------------------------------------------------------------
Fitch Ratings has upgraded six and affirmed 13 classes from three
Canadian CMBS transactions from the 2014 vintage. All currencies
are denominated in Canadian dollars (CAD).
Classes F and G of the MCAP CMBS Issuer Corporation Commercial
Mortgage Pass-Through Certificates 2014-1 (MCAP 2014-1) transaction
and classes C, D, E, and F of the Real Estate Asset Liquidity Trust
Commercial Mortgage Pass-Through Certificates 2014-1 transaction
(REAL-T 2014-1) were assigned Stable Outlooks following their
upgrades. Along with class G remaining on Negative Outlook, due to
its exposure to the Spring Garden and Europro Stratford Mixed Use
loans, class F of the CMLSI Issuer Corporation Commercial Mortgage
Pass Through Certificates Series 2014-1 (CMLSI 2014-1) transaction
was revised to Negative from Stable.
Given the concentrated nature of the pools, Fitch performed a
look-through analysis that grouped the remaining loans based on the
likelihood of repayment and recovery prospects; the ratings and
Outlooks reflect this analysis.
Entity/Debt Rating Prior
----------- ------ -----
MCAP CMBS Issuer
Corporation 2014-1
D 55280LAJ7 LT AAAsf Affirmed AAAsf
E 55280LAE8 LT AAAsf Affirmed AAAsf
F 55280LAF5 LT Asf Upgrade BBBsf
G 55280LAG3 LT BBsf Upgrade Bsf
Real Estate Asset
Liquidity Trust
2014-1
A 75585RLT0 LT AAAsf Affirmed AAAsf
B 75585RLU7 LT AAAsf Affirmed AAAsf
C 75585RLV5 LT AAAsf Upgrade AAsf
D 75585RLW3 LT A-sf Upgrade BBBsf
E 75585RLX1 LT BBB+sf Upgrade BBB-sf
F 75585RLQ6 LT BBB-sf Upgrade BBsf
G 75585RLR4 LT Bsf Affirmed Bsf
CMLS Issuer
Corporation 2014-1
A-1 125824AA0 LT AAAsf Affirmed AAAsf
A-2 125824AB8 LT AAAsf Affirmed AAAsf
B 125824AC6 LT AAsf Affirmed AAsf
C 125824AD4 LT Asf Affirmed Asf
D 125824AE2 LT BBBsf Affirmed BBBsf
E 125824AF9 LT BBB-sf Affirmed BBB-sf
F 125824AG7 LT BBsf Affirmed BBsf
G 125824AH5 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Performance and 'Bsf' Loss Expectations: Deal-Level 'Bsf' ratings
case losses range from 1.9% to 3.6%. Loan performance for the
REAL-T 2014-1 and MCAP 2014-1 transactions remains stable with no
loans identified as Fitch Loans of Concern (FLOCs), while four
loans (17.6% of the pool) in CMLSI 2014-1 have been identified as
FLOCs.
Upgrades in the REAL-T 2014-1 and MCAP 2014-1 transactions reflect
stable loan performance, improving credit enhancement, and
expectation of payoff as loans reach maturity.
Limited Office Exposure: Each of the transactions are predominantly
composed of retail or mixed-use loans and have limited exposure to
office concentration. Retail is the largest concentration in the
CMLSI 2014-1 transaction representing 38% of the pool, with office
loans accounting for 11.5%. Retail represents 44.2% as the largest
concentration in the REAL-T 2014-1 transaction with office loans
accounting for 17% off the pool. In the MCAP 2014-1 transaction,
mixed-use concentration is 90.3% with retail representing 9.7%.
Recourse: A majority of loans across the transactions reflect some
level of sponsor recourse. Along with the defeasance of one loan
(11.6% of the pool), REAL-T 2014-1 includes six loans (76.6%) with
a recourse provision and one loan (11.9% of the pool) without
recourse to the sponsor. All remaining loans in MCAP 2014-1 contain
a recourse provision. There are 23 loans (83.7%) in the CMLSI
2014-1 transaction that contain a recourse provision, while two
loans (16.2%) contain no recourse to the sponsor.
Pool Concentration: The aggregate balance of the CMLSI 2014-1
transaction has been reduced by 40.5% with 25 loans remaining. The
REAL-T 2014-1 transaction has eight loans remaining in the pool and
the MCAP 2014-1 has three loans remaining.
