/raid1/www/Hosts/bankrupt/TCR_Public/240331.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 31, 2024, Vol. 28, No. 90
Headlines
AGL CLO 30: Fitch Assigns 'BB-sf' Rating on Class E Notes
AMERICREDIT AUTOMOBILE 2023-1: Moody's Ups E Notes Rating to Ba1
AMERIQUEST 2004-R10: S&P Raises Class M-2 Notes Rating to BB- (sf)
AMSR 2023-SFR1: DBRS Confirms BB Rating on Class F Certs
APIDOS CLO XLVII: Fitch Assigns Final 'BB+sf' Rating on Cl. E Notes
ARIVO ACCEPTANCE 2024-1: DBRS Gives Prov. BB Rating on D Notes
ATLAS SENIOR XII: S&P Lowers Class E Notes Rating to 'B (sf)'
BAIN CAPITAL 2020-5: Fitch Assigns BB-sf Rating on Cl. E-R Notes
BELMONT PARK: S&P Assigns BB- (sf) Rating on Class E Notes
BHG SECURITIZATION 2024-1CON: Fitch Gives 'BBsf' Rating on E Notes
BIRCH GROVE 8: Fitch Assigns 'BB-sf' Rating on Class E Notes
BLUEMOUNTAIN 2018-3: S&P Affirms B- (sf) Rating on Class F Notes
BRIGHTWOOD 2024-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
BRYANT PARK 2024-22: S&P Assigns BB- (sf) Rating on Class E Notes
BSPRT 2021-FL6: DBRS Confirms B(low) Rating on Class H Notes
BX COMMERCIAL 2024-WPT: Moody's Assigns (P)Ba2 Rating to E Certs
BXMT 2020-FL2: DBRS Cuts Class F Notes Rating to B
CFCRE COMMERCIAL 2016-C6: DBRS Confirms B Rating on X-F Certs
CHASE HOME 2024-3: Fitch Assigns 'B+sf' Rating on Class B-5 Certs
CHURCHILL MIDDLE IV: S&P Assigns Prelim BB- (sf) Rating E-R Notes
CIM TRUST 2021-J1: Moody's Upgrades Rating on Cl. B-5 Certs to Ba2
CITIGROUP 2015-GC29: Fitch Lowers Class F Debt Rating to CCsf
CITIGROUP COMMERCIAL 2013-GC15: DBRS Confirms C Rating on F Certs
CITIGROUP MORTGAGE 2024-RP1: Fitch Gives B(EXP) Rating on B-2 Notes
CITIGROUP MORTGAGE 2024-RP1: Fitch Rates Class B-2 Notes 'B'
COMM 2014-CCRE14: Moody's Lowers Rating on Cl. D Certs to B3
COMM 2014-UBS5: DBRS Cuts Class E Certs Rating to C
COMM 2014-UBS6: DBRS Confirms C Rating on Class G Certs
CONNECTICUT 2024-R02: DBRS Gives Prov. BB Rating on 1B-2X Notes
CONNECTICUT AVENUE 2024-R02: DBRS Finalizes BB Rating on 2 Classes
CROWN CITY IV: S&P Assigns BB- (sf) Rating on Class D-R Notes
DIAMETER CAPITAL 6: S&P Assigns Prelim BB- (sf) Rating on D Notes
DRYDEN 115: S&P Assigns BB- (sf) Rating on $20MM Class E Notes
ELLINGTON CLO III: Moody's Lowers Rating on $40MM E Notes to Caa3
ELMWOOD CLO VIII: S&P Assigns B- (sf) Rating on Class F-R Notes
EXETER AUTOMOBILE 2024-2: Fitch Gives BB-(EXP) Rating on E Notes
FIGRE TRUST 2024-HE1: DBRS Gives Prov. B(low) Rating on F Notes
FIRST EAGLE 2016-1: S&P Affirms BB- (sf) Rating on Class E-R Notes
GOLUB CAPITAL 72(B): Fitch Assigns 'BB-sf' Rating on Class E Notes
GREAT WOLF 2024-WOLF: DBRS Finalizes B(low) Rating on G Certs
GROVE FUNDING 2024-1: DBRS Gives Prov. B Rating on Class B-2 Certs
GROVE FUNDING III 2024-1: DBRS Finalizes B Rating on B-2 Certs
GS MORTGAGE 2017-485L: S&P Affirms 'BB' Rating on 2014A Rev. Bonds
GS MORTGAGE 2017-GS5: DBRS Confirms B(low) Rating on F Certs
GS MORTGAGE 2024-PJ3: Fitch Gives B-(EXP) Rating on Cl. B-5 Certs
GS MORTGAGE 2024-PJ4: Fitch Gives B-(EXP)sf Rating on Cl. B-5 Certs
GS MORTGAGE 2024-RPL2: DBRS Finalizes B(high) Rating on B-2 Notes
GS MORTGAGE 2024-RPL2: DBRS Gives Prov. B(high) Rating on B2 Notes
HARVEST US 2024-1: Fitch Assigns Final BB-sf Rating on Cl. E Notes
HILDENE TRUPS 2019-P12B: Moody's Ups $42.7MM B Notes Rating to Ba1
HINNT LLC 2024-A: Moody's Assigns B3 Rating to Class E Notes
INDEPENDENCE PLAZA 2018-INDP: DBRS Confirms B Rating on HRR Certs
INVESCO U.S. 2024-1: S&P Assigns 'BB-(sf)' Rating on Cl. E-R Notes
JP MORGAN 2012-WLDN: DBRS Confirms CCC Rating on Class C Certs
JP MORGAN 2019-ICON: DBRS Confirms B(low) Rating on G Certs
JP MORGAN 2024-3: Moody's Assigns (P)B3 Rating to Cl. B-5 Certs
JP MORGAN 2024-3: Moody's Assigns B3 Rating to Cl. B-5 Certs
JP MORGAN 2024-CES1: Fitch Assigns 'B-(EXP)' Rating on B-2 Certs
JP MORGAN 2024-VIS1: S&P Assigns Prelim 'B-' Rating on B-2 Certs
JPMBB COMMERCIAL 2015-C27: DBRS Cuts Class D Certs Rating to C
JPMCC COMMERCIAL 2014-C20: DBRS Confirms C Rating on 3 Classes
MAGNETITE LTD XII: Moody's Cuts $11.86MM F-R Notes Rating to Caa1
MAPS 2019-1: S&P Affirms CCC+ (sf) Rating on Class C Notes
MARATHON STATIC 2022-18: Fitch Affirms BB+sf Rating on Cl. E Notes
MCF CLO IX: S&P Assigns Prelim BB- (sf) Rating on Cl. E-R Notes
MULTI SECURITY 2005-RR4: DBRS Confirms CCC Rating on N Certs
NASSAU LTD 2022-I: Fitch Assigns 'BB+sf' Rating on Class E Notes
NATIONAL COLLEGIATE 2007-A: Moody's Cuts Rating on C Notes to Caa3
NAVESINK CLO 2: S&P Assigns Prelim BB- (sf) Rating on Cl. E Loans
NAVIENT STUDENT 2014-1: Fitch Lowers Rating on Two Tranches to Bsf
NEUBERGER BERMAN 54: Fitch Assigns 'BB-sf' Rating on Class E Notes
NYT 2019-NYT: Fitch Affirms 'BB-sf' Rating on Class F Notes
OCP CLO 2024-32: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
OLYMPIC TOWER 2017-OT: Fitch Lowers Rating on Cl. E Certs to 'Bsf'
ONE MARKET 2017-1MKT: S&P Lowers Class E Notes Rating to 'B+ (sf)'
PALMER SQUARE 2018-2: Moody's Gives B3 Rating to $6.65MM E-R Notes
PAWNEE EQUIPMENT 2022-1: DBRS Confirms BB(low) Rating on E Notes
PIKES PEAK 7: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
PPM CLO 2: S&P Assigns Prelim BB- (sf) Rating on Class E-R Notes
PRESTIGE AUTO 2024-1: DBRS Gives Prov. BB Rating on Class E Notes
PRET 2024-RPL1: DBRS Gives Prov. B Rating on Class B-2 Notes
PRPM 2024-NQM1: DBRS Gives Prov. BB Rating on Class B-1 Certs
RCKT MORTGAGE 2024-CES2: Fitch Assigns Bsf Rating on Cl. B-2 Notes
SALUDA GRADE 2024-CES1: DBRS Gives Prov. B(low) Rating on B2 Notes
SBNA AUTO 2024-A: Fitch Assigns 'BB(EXP)' Rating on Cl. E Notes
SIERRA TIMESHARE 2024-1: Fitch Assigns 'BBsf' Rating on Cl. D Notes
SIERRA TIMESHARE 2024-1: S&P Assigns BB- (sf) Rating on D Notes
SILVER POINT 4: Fitch Assigns 'BBsf' Rating on Class E Notes
SLM PRIVATE 2003-A: Moody's Downgrades 2 Tranches to Ba2
SPRUCE HILL 2020-SH1: S&P Affirms BB (sf) Rating on Cl. B-2 Notes
STONE STREET 2015-1: DBRS Confirms BB Rating on Class C Notes
TICP CLO VII: S&P Affirms 'B+ (sf)' Rating on Class E-R Notes
TRINITAS CLO XXVII: S&P Assigns BB- (sf) Rating on Class E Loans
UBSCM 2018-NYCH: S&P Affirms 'BB-(sf)' Rating on Class X-NCP Certs
VERUS SECURITIZATION 2024-INV1: DBRS Confirms BB on B-1 Notes
VERUS SECURITIZATION 2024-INV1: S&P Assigns B-(sf) on B-2 Notes
VIBRANT CLO XR: Fitch Assigns Final 'B-sf' Rating on Class E Notes
WELLS FARGO 2014-LC18: DBRS Cuts Class E Certs Rating to B
WELLS FARGO 2015-NXS2: DBRS Cuts Rating on 3 Classes to C
WELLS FARGO 2016-C32: DBRS Confirms B Rating on Class X-F Certs
WELLS FARGO 2016-NXS5: DBRS Confirms C Rating on Class G Certs
WHITNEY FUNDING: DBRS Confirms B(low) Rating on Class E Loan
[*] DBRS Reviews 78 Classes From 14 US RMBS Transactions
[*] DBRS Takes Rating Actions on Eight Real Estate Transactions
[*] Moody's Takes Actions on $129.8MM of US RMBS Issued 2004-2006
[*] S&P Takes Various Actions on 51 Classes From 25 U.S. RMBS Deals
[*] S&P Takes Various Actions On 64 Classes From 7 US RMBS Deals
*********
AGL CLO 30: Fitch Assigns 'BB-sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to AGL CLO
30 Ltd.
Entity/Debt Rating Prior
----------- ------ -----
AGL CLO 30 Ltd.
A-1 LT NRsf New Rating NR(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D 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 30 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 24.27, 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
99.69% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.49% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.1%.
Portfolio Composition (Neutral): The largest three industries may
comprise up to 44.5% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (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 '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, 'AA+sf' 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for AGL CLO 30 Ltd. In
cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
AMERICREDIT AUTOMOBILE 2023-1: Moody's Ups E Notes Rating to Ba1
----------------------------------------------------------------
Moody's Ratings takes action on 28 classes of bonds issued from 23
non-prime auto securitizations. The bonds are backed by pools of
retail automobile non-prime loan contracts originated and serviced
by multiple parties.
The complete rating actions are as follows:
Issuer: AmeriCredit Automobile Receivables Trust 2020-1
Class E Notes, Upgraded to Aa1 (sf); previously on Dec 18, 2023
Upgraded to Aa3 (sf)
Issuer: AmeriCredit Automobile Receivables Trust 2020-3
Class E Notes, Upgraded to Aa3 (sf); previously on Dec 18, 2023
Upgraded to A1 (sf)
Issuer: AmeriCredit Automobile Receivables Trust 2021-2
Class D Notes, Upgraded to Aaa (sf); previously on Jun 14, 2023
Upgraded to Aa1 (sf)
Class E Notes, Upgraded to A2 (sf); previously on Mar 17, 2022
Upgraded to Baa1 (sf)
Issuer: AmeriCredit Automobile Receivables Trust 2021-3
Class D Notes, Upgraded to Aa1 (sf); previously on Dec 18, 2023
Upgraded to Aa2 (sf)
Class E Notes, Upgraded to Baa1 (sf); previously on Jun 22, 2022
Upgraded to Baa2 (sf)
Issuer: AmeriCredit Automobile Receivables Trust 2022-1
Class D Notes, Upgraded to Aa3 (sf); previously on Jun 14, 2023
Upgraded to A1 (sf)
Class E Notes, Upgraded to Baa3 (sf); previously on Mar 16, 2022
Definitive Rating Assigned Ba1 (sf)
Issuer: AmeriCredit Automobile Receivables Trust 2023-1
Class C Notes, Upgraded to Aaa (sf); previously on Mar 15, 2023
Definitive Rating Assigned Aa2 (sf)
Class D Notes, Upgraded to A2 (sf); previously on Mar 15, 2023
Definitive Rating Assigned Baa1 (sf)
Class E Notes, Upgraded to Ba1 (sf); previously on Mar 15, 2023
Definitive Rating Assigned Ba2 (sf)
Issuer: Exeter Automobile Receivables Trust 2021-2
Class D Notes, Upgraded to Aaa (sf); previously on Dec 18, 2023
Upgraded to Aa1 (sf)
Issuer: Exeter Automobile Receivables Trust 2021-3
Class D Notes, Upgraded to Aa1 (sf); previously on Dec 18, 2023
Upgraded to Aa2 (sf)
Issuer: Exeter Automobile Receivables Trust 2021-4
Class D Notes, Upgraded to Aa1 (sf); previously on Dec 18, 2023
Upgraded to Aa3 (sf)
Issuer: Exeter Automobile Receivables Trust 2022-3
Class C Notes, Upgraded to Aaa (sf); previously on Sep 18, 2023
Upgraded to Aa1 (sf)
Issuer: Santander Drive Auto Receivables Trust 2021-1
Class E Notes, Upgraded to Aa1 (sf); previously on Dec 18, 2023
Upgraded to Aa2 (sf)
Issuer: Santander Drive Auto Receivables Trust 2021-2
Class E Notes, Upgraded to Aa3 (sf); previously on Dec 18, 2023
Upgraded to A2 (sf)
Issuer: Santander Drive Auto Receivables Trust 2021-3
Class E Notes, Upgraded to A1 (sf); previously on Dec 18, 2023
Upgraded to A3 (sf)
Issuer: Santander Drive Auto Receivables Trust 2021-4
Class E Notes, Upgraded to A3 (sf); previously on Dec 18, 2023
Upgraded to Baa2 (sf)
Issuer: Santander Drive Auto Receivables Trust 2022-1
Class D Notes, Upgraded to A3 (sf); previously on Feb 23, 2022
Definitive Rating Assigned Baa3 (sf)
Issuer: Santander Drive Auto Receivables Trust 2022-2
Class C Notes, Upgraded to Aaa (sf); previously on Sep 18, 2023
Upgraded to Aa1 (sf)
Issuer: Santander Drive Auto Receivables Trust 2022-3
Class C Notes, Upgraded to Aaa (sf); previously on Sep 18, 2023
Upgraded to Aa1 (sf)
Issuer: Santander Drive Auto Receivables Trust 2022-4
Class C Notes, Upgraded to Aaa (sf); previously on Sep 18, 2023
Upgraded to Aa1 (sf)
Issuer: Santander Drive Auto Receivables Trust 2022-5
Class D Notes, Upgraded to Aa3 (sf); previously on Dec 18, 2023
Upgraded to A1 (sf)
Issuer: Santander Drive Auto Receivables Trust 2022-6
Class D Notes, Upgraded to A1 (sf); previously on Dec 18, 2023
Upgraded to A3 (sf)
Issuer: Santander Drive Auto Receivables Trust 2022-7
Class C Notes, Upgraded to Aaa (sf); previously on Sep 18, 2023
Upgraded to Aa1 (sf)
Issuer: Santander Drive Auto Receivables Trust 2023-2
Class C Notes, Upgraded to Aaa (sf); previously on May 17, 2023
Definitive Rating Assigned Aa1 (sf)
Issuer: Santander Drive Auto Receivables Trust 2023-3
Class C Notes, Upgraded to Aaa (sf); previously on Jul 26, 2023
Definitive Rating Assigned Aa1 (sf)
A comprehensive review of all credit ratings for the respective
transaction(s) has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade actions are primarily driven by the buildup of credit
enhancement due to structural features including a sequential pay
structure, non-declining reserve account and
overcollateralization.