Changes to Credit Enhancement: As of the December remittance
report, the aggregate balance reduction for the transactions range
from 40.5% to 94.7% with all remaining loans scheduled to mature in
2024. Realized losses of $3.2 million (1.4% of the original pool
balance) are impacting the non-rated class H of the MCAP 2014-1
transaction. Interest shortfalls of $113.7k and $14.7k are
impacting the non-rated class H of the MCAP 2014-1 and REAL-T
2014-1 transactions, respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflects possible future downgrade stemming
from the FLOCs in the CMLSI 2014--1 transaction, which include
Spring Garden Place and Europro Stratford Mixed-Use, maturing in
2024 and the potential for at least one of the remaining loans to
be unable to refinance at maturity.
- Downgrades to 'AAAsf' and 'AAsf' category rated classes are not
expected, but could occur if deal-level expected losses increase
significantly and/or interest shortfalls occur;
- Downgrades to 'Asf' and 'BBBsf' category rated classes could
occur if deal-level losses increase significantly on non-defeased
loans in the transactions including outsized losses on larger
FLOCs;
- Downgrades to 'BBsf' and 'Bsf' category rated classes are
possible with higher expected losses from FLOCs and/or if loans are
unable to refinance and default at maturity;
- Downgrades to distressed ratings of 'CCCsf' through 'Csf' would
occur as losses become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with increased credit enhancement resulting from amortization and
paydowns, coupled with stable-to-improved pool-level loss
expectations and performance stabilization of FLOCs, in particular
the Spring Garden Place and Europro Stratford Mixed-Use loans in
the CMLSI 2014-1 transaction. Classes would not be upgraded above
'Asf' if there is likelihood for interest shortfalls.
Upgrades to the 'BBBsf', 'BBsf', and 'Bsf' category rated classes
would be limited based on sensitivity to concentrations of the
pools, including maturity dates.
Upgrades to distressed ratings of 'CCCsf' through 'Csf' are not
expected but possible with better than expected values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] Fitch Affirms 35 Tranches on 7 Collateralized Loan Obligations
------------------------------------------------------------------
Fitch Ratings has affirmed 35 tranches from GoldenTree 12 Loan
Management US CLO 12, Ltd. (GoldenTree 12), Trinitas CLO XIX, Ltd.,
Trinitas CLO XX, Ltd., Bain Capital Credit CLO 2023-1, Limited,
Bain Capital Credit CLO 2022-2, Limited (Bain 2022-2), Bain Capital
Credit CLO 2022-3, Limited and Octagon 67, Ltd. Fitch revised the
Rating Outlooks to Positive from Stable on classes B, C and D-1
notes from Bain 2022-2 and classes B, C and D in GoldenTree 12.
Entity/Debt Rating Prior
----------- ------ -----
Bain Capital Credit CLO
2022-3, Limited
A-1 05684NAA9 LT AAAsf Affirmed AAAsf
A-2 05684NAC5 LT AAAsf Affirmed AAAsf
B 05684NAE1 LT AAsf Affirmed AAsf
C 05684NAG6 LT Asf Affirmed Asf
D 05684NAJ0 LT BBB-sf Affirmed BBB-sf
E 05684QAA2 LT BB-sf Affirmed BB-sf
Octagon 67, Ltd.
A-2 67571LAC5 LT AAAsf Affirmed AAAsf
B 67571LAE1 LT AAsf Affirmed AAsf
C 67571LAG6 LT Asf Affirmed Asf
D 67571LAJ0 LT BBB-sf Affirmed BBB-sf
E 67577YAA5 LT BB-sf Affirmed BB-sf
GoldenTree Loan Management
US CLO 12, Ltd.
A 38138FAC5 LT AAAsf Affirmed AAAsf
B 38138FAG6 LT AAsf Affirmed AAsf
C 38138FAJ0 LT Asf Affirmed Asf
D 38138FAL5 LT BBB-sf Affirmed BBB-sf
E 38138YAA8 LT BB+sf Affirmed BB+sf
Trinitas CLO XX, Ltd.