Moody's lifetime cumulative net loss expectations are noted below
for the transaction pools. The loss expectations reflect updated
performance trends on the underlying pools.
AmeriCredit Automobile Receivables Trust 2020-1: 4.25%
AmeriCredit Automobile Receivables Trust 2020-3: 3.75%
AmeriCredit Automobile Receivables Trust 2021-2: 5.25%
AmeriCredit Automobile Receivables Trust 2021-3: 6.75%
AmeriCredit Automobile Receivables Trust 2022-1: 7.50%
AmeriCredit Automobile Receivables Trust 2023-1: 9.00%
Exeter Automobile Receivables Trust 2021-2: 18.00%
Exeter Automobile Receivables Trust 2021-3: 20.50%
Exeter Automobile Receivables Trust 2021-4: 23.00%
Exeter Automobile Receivables Trust 2022-3: 28.00%
Santander Drive Auto Receivables Trust 2021-1: 6.50%
Santander Drive Auto Receivables Trust 2021-2: 8.50%
Santander Drive Auto Receivables Trust 2021-3: 9.50%
Santander Drive Auto Receivables Trust 2021-4: 11.00%
Santander Drive Auto Receivables Trust 2022-1: 13.50%
Santander Drive Auto Receivables Trust 2022-2: 14.00%
Santander Drive Auto Receivables Trust 2022-3: 15.50%
Santander Drive Auto Receivables Trust 2022-4: 16.50%
Santander Drive Auto Receivables Trust 2022-5: 17.00%
Santander Drive Auto Receivables Trust 2022-6: 17.00%
Santander Drive Auto Receivables Trust 2022-7: 17.00%
Santander Drive Auto Receivables Trust 2023-2: 17.00%
Santander Drive Auto Receivables Trust 2023-3: 17.00%
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.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
November 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are greater than necessary to
protect investors against current expectations of loss could lead
to an upgrade of the ratings. Losses could decline from Moody's
original expectations as a result of a lower number of obligor
defaults or greater recoveries from the value of the vehicles
securing the obligors promise of payment. The US job market and the
market for used vehicles are also primary drivers of the
transaction's performance. Other reasons for better-than-expected
performance include changes in servicing practices to maximize
collections on the loans or refinancing opportunities that result
in a prepayment of the loan.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could lead to a
downgrade of the ratings. Losses could increase from Moody's
original expectations as a result of a higher number of obligor
defaults or a deterioration in the value of the vehicles securing
the obligors promise of payment. The US job market and the market
for used vehicles are also primary drivers of the transaction's
performance. Other reasons for worse-than-expected performance
include poor servicing, error on the part of transaction parties
including further restatement of performance data, lack of
transactional governance and fraud.
AMERIQUEST 2004-R10: S&P Raises Class M-2 Notes Rating to BB- (sf)
------------------------------------------------------------------
S&P Global Ratings completed its review of 53 ratings from seven
U.S. RMBS transactions issued between 2004 and 2005. The review
yielded one upgrade, 50 affirmations, and two withdrawals.
Analytical Considerations
S&P incorporates various considerations into its decisions to raise
or affirm ratings when reviewing the indicative ratings suggested
by its projected cash flows. These considerations are based on
transaction-specific performance and/or structural characteristics
and their potential effects on certain classes. Some of these
considerations may include:
-- Collateral performance or delinquency trends;
-- An increase or decrease in available credit support;
-- Historical and/or outstanding missed interest payments or
interest shortfalls;
-- Available subordination and/or overcollateralization;
-- A small loan count; and
-- Reduced interest payments due to loan modifications.
Rating Actions
The rating changes reflect S&P's view regarding the associated
transaction-specific collateral performance, structural
characteristics, and/or the application of specific criteria
applicable to these classes.
The upgrade reflects the classes' increased credit support. As a
result, the upgrades reflect the classes' ability to withstand a
higher level of projected losses than S&P had previously
anticipated.
The rating affirmations reflect S&P's view that its projected
credit support, collateral performance, and credit-related
reductions in interest on these classes have remained relatively
consistent with our prior projections.
S&P also withdrew its ratings on two classes from one transaction
due to the small remaining loan count on the related structure.
Once a pool has declined to a de minimis amount, S&P believes there
is a high degree of credit instability that is incompatible with
any rating level.
Ratings list
RATING
ISSUER
SERIES CLASS CUSIP TO FROM
Ameriquest Mortgage Securities Inc.
2004-R10 M-1 03072SVR3 BBB (sf) BBB (sf)
Ameriquest Mortgage Securities Inc.
2004-R10 M-2 03072SVS1 BB- (sf) B (sf)
PRIMARY RATING DRIVER(S): Increased credit support.
Ameriquest Mortgage Securities Inc.
2004-R10 M-3 03072SVT9 CCC (sf) CCC (sf)
Ameriquest Mortgage Securities Inc.
2004-R10 M-4 03072SVU6 CCC (sf) CCC (sf)
Ameriquest Mortgage Securities Inc.
2004-R10 M-5 03072SVV4 CCC (sf) CCC (sf)
Ameriquest Mortgage Securities Inc.
2004-R10 M-6 03072SVW2 CC (sf) CC (sf)
CHL Mortgage Pass-Through Trust 2004-HYB6
2004-HYB6 A-1 12669F6L2 BB+ (sf) BB+ (sf)
CHL Mortgage Pass-Through Trust 2004-HYB6
2004-HYB6 A-2 12669GBA8 BB+ (sf) BB+ (sf)
CHL Mortgage Pass-Through Trust 2004-HYB6
2004-HYB6 A-3 12669GBC4 BB+ (sf) BB+ (sf)
CHL Mortgage Pass-Through Trust 2004-HYB6
2004-HYB6 A-4 12669GBE0 B+ (sf) B+ (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 1-A-1 12669GA50 BB (sf) BB (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 2-A-1A 12669GA76 BBB (sf) BBB (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 2-A-2A 12669GE49 BBB (sf) BBB (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 2-A-3A 12669GE56 BB (sf) BB (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 2-A-4A 12669GE64 BB (sf) BB (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 2-A-6B 12669GF48 BB (sf) BB (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 3-A-1 12669GA92 BB (sf) BB (sf)
CHL Mortgage Pass-Through Trust 2005-HYB3
2005-HYB3 3-A-2 12669GF55 BB (sf) BB (sf)
First Horizon Alternative Mortgage Securities Trust 2004-AA7
2004-AA7 II-A-1 32051GFB6 NR B- (sf)
PRIMARY RATING DRIVER(S): Criteria no longer applicable.
First Horizon Alternative Mortgage Securities Trust 2004-AA7
2004-AA7 II-A-2 32051GFC4 NR CCC (sf)
PRIMARY RATING DRIVER(S): Criteria no longer applicable.
GSR Mortgage Loan Trust 2005-AR2
2005-AR2 1A1 36242DH48 B+ (sf) B+ (sf)
GSR Mortgage Loan Trust 2005-AR2
2005-AR2 1A2 6242DH55 BBB- (sf) BBB- (sf)
GSR Mortgage Loan Trust 2005-AR2
2005-AR2 1A3 36242DH63 B+ (sf) B+ (sf)
GSR Mortgage Loan Trust 2005-AR2
2005-AR2 2A1 36242DH71 B+ (sf) B+ (sf)
GSR Mortgage Loan Trust 2005-AR2
2005-AR2 3A1 36242DH89 BB+ (sf) BB+ (sf)
GSR Mortgage Loan Trust 2005-AR2
2005-AR2 4A1 36242DH97 B+ (sf) B+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 1-A-1 466247LJ0 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 2-A-1 466247LK7 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 2-A-3 466247LM3 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 2-A-4 466247LN1 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 3-A-1 466247LP6 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 3-A-2 466247LQ4 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 3-A-4 466247LS0 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 3-A-5 466247NJ8 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 4-A-1 466247LU5 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 4-A-2 466247LV3 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 5-A-2 466247LX9 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 5-A-3 466247LY7 A+ (sf) A+ (sf)
JPMorgan Mortgage Trust 2005-A1
2005-A1 1-B-1 466247MB6 B- (sf) B- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 1-A-1 466247NK5 AA+ (sf) AA+ (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 1-A-2 466247NL3 AA- (sf) AA- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 2-A-1 466247NM1 AA+ (sf) AA+ (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 2-A-2 466247NN9 AA- (sf) AA- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 3-A-2 466247NQ2 AA+ (sf) AA+ (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 3-A-3 466247NR0 AA+ (sf) AA+ (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 3-A-4 466247NS8 AA- (sf) AA- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 4-A-1 466247NT6 AA- (sf) AA- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 5-A-2 466247NV1 AA+ (sf) AA+ (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 5-A-3 466247NW9 AA- (sf) AA- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 7-CB-1 466247NZ2 AA+ (sf) AA+ (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 7-CB-2 466247PA5 AA- (sf) AA- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 8-A-1 466247PB3 AA- (sf) AA- (sf)
JPMorgan Mortgage Trust 2005-A2
2005-A2 9-A-1 466247PC1 AA- (sf) AA- (sf)
AMSR 2023-SFR1: DBRS Confirms BB Rating on Class F Certs
--------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on the Single-Family Rental
Pass-Through Certificates issued by AMSR 2023-SFR1 Trust as
follows:
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E-1 at BBB (high) (sf)
-- Class E-2 at BBB (low) (sf)
-- Class F at BB (sf)
The credit rating confirmations reflect asset performance and
credit-support levels that are consistent with the current credit
ratings.
Morningstar DBRS' credit rating actions are based on the following
analytical considerations:
-- Key performance measures as reflected in month-over-month
changes in vacancy and delinquency, quarterly analysis of the
actual expenses, credit enhancement increases since deal inception,
and bond paydown factors.
Morningstar DBRS' long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued. The Morningstar DBRS short-term debt rating scale
provides an opinion on the risk that an issuer will not meet its
short-term financial obligations in a timely manner.
Notes: The principal methodology applicable to the credit ratings
is Rating and Monitoring U.S. Single-Family Rental Securitizations
(November 23, 2022), https://dbrs.morningstar.com/research/405662.
APIDOS CLO XLVII: Fitch Assigns Final 'BB+sf' Rating on Cl. E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Apidos CLO XLVII Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Apidos CLO XLVII Ltd.
A-1 LT NRsf New Rating NR(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AA+sf New Rating AA+(EXP)sf
C LT A+sf New Rating A+(EXP)sf
D-1 LT BBB-sf New Rating BBB-(EXP)sf
D-2 LT BBB-sf New Rating BBB-(EXP)sf
E LT BB+sf New Rating BB+(EXP)sf
F LT NRsf New Rating NR(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Apidos CLO XLVII Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by CVC
Credit Partners, 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
97.5% first-lien senior secured loans and has a weighted average
recovery assumption of 74.94%. 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 '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-1,
between less than 'B-sf' and 'BB+sf' for class D-2, and between
less than 'B-sf' and 'BB-sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes 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-1, 'A-sf' 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Apidos CLO XLVII
Ltd. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
ARIVO ACCEPTANCE 2024-1: DBRS Gives Prov. BB Rating on D Notes
--------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
notes issued by Arivo Acceptance Auto Loan Receivables Trust 2024-1
(ARIVO 2024-1 or the Issuer):
-- $108,740,000 Class A Notes at AA (sf)
-- $24,920,000 Class B Notes at A (sf)
-- $14,270,000 Class C Notes at BBB (sf)
-- $27,840,000 Class D Notes at BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The provisional ratings are based on Morningstar DBRS' review of
the following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the cash collateral account,
and excess spread. Credit enhancement levels are sufficient to
support the Morningstar DBRS-projected cumulative net loss (CNL)
assumption under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(2) The Morningstar DBRS CNL assumption is 18.80% based on the
cut-off date pool composition.
(3) The transaction assumptions consider Morningstar DBRS's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios For
Rated Sovereigns: December 2023 Update", published on December 19,
2023. These baseline macroeconomic scenarios replace Morningstar
DBRS's moderate and adverse Coronavirus Disease (COVID-19) pandemic
scenarios, which were first published in April 2020.
(4) Morningstar DBRS performed an operational review of Arivo
Acceptance, LLC (Arivo) and considers the entity an acceptable
originator and servicer of subprime and nonprime auto loans. The
transaction structure provides for a transition of servicing in the
event a Servicer Termination Event occurs. Wilmington Trust,
National Association (rated AA (low) with a Negative trend by
Morningstar DBRS) is the Backup Servicer, and Systems & Services
Technologies, Inc. is the contracted subagent to perform the Backup
Servicer's duties.
(5) The credit quality of the collateral and performance of Arivo's
auto loan portfolio. The weighted-average (WA) remaining term of
the Initial Receivables is approximately 63.0 months with WA
seasoning of approximately 8.3 months. Approximately 5.47% of the
pool was originated prior to 2022. The nonzero WA credit score of
the pool is 565 and the WA annual percentage rate is 18.52%.