A-1 89640EAA6 LT AAAsf Affirmed AAAsf
A-2 89640EAJ7 LT AAAsf Affirmed AAAsf
E 89640GAA1 LT BB-sf Affirmed BB-sf
Bain Capital Credit
CLO 2023-1, Limited
A-F 05685NAC4 LT AAAsf Affirmed AAAsf
A-L Loans LT AAAsf Affirmed AAAsf
A-N 05685NAA8 LT AAAsf Affirmed AAAsf
C 05685NAG5 LT Asf Affirmed Asf
D 05685NAJ9 LT BBB-sf Affirmed BBB-sf
E 05685PAA3 LT BB-sf Affirmed BB-sf
Bain Capital Credit
CLO 2022-2, Limited
A-1 05682GAA6 LT AAAsf Affirmed AAAsf
A-2A 05682GAC2 LT AAAsf Affirmed AAAsf
A-2B 05682GAE8 LT AAAsf Affirmed AAAsf
B 05682GAG3 LT AAsf Affirmed AAsf
C 05682GAJ7 LT Asf Affirmed Asf
D-1 05682GAL2 LT BBBsf Affirmed BBBsf
D-2 05682GAN8 LT BBB-sf Affirmed BBB-sf
Trinitas CLO XIX, Ltd.
C 89642FAG8 LT A+sf Affirmed A+sf
D-1 89642FAJ2 LT BBB+sf Affirmed BBB+sf
D-2 89642FAL7 LT BBB-sf Affirmed BBB-sf
TRANSACTION SUMMARY
All seven CLOs are secured primarily by first-lien, senior secured
leveraged loans and all transactions are still in their
reinvestment periods.
KEY RATING DRIVERS
Improved Break-Even Default Rate Cushions
The Outlook revisions in GoldenTree 12 and Bain 2022-2 were based
on improved modelling results in the updated Fitch Stressed
Portfolio (FSP) analysis that were driven by shorter risk horizons
compared to the last review in March 2023 leading to higher
model-implied ratings (MIRs), as defined in Fitch's "CLOs and
Corporate CDOs Rating Criteria".
Despite the above-mentioned improved modelling results, Fitch
affirmed the class B and C notes in GoldenTree 12 and classes B, C,
D-1 and D-2 notes in Bain 2022-2 one notch below their respective
MIRs and class D notes in GoldenTree 12 two notches below their
respective MIR. The variations from the respective MIRs are due to
the remaining time in the transaction's reinvestment periods as
well as an increased exposure to Fitch's Watchlist to 6.8% from
5.0% at the time of last review for GoldenTree 12 and to 6.5% from
3.4% at the time of last review for Bain 2022-2, and additional
defaulted obligors which contributed to par losses of 0.5% since
last review for GoldenTree 12 and 1.2% for Bain 2022-2.
The Stable Outlooks on the remaining notes reflect Fitch's
expectation that the notes have sufficient levels of credit
enhancement (CE) to withstand potential deterioration in the credit
quality of the portfolios in stress scenarios commensurate with
each class' rating.
Fitch analyzed each CLO based on the current portfolio and an
updated FSP cash flow analysis. The FSP analysis stressed the
current portfolios as of the latest trustee reporting to account
for permissible concentration and collateral quality test (CQT)
limits of each transaction.
Asset Credit Quality and Asset Security
Please refer to the supplemental Rating Action Report for
additional portfolio specific information on the asset credit
quality and security.
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/at time of
last review and the notes' CE do not compensate for the higher loss
expectation than initially assumed. Analysis outcomes at initial
rating assignment for the transactions remain in line with Fitch's
expectation.
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. Analysis outcomes at initial
rating assignment for the transactions remain in line with Fitch's
expectation.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions 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.
[*] Fitch Affirms 37 Classes on 12 National Collegiate Trusts
-------------------------------------------------------------
Fitch Ratings has affirmed 37 classes of notes and maintained three
classes on Rating Watch Negative (RWN) from 12 National Collegiate
Student Loan Trusts (NCSLTs).
Entity/Debt Rating Prior
----------- ------ -----
National Collegiate
Student Loan Trust
2004-2/NCF Grantor
Trust 2004-2
B 63543PBA3 LT CCsf Affirmed CCsf
C 63543PBB1 LT Csf Affirmed Csf
National Collegiate
Student Loan Trust
2005-1/NCF Grantor
Trust 2005-1
B 63543PBK1 LT CCsf Affirmed CCsf
C 63543PBL9 LT Dsf Affirmed Dsf
National Collegiate
Student Loan Trust
2007-1
A-4 63543XAD1 LT Csf Affirmed Csf
B 63543XAF6 LT Csf Affirmed Csf
C 63543XAG4 LT Csf Affirmed Csf
D 63543XAH2 LT Csf Affirmed Csf
National Collegiate
Student Loan Trust
2007-2
A-4 63543LAD7 LT Csf Affirmed Csf
B 63543LAF2 LT Csf Affirmed Csf
C 63543LAG0 LT Csf Affirmed Csf
D 63543LAH8 LT Csf Affirmed Csf
National Collegiate
Student Loan Trust
2006-3
A-5 63543VAE3 LT CCsf Affirmed CCsf
B 63543VAG8 LT Csf Affirmed Csf
C 63543VAH6 LT Csf Affirmed Csf
D 63543VAJ2 LT Csf Affirmed Csf
National Collegiate
Student Loan Trust
2006-1
A-5 63543PCD6 LT Csf Affirmed Csf
B 63543PCF1 LT Csf Affirmed Csf
C 63543PCG9 LT Csf Affirmed Csf
National Collegiate
Student Loan Trust
2005-2/NCF Grantor
Trust 2005-2
A-5-1 63543PBU9 LT CCCsf Affirmed CCCsf
A-5-2 63543PBY1 LT CCCsf Affirmed CCCsf
B 63543PBW5 LT Csf Affirmed Csf
C 63543PBX3 LT Csf Affirmed Csf
National Collegiate
Student Loan Trust
2005-3/NCF Grantor
Trust 2005-3
A-5-1 63543TAE8 LT Bsf Rating Watch Maintained Bsf
A-5-2 63543TAF5 LT Bsf Rating Watch Maintained Bsf
B 63543TAJ7 LT Csf Affirmed Csf
C 63543TAK4 LT Csf Affirmed Csf
National Collegiate
Student Loan
Trust2006-2
A-4 63543MAD5 LT Csf Affirmed Csf
B 63543MAF0 LT Csf Affirmed Csf
C 63543MAG8 LT Csf Affirmed Csf
National Collegiate
Student Loan
Trust 2003-1
A-7 63543PAG1 LT BBsf Rating Watch Maintained BBsf
B-1 63543PAJ5 LT Csf Affirmed Csf
B-2 63543PAK2 LT Csf Affirmed Csf
National Collegiate
Student Loan
Trust 2004-1
A-4 63543PAP1 LT CCsf Affirmed CCsf
B-1 63543PAS5 LT Csf Affirmed Csf
B-2 63543PAT3 LT Csf Affirmed Csf
National Collegiate
Student Loan
Trust 2006-4
A-4 63543WAD3 LT Csf Affirmed Csf
B 63543WAF8 LT Csf Affirmed Csf
C 63543WAG6 LT Csf Affirmed Csf
D 63543WAH4 LT Csf Affirmed Csf
TRANSACTION SUMMARY
For each of these classes Fitch maintained a rating cap at the
current rating of 'BBsf' or 'Bsf' and each of these classes remain
on RWN:
- NCSLT 2003-1 A-7;
- NCSLT 2005-3 A-5-1 and A-5-2.
The RWN and the rating cap reflects the ongoing litigation between
the Consumer Financial Protection Bureau (CFPB) and the trusts,
which could have a negative credit impact on the transactions.
Fitch will resolve the RWN as soon as additional clarity is
available on the outcome of this ongoing litigation, as well as any
other pending litigation involving the trusts and the transactions'
parties, which may be more than six months from the date of this
review.
KEY RATING DRIVERS
Collateral Performance:
The NCSLT trusts are collateralized by private student loans
originated by First Marblehead Corporation. At deal inception, all
loans were guaranteed by The Education Resources Institute (TERI);
however, no credit is given to the guaranty since TERI filed for
bankruptcy on April 7, 2008.
Fitch maintained its assumption of constant default rate (CDR) at
4.00% on the transactions with outstanding ratings of 'B-sf' or
higher (NCSLT 2003-1 and 2005-3). The recovery rate was assumed to
be 0% in light of recent lawsuit uncertainty between the trusts and
defaulted borrowers.
Payment Structure:
All trusts are under-collateralized as total parity is less than
100%. As of the January 2024 distribution date, the senior reported
parity is 1130.11%, 61.31%, 157.21%, 326.75%, 136.11%, 74.71%,
245.55%, 167.11%, 130.64% and 119.70% for NCSLT 2003-1, 2004-1,
2005-2, 2005-3, 2006-1, 2006-2, 2006-3, 2006-4, 2007-1 and 2007-2,
respectively. Senior notes benefit from subordination provided by
the junior notes and have had increasing parity levels due to
amortization. However, Fitch has capped the ratings of each at
their current ratings given ongoing litigation risk.