(6) Loss performance for Arivo's loan originations is limited. As a
result, in addition to Arivo's loan performance data, Morningstar
DBRS incorporated proxy analysis to help determine the timing of
expected losses for the pool. The proxy analysis evaluated certain
demographic characteristics of Arivo's originations relative to
those of other issuers where Morningstar DBRS possessed more
extensive performance history.
(7) The legal structure and expected presence of legal opinions,
which will address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Arivo, that
the trust has a valid first-priority security interest in the
assets, and consistency with the Morningstar DBRS "Legal Criteria
for U.S. Structured Finance."
The rating on the Class A Notes reflects 46.90% of initial hard
credit enhancement provided by subordinated notes in the pool
(33.35%), OC (12.55%), and cash collateral account (1.00% of the
aggregate pool balance, including the initial pool balance plus the
subsequent receivable balance, and nondeclining). The ratings on
the Class B, C, and D Notes reflect 34.50%, 27.40% and 13.55% of
initial hard credit enhancement, respectively.
Morningstar DBRS' credit ratings on the Class A, Class B, Class C,
and Class D Notes address the credit risk associated with the
identified financial obligations in accordance with the relevant
transaction documents. The associated financial obligations are the
Note Interest and Note Principal Balance for each of the Class A,
Class B, Class C, and Class D Notes.
Morningstar DBRS' credit rating does not address nonpayment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. Contractual payment obligations that are not financial
obligations are the accrued interest on the overdue interest on
each of the Class A, Class B, Class C, and Class D Notes.
Morningstar DBRS' long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued. The Morningstar DBRS short-term debt rating scale
provides an opinion on the risk that an issuer will not meet its
short-term financial obligations in a timely manner.
Notes: All figures are in U.S. dollars unless otherwise noted.
ATLAS SENIOR XII: S&P Lowers Class E Notes Rating to 'B (sf)'
-------------------------------------------------------------
S&P Global Ratings lowered its rating on the class E notes from
Atlas Senior Loan Fund XII Ltd. and removed them from CreditWatch
with negative implications. The transaction is a U.S.
collateralized loan obligation (CLO) managed by Crescent Capital
Group LP. S&P also affirmed its ratings on the class A-1, B, C, and
D debt from the same transaction.
The rating actions follow its review of the transaction's
performance using data from the January and February 2024 trustee
reports.
S&P had placed the class E notes on CreditWatch with negative
implications on Jan. 18, 2024, primarily due to its failing
overcollateralization (O/C) test, preliminary indicative cash flow
results, and increased exposure to 'CCC' rated and defaulted
collateral.
Since S&P's November 2021 rating actions, the class X notes have
been paid down completely and the class A-1 notes have been paid
down by $19.08 million, which reduced its outstanding balance to
93.64% of its original balance. Following are the changes in the
reported O/C ratios as of the February 2024 trustee report compared
to the August 2021 trustee report, which S&P used for its previous
rating actions:
-- The class A/B O/C ratio declined to 126.94% from 128.56%.
-- The class C O/C ratio declined to 116.05% from 118.04%.
-- The class D O/C ratio declined to 109.58% from 111.75%.
-- The class E O/C ratio declined to 103.55% from 105.85%.
Collateral obligations with ratings in the 'CCC' category have
increased, with $47.24 million reported as of the February 2024
trustee report, compared with $28.80 million reported as of the
August 2021 trustee report. Over the same period, the par amount of
defaulted collateral also increased, to $5.47 million from $3.10
million. The portfolio has also lost some par compared to the time
of S&P's last rating actions. The O/C ratios have declined due to a
combination of par losses and increases in defaults and haircuts.
The class E O/C test is currently below its required threshold and
interest proceeds are currently being diverted to pay down the
class A-1 notes.
The lowered rating on the class E notes reflects S&P's cash flow
results (which are not passing at the prior rating level),
deteriorated credit quality of the underlying portfolio, and the
decrease in credit support available to the notes.
The affirmed ratings reflect adequate credit support at the current
rating levels, though any further deterioration in the credit
support available to the notes could results in further rating
changes.
S&P said, "Although our cash flow analysis indicated higher ratings
for the class B notes, our rating actions consider the decline in
O/C ratios, increase in defaults, and uptick in the 'CCC' exposure.
As a result, we affirmed the ratings to retain some cushions that
could help offset any potential future negative credit migration in
the underlying collateral.
"In line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults and recoveries upon default under various interest rate
and macroeconomic scenarios. In addition, our analysis 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 all of the rated
outstanding classes have adequate credit enhancement available at
the rating levels associated with this rating action."
S&P Global Ratings will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the credit
enhancement available to support them and take rating actions as it
deems necessary.
Rating Lowered And Removed From CreditWatch
Atlas Senior Loan Fund XII Ltd.
Class E to 'B (sf)' from 'B+ (sf)/Watch Neg'
Ratings Affirmed
Atlas Senior Loan Fund XII Ltd.
Class A-1: AAA (sf)
Class B: AA (sf)
Class C: A (sf)
Class D: BBB- (sf)
Other Outstanding Notes
Atlas Senior Loan Fund XII Ltd.
Class A-2: Not rated
BAIN CAPITAL 2020-5: Fitch Assigns BB-sf Rating on Cl. E-R Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Bain
Capital Credit CLO 2020-5, Limited (Reset) Transaction.
Entity/Debt Rating
----------- ------
Bain Capital Credit
CLO 2020-5, Limited
A-R loans LT AAAsf New Rating
B-R LT AAsf New Rating
C-1-R LT Asf New Rating
C-F-R LT Asf New Rating
D-R LT BBBsf New Rating
E-R LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
X-R LT AAAsf New Rating
TRANSACTION SUMMARY
Bain Capital Credit CLO 2020-5, Limited (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that will
be managed by Bain Capital Credit U.S. CLO Manager, LLC. Net
proceeds from the issuance of the secured and subordinated notes
will provide financing on a portfolio of approximately $395.9
million of primarily first lien senior secured leveraged loans,
which amount excludes defaulted obligations.
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 25.04, versus a maximum covenant, in
accordance with the initial expected matrix point of 25.25. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
95.65% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.37% versus a
minimum covenant, in accordance with the initial expected matrix
point of 68.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 42.5% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 2.1-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-R, between
'BBB-sf' and 'A+sf' for class B-R, between 'BB-sf' and 'A-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.
Sensitivity scenarios have no impact to the class X-R notes rated
'AAAsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X-R notes and
class A-R loans; as these 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, 'AA+sf' for class C-R, 'A+sf'
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, 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Bain Capital Credit
CLO 2020-5, Limited. In cases where Fitch does not provide ESG
relevance scores in connection with the credit rating of a
transaction, programme, instrument or issuer, Fitch will disclose
in the key rating drivers any ESG factor which has a significant
impact on the rating on an individual basis.
BELMONT PARK: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------
S&P Global Ratings assigned its 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 ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
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
BHG SECURITIZATION 2024-1CON: Fitch Gives 'BBsf' Rating on E Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to the
notes issued by BHG Securitization Trust 2024-1CON (BHG
2024-1CON).
Entity/Debt Rating Prior
----------- ------ -----
BHG Securitization
Trust 2024-1CON
A LT AAAsf New Rating AAA(EXP)sf
B LT AA-sf New Rating AA-(EXP)sf
C LT A-sf New Rating A-(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BBsf New Rating BB(EXP)sf
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.
KEY RATING DRIVERS
Collateral Pool Comprised of High FICO Borrowers: As of the final
pool composition, the BHG 2024-1CON receivables pool has a weighted
average (WA) FICO score of 746; 1.08% of the borrowers have a score
below 661 and 51.24% 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'/'BBB-sf'/'BBsf';
Increased default base case by 25% and reduced recovery base case
by 25%: 'AAsf'/'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.