Operational Capabilities:
Pennsylvania Higher Education Assistance Agency (PHEAA) services
roughly 98% of the trusts, with Nelnet servicing the rest. US Bank
N.A. acts as special servicer for the trusts. Fitch believes all
servicers are acceptable servicers of private student loans.
A lawsuit to call a servicer default under the transaction
documents against PHEAA was initiated by some of the holders of the
beneficial interest in the NCSLT trusts. Despite the uncertainty on
the outcome of pending litigations between transaction parties,
including PHEAA, Fitch believes such risk is addressed by the
rating cap at current ratings of 'BBsf' or 'Bsf' and Fitch's
conservative assumptions on defaults and recoveries.
Ongoing Litigation Risk:
Fitch maintained the RWN on all classes with ratings of 'B-sf' or
higher due to the ongoing litigation between the CFPB and the
trusts. These classes have been on RWN since Sept. 22, 2017 due to
the proposed consent judgment and the uncertainty around any
possible negative credit impact on the transactions. The CFPB filed
an action on Sept. 18, 2017 and a proposed consent order against
the NCSLT issuers for illegal student loan debt collection
practices. According to the CFPB, consumers were sued for
collection on private student loan debt that the companies could
not prove was owed or which obligations were beyond the statutes of
limitation for legal action.
ESG - Customer Welfare - Fair Messaging, Privacy & Data Security:
The trusts must comply with consumer protection-related regulatory
requirements such as fair/transparent lending, data security, and
safety standards.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch expects to resolve the RWN on the notes rated 'B-sf' or
higher as soon as additional information is available on the
outcome of the ongoing litigation between the CFPB and the NCSLT
trusts. Should the litigation result in unforeseen monetary
expenses, this could result in negative rating actions, depending
on the type, timing and size of such expenses.
Fitch increased base case default rates by 10%, 25% and 50%, in
accordance with its U.S. Private Student Loan ABS Rating Criteria,
and there was no change to expected ratings due to the rating cap
on the trusts following the ongoing litigation risk.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Positive rating actions are not likely until there is resolution of
the outstanding litigation between the CFPB and the NCSLT trusts.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
National Collegiate Student Loan Trust 2003-1, 2004-1, 2004-2,
2005-1, 2005-2, 2005-3, 2006-1, 2006-2, 2006-3, 2006-4, 2007-1 and
2007-2 have an ESG Relevance Score of '5' for Customer Welfare -
Fair Messaging, Privacy & Data Security. This is due to compliance
with consumer protection related regulatory requirements, such as
fair/transparent lending, data security, and safety standards,
which has a negative impact on the credit profile and is highly
relevant to the rating, resulting in capping the ratings at 'BBBsf'
as well as placing the non-distressed notes on Rating Watch
Negative.
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 Cuts 13 Classes on Three US CMBS BMARK 2018 Vintage Deals
-------------------------------------------------------------------
Fitch Ratings has downgraded 13 and affirmed 30 classes from three
U.S. CMBS 2018 vintage conduit transactions in the Benchmark shelf.
The Rating Outlooks for 10 classes across the three transactions
were revised to Negative from Stable, and eight classes were
assigned Negative Outlooks following downgrades of those classes.