BIRCH GROVE 8: Fitch Assigns 'BB-sf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Birch
Grove CLO 8 Ltd.
Entity/Debt Rating
----------- ------
Birch Grove
CLO 8 Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Birch Grove CLO 8 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by AS
Birch Grove CLO Management LP. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $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
95.38% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.76% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.8%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate, while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 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 and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. Fitch believes these conditions would reduce the effective
risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D; and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes; and as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, '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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Pikes Peak CLO 7.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
BLUEMOUNTAIN 2018-3: S&P Affirms B- (sf) Rating on Class F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1R, A-2R,
and B-R replacement debt from BlueMountain CLO 2018-3
Ltd./BlueMountain CLO 2018-3 LLC, a CLO originally issued in
October 2018 that is managed by Sound Point Capital Management L.P.
At the same time, S&P withdrew its ratings on the class A-1 and B
debt following payment in full on the March 21, 2024, refinancing
date (S&P did not rate the original class A-2 debt). S&P also
affirmed its ratings on the class C, D, E, and F debt, which was
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 non-call period for the newly issued
debt was set to Sept. 21, 2024.
Replacement And Outstanding Debt Issuances
Replacement debt
-- Class A-1R, $361.04 million: Three-month term SOFR + 1.19%
-- Class A-2R, $24.00 million: Three-month term SOFR + 1.60%
-- Class B-R, $69.00 million: Three-month term SOFR + 1.85%
Outstanding debt
-- Class A-1, $361.04 million: Three-month term SOFR + 1.41%
-- Class A-2, $24.00 million: Three-month term SOFR + 1.66%
-- Class B, $69.00 million: Three-month term SOFR + 2.03%
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.
"On a standalone basis, the results of the cash flow analysis
indicated a lower rating on the class F debt. Given the overall
credit quality of the portfolio and the passing coverage tests, we
affirmed our rating on the class F debt. Additionally, the class F
debt does not meet our 'CCC' rating definition.
"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 we will take rating actions as we
deem necessary."
Ratings Assigned
BlueMountain CLO 2018-3 Ltd./BlueMountain CLO 2018-3 LLC
Class A-1R, $361.04 million: 'AAA (sf)'
Class A-2R, $24.00 million: 'AAA (sf)'
Class B-R, $69.00 million: 'AA (sf)'
Ratings Affirmed
BlueMountain CLO 2018-3 Ltd./BlueMountain CLO 2018-3 LLC
Class C: A (sf)
Class D: BBB- (sf)
Class E: BB- (sf)
Class F: B- (sf)
Ratings Withdrawn
BlueMountain CLO 2018-3 Ltd./BlueMountain CLO 2018-3 LLC
Class A-1 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Other Outstanding Debt
BlueMountain CLO 2018-3 Ltd./BlueMountain CLO 2018-3 LLC
Subordinated notes: NR
Class A-2: NR
NR--Not rated.
BRIGHTWOOD 2024-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Brightwood
Capital MM CLO 2024-2 Ltd./Brightwood Capital MM CLO 2024-2 LLC's
floating- and fixed-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 Brightwood SPV Advisors LLC.
The preliminary ratings are based on information as of March 26,
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
Brightwood Capital MM CLO 2024-2 Ltd./
Brightwood Capital MM CLO 2024-2 LLC
Class A-1, $292.00 million: AAA (sf)
Class A-1L loans, $100.00 million: AAA (sf)
Class A-2, $28.00 million: AAA (sf)
Class B-1, $21.00 million: AA (sf)
Class B-L loans, $15.00 million: AA (sf)
Class B-2, $13.00 million: AA (sf)
Class C (deferrable), $56.00 million: A (sf)
Class D (deferrable), $49.00 million: BBB- (sf)
Class E (deferrable), $35.00 million: BB- (sf)
Subordinated notes, $98.30 million: Not rated
BRYANT PARK 2024-22: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Bryant Park Funding
2024-22 Ltd./Bryant Park Funding 2024-22 LLC's floating- and fixed
rate-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 Marathon Asset Management L.P.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Bryant Park Funding 2024-22 Ltd./Bryant Park Funding 2024-22 LLC
Class A-1, $252.00 million: AAA (sf)
Class A-2, $4.00 million: AAA (sf)
Class B, $48.00 million: AA (sf)
Class C-1 (deferrable), $20.00 million: A+ (sf)
Class C-2 (deferrable), $4.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $37.25 million: Not rated
BSPRT 2021-FL6: DBRS Confirms B(low) Rating on Class H Notes
------------------------------------------------------------
DBRS, Inc. confirmed all credit ratings on the classes of notes
issued by BSPRT 2021-FL6 Issuer, Ltd. (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (high) (sf)
-- Class G Notes at BB (low) (sf)
-- Class H Notes at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which has remained in line with
Morningstar DBRS' expectations, as the trust continues to be
primarily secured by multifamily collateral. While the borrowers of
the majority of the remaining loans are generally progressing with
their respective business plans, two loans, representing 15.1% of
the pool balance, are 90 days delinquent and are expected to
transfer to special servicing next month. In conjunction with this
press release, Morningstar DBRS has published a Surveillance
Performance Update report with in-depth analysis and credit metrics
for the transaction as well as business plan updates on select
loans.
The pool's collateral initially consisted of 21 floating-rate loans
secured by 25 properties with a cut-off pool balance of $446.7
million and a potential maximum pool balance of $700.0 million. The
trust featured a 30-month reinvestment period that expired with the
September 2023 payment date with a subsequent Replenishment Period
commencing thereafter. The Replenishment Period is expected to end
after the Issuer has acquired $70.0 million of cumulative funded
companion loan participation interests into the trust. As of the
February 2024 remittance, the pool comprised 51 loans secured by 81
properties with a cumulative trust balance of $672.6 million and an
outstanding bond balance of $675.0 million, representing collateral
reduction of 3.6% since issuance. Since Morningstar DBRS' previous
credit rating action in May 2023, 16 loans with a prior cumulative
trust balance of $189.1 million have been successfully repaid in
full from the pool. In addition, nine loans, totaling $54.1
million, have been added to the pool.
The transaction is concentrated by property type as 39 loans,
representing 63.6% of the current trust balance, are secured by
multifamily properties; seven loans, representing 20.0% of the
current trust balance, are secured by hospitality properties; and
five loans, representing 16.4% of the current trust balance, are
secured by office properties. The pool is primarily secured by
properties in suburban markets, with 40 loans, representing 72.3%
of the pool, with a Morningstar DBRS Market Rank of 3, 4, or 5. An
additional four loans, representing 15.3% of the pool, are secured
by properties in urban markets, with a Morningstar DBRS Market Rank
of 6 or 7. The remaining seven loans, representing 12.5% of the
pool, are secured by properties in tertiary markets, with a
Morningstar DBRS Market Rank of 2. In comparison with the pool
composition in May 2023, loans comprising 74.7% of the pool were in
suburban markets, 19.6% were in urban markets, and 5.7% were in
tertiary markets.
Leverage across the pool was generally stable as of the February
2024 reporting when compared with issuance metrics. The current
weighted-average (WA) as-is appraised loan-to-value ratio (LTV) is
65.1%, with a current WA stabilized LTV of 58.4%. In comparison,
these figures were 66.3% and 60.6%, respectively, at issuance.