Entity/Debt Rating Prior
----------- ------ -----
BENCHMARK 2018-B3
A-2 08161BAV5 LT AAAsf Affirmed AAAsf
A-3 08161BAW3 LT AAAsf Affirmed AAAsf
A-4 08161BAX1 LT AAAsf Affirmed AAAsf
A-5 08161BAY9 LT AAAsf Affirmed AAAsf
A-AB 08161BAZ6 LT AAAsf Affirmed AAAsf
A-S 08161BBA0 LT AAAsf Affirmed AAAsf
B 08161BBB8 LT AA-sf Affirmed AA-sf
C 08161BBC6 LT A-sf Affirmed A-sf
D 08161BAA1 LT BBB-sf Affirmed BBB-sf
E-RR 08161BAC7 LT BB-sf Downgrade BBB-sf
F-RR 08161BAE3 LT Bsf Downgrade BBsf
G-RR 08161BAG8 LT CCCsf Downgrade B+sf
H-RR 08161BAJ2 LT CCsf Downgrade B-sf
X-A 08161BBD4 LT AAAsf Affirmed AAAsf
X-B 08161BBE2 LT AA-sf Affirmed AA-sf
X-D 08161BAN3 LT BBB-sf Affirmed BBB-sf
Benchmark 2018-B1
Mortgage Trust
A-4 08162PAW1 LT AAAsf Affirmed AAAsf
A-5 08162PAX9 LT AAAsf Affirmed AAAsf
A-M 08162PAZ4 LT AAAsf Affirmed AAAsf
A-SB 08162PAV3 LT AAAsf Affirmed AAAsf
B 08162PBA8 LT AA-sf Affirmed AA-sf
C 08162PBB6 LT A-sf Affirmed A-sf
D 08162PAG6 LT BB-sf Downgrade BBB-sf
E 08162PAJ0 LT CCCsf Downgrade B-sf
F-RR 08162PAL5 LT CCsf Downgrade CCCsf
X-A 08162PAY7 LT AAAsf Affirmed AAAsf
X-B 08162PAA9 LT AA-sf Affirmed AA-sf
X-D 08162PAC5 LT BB-sf Downgrade BBB-sf
X-E 08162PAE1 LT CCCsf Downgrade B-sf
Benchmark 2018-B2
A-2 08161CAB7 LT AAAsf Affirmed AAAsf
A-3 08161CAC5 LT AAAsf Affirmed AAAsf
A-4 08161CAD3 LT AAAsf Affirmed AAAsf
A-5 08161CAE1 LT AAAsf Affirmed AAAsf
A-S 08161CAJ0 LT AAAsf Affirmed AAAsf
A-SB 08161CAF8 LT AAAsf Affirmed AAAsf
B 08161CAK7 LT AA-sf Affirmed AA-sf
C 08161CAL5 LT A-sf Affirmed A-sf
D 08161CAP6 LT BBB-sf Downgrade BBB+sf
E-RR 08161CAR2 LT BB-sf Downgrade BBsf
F-RR 08161CAT8 LT B-sf Downgrade B+sf
G-RR 08161CAV3 LT CCCsf Affirmed CCCsf
X-A 08161CAG6 LT AAAsf Affirmed AAAsf
X-D 08161CAM3 LT BBB-sf Downgrade BBB+sf
KEY RATING DRIVERS
Performance and 'Bsf' Loss Expectations: Deal-level 'Bsf' ratings
case losses are 8.63% in BMARK 2018-B1, 6.68% in BMARK 2018-B2, and
8.56% in BMARK 2018-B3, each of which increased since Fitch's prior
rating action.
Across the three transactions, Fitch has identified 39 loans as
Fitch Loans of Concern (FLOCs) due to performance declines, major
tenant vacancy, borrower-related issues and lease rollover
concerns. The weighted-average concentration of FLOCs is 40.5%
(ranging from 29.0% to 48.4%).
Across the three transactions, eight loans/assets are in special
servicing, which include three (6.2% of the pool) loans/assets in
BMARK 2018-B1, one of which is REO (3.9%); two loans/assets in
BMARK 2018-B2, including the largest loan which is REO (6.7%); and
three loans (7.8%) in BMARK 2018-B3.
Downgrades reflect increased pool loss expectations across the
three transactions driven by performance deterioration of FLOCs,
most notably for the 90 Hudson loan, which is pari passu in all
three transactions, The Valencia Town Center in BMARK 2018-B1, The
REO Central Park at Lisle in BMARK 2018-B2 and the 315 West 36th
Street loan in the BMARK 2018-B3 transaction.
Five of the downgraded classes were from BMARK 2018-B1, which has a
FLOC concentration of 48.4%. The largest contributors to expected
loss are 90 Hudson (8.0%), Valencia Town Center (6.2%), and the
specially serviced 153-168 Bleeker Street (3.9%) and 1114-1126 Lake
Street (1.3%).
The Outlook revisions to Negative from Stable in BMARK 2018-B1
reflect the overall office concentration of 26.4%, as well as an
additional sensitivity loss of 40% applied on Valencia Town Center
reflecting concerns with dark space, submarket conditions, the
leasehold interest and escalating ground rent payments.
Four of the downgraded classes were from BMARK 2018-B2, which has a
FLOC concentration of 43.6%. The largest contributors to expected
loss are the specially serviced Central Park at Lisle (6.7%), 90
Hudson (2.5%) and the specially serviced 220 Northwest 8th Avenue
(1.6%).
The Outlook revision to Negative from Stable in BMARK 2018-B2
reflect the overall office concentration of 45.5% and concern with
continued decline in performance, most notably with the largest
asset in the pool, the REO Central Park at Lisle.
An additional four of the downgraded classes were from BMARK
2018-B3, which has a FLOC concentration of 29.0% The largest
contributors to loss are 6420 Wilshire (6.7%), the specially
serviced loans Greystone Park and The Meridian at Deerwood Park
(4.1%) and 315 W. 36th Street (3.2% - WeWork) and 90 Hudson
(3.2%).
The Outlook revisions to Negative from Stable in BMARK 2018-B3
reflect the overall office concentration of 40.8% and the potential
for further declines in performance including in the specially
serviced loans (7.8%).
Fitch Loans of Concern:
90 Hudson is secured by a 432,284-sf office property located in
Jersey City, NJ that was built in 1999. The loan is pari passu
across all three transactions. The largest tenant at the property,
Lord Abbett (60.5% of the NRA) has recently indicated intentions to
vacate at lease expiration in December 2024, information that was
not known at Fitch's prior rating action. As of September 2023,
revenue from the largest tenant represented 66% of the total
building income. Occupancy and NOI DSCR was 98% and 2.29x as of
September 2023, but is anticipated to decline to 38% and 0.84x,
respectively, with the departure of Lord Abbett.
Fitch's 'Bsf' rating case loss of 27.2% (prior to concentration
adjustments) factors a higher probability of default given the
concerns with the imminent tenant departure and weakness in the
market with Costar reporting an availability rate of 27.9% in the
Hudson Waterfront office submarket.
Valencia Town Center is secured by the leasehold interest in a
395,483-sf mixed-use property located in Santa Clarita, CA. The
largest tenant, Princess Cruise Lines (PCL) (73.3% of the NRA at
issuance), has listed their entire space for sublease, but
continues to pay rent and perform under their current lease
obligation that expires in March 2026. The PCL lease is guaranteed
by their parent company, Carnival Corporation.
As of September 2023, NOI DSCR remained stable at 2.25x due to
PCL's continued rent payments. A cash flow sweep has been triggered
with the January 2024 reserve balance reported at about $15.3
million.
Fitch's 'Bsf' rating case loss of 9.7% prior to concentration
adjustments reflects a "sum of the parts" analysis to ascertain the
aggregate individual values of the leased fee and leasehold
interests based on market occupancy and rental rate assumptions to
lease-up the vacated office space. A sensitivity stress was
applied, resulting in a 'Bsf' sensitivity case loss of 40.0%. This
factors in a higher probability of default given the concerns with
the large portion of dark space, elevated availability rates in the
submarket and leasehold interest in the collateral with escalating
ground rent payments. This sensitivity scenario contributed to the
Negative Outlook revisions.
Central Park of Lisle is a 693,606-sf suburban office building
located in Lisle, IL. The loan transferred to special servicing in
September 2022 due to an imminent maturity default in advance of
its January 2023 maturity date.
Property occupancy continues to decline. Per the special servicer,
occupancy as of December 2023 was 67.8%, compared with 77.7% at YE
2021 and 87.5% at issuance. The property's previous largest tenant,
Armour-Eckrich Meats LLC, exercised an early termination option in
February 2022 (one year before actual lease termination) for a
significant portion of its space at the property (8.4% of NRA).
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 30.2% reflects a discount to the most recently reported
appraisal value.
315 West 36th Street is secured by a 143,479-sf office building
with ground-floor retail located in Midtown Manhattan, proximate to
Penn Station and the Port Authority Bus Terminal. Floors 11 and
above in the building are residential and not part of the
collateral. The servicer noted that WeWork ceased paying rent in
April 2023 and the space formerly occupied by WeWork is fully
vacant. Collateral occupancy is only 3.0%.
The loan transferred to special servicing in June 2023 for payment
default. The loan status is current as the servicer is making
interest payments with funds from a letter of credit provided by
WeWork. The borrower has noted that they are in discussions with
the city on a short-term lease for temporary housing. Fitch's 'Bsf'
rating case loss of 56.0% reflects a discount to a recent appraisal
value which equates to a stressed value of $238 psf.
WeWork Exposure: Three loans across the three transactions have or
had exposure to WeWork. All three loans have notable concentrations
greater than 26% of the square footage in their respective
buildings, including Red Building (26% of NRA, Los Angeles, CA,
BMARK 2018-B2), 220 Northwest 8th Avenue (100% of NRA, Portland,
OR, BMARK 2018-B2) and 315 West 36th Street (93% of NRA, New York,
NY, BMARK 2018-B3).