Morningstar DBRS recognizes that select property values may be
inflated as the majority of the individual property appraisals were
completed in 2021 and 2022 and may not reflect the current rising
interest rate or widening capitalization rate (cap rate)
environment. In the analysis for this review, Morningstar DBRS
applied upward LTV adjustments across 15 loans, representing 61.3%
of the current trust balance.
Through December 2023, the collateral manager had advanced
cumulative loan future funding of $225.4 million to 42 of the
outstanding individual borrowers. The largest loan with future
funding advances to date is the Grand Cypress & Palacio loan
($126.0 million). The loan, which represents the largest in the
pool, is secured by 844 multifamily units across two Class A
multifamily properties in St. Johns, Florida. The borrower used the
future funding advances to fund hard and soft costs following the
construction of the property as well as to fund interest payments
on the mezzanine loan.
An additional $47.8 million of future loan funding allocated to 29
of the outstanding individual borrowers remains available. The
largest portion of available funds ($5.4 million) is allocated to
the borrower of the Cedar Grove Portfolio loan, which is sponsored
by GVA Real Estate Group (GVA). The loan is secured by a portfolio
consisting of 15 multifamily properties spread across North
Carolina, South Carolina, and Oklahoma. According to the Q4 2023
collateral manager report, the loan is 90 days delinquent and is
expected to transfer to special servicing, as the lender is
pursuing foreclosure. As of YE2023, the portfolio was 84.0%
occupied with a debt service coverage ratio (DSCR) of 0.87 times
(x). The loan has an initial maturity date of June 2024 followed by
up to three 12-month extension options. In its analysis,
Morningstar DBRS applied a current market cap rate to the in-place
net cash flow (NCF), which resulted in an elevated LTV nearing
100.0%, suggesting a replacement loan will require a significant
cash equity contribution from the sponsor if it remains committed
to the loan.
As of February 2024, there were no specially serviced loans;
however, eight loans, representing 26.0% of the current pool
balance, were on the servicer's watchlist. The loans have primarily
been flagged for upcoming loan maturity and low occupancy rates.
The largest loan on the servicer's watchlist, 150 West & 86 North,
is secured by two garden-style multifamily properties totaling 345
units in Mooresville and Chapel Hill, North Carolina. The loan is
also sponsored by GVA and is being monitored on the servicer's
watchlist for delinquency concerns after the loan was reported 90
days delinquent. According to the Q4 2023 collateral manager
report, the loan is also expected to transfer to special servicing,
as the lender has initiated foreclosure proceedings. As per the Q4
2023 update from the collateral manager, the portfolio had a
combined occupancy rate of 78.8% as of the December 2023 rent roll
with an average rental rate of $1,270 per unit. The two-year term
loan has an initial maturity of June 2024 followed by up to three
12-month extension options. According to the YE2023 financials
provided by the collateral manager, the property generated NCF of
$2.4 million, equating to a debt yield of 4.1% and a DSCR of 0.58x.
In its current analysis, Morningstar DBRS applied a current market
cap rate to the in-place NCF as well an increased probability of
default on the loan, which resulted in a loan expected loss
approximately two times the expected loss of the overall pool.
The second-largest loan on the servicer's watchlist, Waterford
Grove Apartments, is secured by 552-unit, garden-style multifamily
property in Houston. The loan is being monitored on the servicer's
watchlist for occupancy concerns after occupancy decreased to 68.3%
as of the December 2023 rent roll. The loan matures in May 2024 and
includes two additional 12-month extension options. In its
analysis, Morningstar DBRS applied a current market cap rate to the
in-place NCF, which resulted in an elevated LTV nearing 100.0%,
suggesting a replacement loan will require a significant cash
equity contribution from the sponsor.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX COMMERCIAL 2024-WPT: Moody's Assigns (P)Ba2 Rating to E Certs
----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to five classes of
CMBS securities, to be issued by BX Commercial Mortgage Trust
2024-WPT, Commercial Mortgage Pass-Through Certificates, Series
2024-WPT:
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba2 (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 a
portfolio of 13 industrial properties encompassing approximately
4,753,232 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 13 industrial properties
located across 5 distinct markets in four states. The metropolitan
statistical area concentration is in Atlanta and the largest state
concentration is in Georgia (44.3% of net rentable area (the "NRA")
and 35.4% of in-place NOI). The portfolio's property-level
Herfindahl score is 7.46 based on allocated loan amount (the
"ALA").
The collateral properties contain a total of 4,753,232 SF of NRA
across the following two industrial subtypes: Bulk Warehouse (58.4%
of NRA, 38.7% of underwritten NOI); and Warehouse (41.6%, 61.3%).
Property size ranges between 111,000 SF and 1,512,552 SF, and
averages approximately 365,633 SF. Maximum clear heights for
properties range between 24 feet and 36 feet, and average
approximately 32 feet. Construction dates for properties in the
portfolio range between 1986 and 2020, with a weighted average year
built of 2005. Since 2021 the sponsors have spent approximately
$1.0 million ($0.21 PSF) in renovations. The properties are
generally well maintained and show little signs of deferred
maintenance.
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 1.07X and Moody's first
mortgage actual stressed DSCR is 0.82X. Moody's DSCR is based on
Moody's stabilized net cash flow.
The loan first mortgage balance of $230,000,000 represents a
Moody's LTV ratio of 101.9% based on Moody's value. Adjusted
Moody's LTV ratio for the first mortgage balance is 91.3% based on
Moody's Value using a cap rate adjusted for the current interest
rate environment.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The portfolio's
property quality grade is 0.77.
Notable strengths of the transaction include: global gateway
markets, strong occupancy rate with high quality tenant roster,
strong leasing activity with positive leasing spreads, low
percentage of office use, age, multiple property pooling and
experienced sponsorship.
Notable concerns of the transaction include: rollover risk,
population density, 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.
BXMT 2020-FL2: DBRS Cuts Class F Notes Rating to B
--------------------------------------------------
DBRS, Inc. downgraded its credit ratings on four classes of notes
issued by BXMT 2020-FL2, Ltd. as follows:
-- Class D to BBB (low) (sf) from BBB (sf)
-- Class E to BB (high) (sf) from BBB (low) (sf)
-- Class F to B (sf) from BB (low) (sf)
-- Class G to CCC (sf) from B (low) (sf)
Morningstar DBRS also confirmed its credit ratings on the remaining
classes of notes as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
Morningstar DBRS also changed the trends on Classes C, D, E, and F
to Negative from Stable. Class G now has a credit rating that does
not typically carry a trend in commercial mortgage backed
securities ratings. The trends on Classes A, A-S, and B remain
Stable.
The credit rating downgrades and trend changes reflect the
increased credit risk to the transaction as a result of Morningstar
DBRS' increased loan-level expected losses for the majority of the
loans in the transaction, particularly for the seven loans secured
by office properties, which represent 47.8% of the current trust
balance. An additional four loans, representing 38.0% of the
current trust balance, are secured by mixed-use properties with a
material office collateral component. The majority of these 11
loans have borrowers who have been unable to successfully execute
the stated business plans to date. The stunted efforts to stabilize
the collateral properties have also been compounded by increased
debt service payments as all 15 loans in the transaction have
floating interest rates. According to the financial statements for
the collateral properties as of the trailing 12 months (T-12) ended
September 30, 2023, the servicer reported the pool had a
weighted-average (WA) net operating income (NOI) debt service
coverage ratio (DSCR) of 0.89 times (x). The seven loans secured by
office collateral reported a WA NOI DSCR of 0.80x, with a range of
0.48x to 1.52x.