Change to Credit Enhancement: Aggregate pool balances have been
reduced on average 20.4% (ranging from 15.3% to 25.0%). BMARK
2018-B1 loan maturities are concentrated in 2027 (27 loans for
69.2% of the pool). BMARK 2018-B2 loan maturities are concentrated
in 2028 (28 loans for 62.2% of the pool). BMARK 2018-B3 loan
maturities are concentrated in 2028 (32 loans for 82.1% of the
pool).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly; downgrades to
'AAAsf' rated classes if interest shortfalls occur.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from the FLOCs and with greater
certainty of near-term losses on specially serviced assets and
other FLOCs.
Downgrades to distressed ratings of 'CCCsf' through 'Csf' would
occur as losses become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
improved pool-level loss expectations and performance stabilization
of FLOCs.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' through 'Csf' are not
expected, but possible with better than expected recoveries on
specially serviced loans or significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] Moody's Takes Action on $91.4MM of US RMBS Issued 2003-2006
---------------------------------------------------------------
Moody's Ratings has upgraded the ratings of five bonds and
downgraded the ratings of two bonds from five US residential
mortgage-backed transactions (RMBS), backed by subprime mortgages
issued by multiple issuers.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Acquisition Corp. 2006-WMC1
Cl. A-5, Upgraded to Ba3 (sf); previously on Apr 20, 2018 Upgraded
to B2 (sf)
Issuer: Ownit Mortgage Loan Trust 2006-2
Cl. A-1, Upgraded to Aa2 (sf); previously on Mar 25, 2019 Upgraded
to A2 (sf)
Cl. A-2C, Upgraded to Ba2 (sf); previously on Jun 29, 2018 Upgraded
to Caa1 (sf)
Issuer: RAMP Series 2005-RS1 Trust
Cl. M-I-1, Upgraded to Ba1 (sf); previously on Feb 27, 2018
Upgraded to Caa1 (sf)
Issuer: RASC Series 2006-EMX1 Trust
Cl. M-2, Upgraded to B2 (sf); previously on Mar 27, 2018 Upgraded
to Caa3 (sf)
Issuer: Specialty Underwriting and Residential Finance Trust,
Series 2003-BC2
Cl. M-1, Downgraded to Ba1 (sf); previously on Jan 15, 2021
Downgraded to Baa1 (sf)
Cl. M-2, Downgraded to B1 (sf); previously on Jan 15, 2021
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 pools, and/or an increase in credit enhancement available
to the bonds. The rating downgrade is due to a deterioration in
collateral performance as well as outstanding interest shortfalls
and the uncertainty of whether those shortfalls will be reimbursed
in the near future.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features and credit enhancement.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment.
Transaction performance also depends greatly on the US macro
economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades Ratings on $58MM of US RMBS Issued 2004
------------------------------------------------------------
Moody's Ratings has upgraded the ratings of five bonds from three
US residential mortgage-backed transactions (RMBS), backed by Alt-A
and subprime mortgages issued by multiple issuers.
The complete rating actions are as follows:
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2004-22CB
Cl. 1-A-1, Upgraded to Baa1 (sf); previously on Sep 14, 2022
Upgraded to Baa2 (sf)
Cl. 2-A-1, Upgraded to Baa1 (sf); previously on Sep 11, 2019
Upgraded to Ba2 (sf)
Issuer: GSAA Trust 2004-3
Cl. AF-4, Upgraded to Aaa (sf); previously on May 23, 2023 Upgraded
to A1 (sf)
Cl. AF-5, Upgraded to Aaa (sf); previously on May 23, 2023 Upgraded
to Aa3 (sf)
Issuer: Structured Asset Investment Loan Trust 2004-11
Cl. M1, Upgraded to Aaa (sf); previously on May 23, 2023 Upgraded
to Aa2 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and an increase in credit enhancement available to
the bonds.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. This includes interest risk from
current or potential missed interest that remain unreimbursed.
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.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Philadelphia, Pa., USA.
Randy Antoni, Jhonas Dampog, Marites Claro, Joy Agravante,
Rousel Elaine Tumanda, Joel Anthony G. Lopez, Psyche A. Castillon,
Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and
Peter A. Chapman, Editors.
Copyright 2024. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000.
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