Nine loans, representing 53.4% of the current trust balance, mature
throughout 2024; of those, seven loans, representing 47.5% of the
current trust balance, are secured by office and mixed-use
properties. Based on the NOI in the T-12 ended September 30, 2023,
for those seven properties and the most recent as-is appraised
values (most of which date from issuance), the implied cap rates
ranged between 2.5% and 6.3%, suggesting the as-is values have
likely declined since those appraisals and borrowers will likely
need to either contribute significant cash equity to secure
refinance capital or exercise the remaining maturity extension
options. As such, those loans were stressed in Morningstar DBRS'
analysis for this review to increase the expected losses,
supporting the rating actions with this review.
In conjunction with this press release, Morningstar DBRS has
published a Surveillance Performance Update report with in-depth
analysis and credit metrics for the transaction as well as business
plan updates on select loans. For access to this report, please
click on the link under Related Documents below or contact us at
info-DBRS@morningstar.com.
As of the February 2024 remittance, the trust reported an
outstanding balance of $1.13 billion with 15 loans remaining in the
trust, representing collateral reduction of 24.6% since issuance.
Since the previous Morningstar DBRS rating action in April 2023,
there has been a collateral reduction of $184.7 million, including
the full repayment of two loans and the partial repayment of two
loans as part of executed loan extensions. The two loans that
repaid in full were secured by hotel properties. There are four
remaining loans, representing 14.2% of the current trust balance,
are secured by hotel properties.
There are currently no specially serviced loans; however, nine
loans, representing 55.6% of the current trust balance, are on the
servicer's watchlist and all loans in the pool have been modified.
Loan modifications have generally allowed borrowers to extend loans
without meeting performance-based extension tests. In some cases,
modifications allowed for changes to the interest rate terms. In
exchange, borrowers have been required to contribute fresh capital,
either in the form of deposits into operating reserves or paying
down loan balances. In select cases, loan modifications have
allowed for increases to future funding dollars, though the
increase in potential additional debt is often junior to the senior
loan held within the trust. In instances where senior debt was
increased, the issuer requested a Rating Agency Condition letter
from Morningstar DBRS.
Loans on the servicer's watchlist have been flagged for upcoming
loan maturities and/or below breakeven DSCRs. The largest loan on
the servicer's watchlist and the largest loan in the transaction is
One South Wacker (Prospectus ID#19; 14.1% of the trust balance).
The loan is secured by a 1.2 million-square foot (sf) Class A
office tower in downtown Chicago. The $289.4 million A-note ($159.0
million trust note) matured in December 2023 and the loan was
modified to allow the borrower to extend the maturity to December
2025 with four additional three-month extension options, pushing
the final maturity date to December 2026. The modification also
converted the previously outstanding $20.6 million of available
loan future funding into junior debt and added an additional $46.0
million of future funding in the form of junior debt for leasing
costs. The potential fully funded whole loan is now $356.0
million.
In exchange, the borrower was required to make an initial cash
equity deposit of $6.9 million with required additional
contributions of $2.5 million each in April 2024, January 2025, and
July 2025. The borrower must also make the following deposits into
the newly created Reallocated Equity Contribution Reserve: $750,000
in April 2024 and $1.0 million in each of July 2024, October 2024,
April 2025, October 2025, May 2026, and August 2026 (if the loan is
extended). Regarding the loan extension options, which include up
to four three-month extensions, the borrower will be required to
contribute an additional $2.5 million each time if it extends the
maturity dates to September 2026 and December 2026. Lastly, the
borrower has agreed to an excess cash trap throughout the full term
of the loan and to purchase a rolling three-month interest rate cap
agreement with a 6.00% strike rate for the outstanding debt amount,
inclusive of any future loan advances. The loan has a current
floating-rate spread of 1.75% with a floating-rate benchmark floor
of 3.50%.
As of December 2023, the property was 66.7% occupied, but according
to the collateral manager, the property is 70.0% leased as the
largest tenant, Invenergy (currently 14.2% of the net rentable area
(NRA)), has agreed to an expansion. Morningstar DBRS is awaiting
further information regarding the tenant's lease renewal terms;
however, multiple news articles noted the tenant is expected to
occupy approximately 180,000 sf (15.1% of the NRA). To execute the
lease, the borrower will fund costs totaling $26.0 million across
tenant improvements, leasing costs, and amenity upgrades. According
to the YE2023 financials provided by the collateral manager, the
property generated NOI of $9.7 million, equating to an NOI DSCR of
0.60x and a 3.3% debt yield.
While operations are expected to improve given the Invenergy lease
renewal and expansion, based on the original as-is appraised value
from October 2019 and the YE2023 NOI, the implied cap rate is 3.1%,
suggesting the current market value of the property has
significantly declined and the current loan-to-value (LTV) ratio is
above 100.0%. According to the CBRE "United States Cap Rate Survey
H1 2023," Class A stabilized office properties in the downtown
Chicago market were valued at cap rates ranging from 7.75% to
8.50%. While the availability of additional loan funding may help
secure new leases, market demand has been low over the life of the
loan and is expected to remain muted for the near to medium term.
As such, Morningstar DBRS believes it is unlikely the borrower will
achieve the Morningstar DBRS' stabilized net cash flow (NCF) of
$19.6 million, or for that matter, the issuer's originally
projected stabilized NCF of $22.7 million. Given these increased
risks, Morningstar DBRS analyzed the loan with elevated as-is and
as-stabilized LTV ratios as well as an elevated probability of
default. The resulting loan expected loss was three times greater
than the expected loss for the pool.
Fourteen of the remaining 15 loans have been modified, with
modifications generally allowing borrowers to exercise extension
options without meeting required performance tests and/or
amendments to interest rate terms. The Park Central loan
(Prospectus ID#28; 4.0% of the current trust balance) was granted a
short-term maturity extension to March 2024 with three additional
three-month extension options to December 2024. The $261.1 million
A-note ($47.0 million trust note) loan is secured by a full-service
hotel in downtown San Francisco, which was reflagged as a Park
Hyatt, opening in Q1 2022. According to the financials for the T-12
ended September 30, 2023, property NCF was $4.8 million,
significantly below the issuer's stabilized NCF projection of $21.8
million and the Morningstar DBRS stabilized NCF projection of $14.0
million. While the collateral manager noted operations may improve
from increased food and beverage revenue, demand drivers for the
downtown San Francisco market have materially changed from loan
closing. The provided 2024 operating budget shows NCF is not
projected to materially increase, further limiting the borrower's
exit options. At loan closing in October 2019, the property had an
as-is appraised value of $336.0 million, indicative of a 1.4% cap
rate based on the NCF for the T-12 ended September 30, 2023. As the
property's as-is value has likely drastically declined since
issuance, Morningstar DBRS analyzed this loan with a liquidation
scenario, suggesting a loan loss severity in excess of 40.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
CFCRE COMMERCIAL 2016-C6: DBRS Confirms B Rating on X-F Certs
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DBRS Limited confirmed its credit ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2016-C6 issued by CFCRE
Commercial Mortgage Trust 2016-C6 as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (low) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class X-E at BB (high) (sf)
-- Class X-F at B (sf)
All trends are Stable.
The credit rating confirmations reflect the minimal changes in the
pool's overall performance since last review. As of the February
2024 remittance, 41 of the original 45 loans remain in the trust,
with an aggregate balance of $715.9 million, representing a
collateral reduction of 9.1% since issuance. The pool benefits from
10 fully defeased loans, representing 14.4% of the current pool
balance. There are four loans with the special servicer,
representing 7.1% of the current pool balance, as well as seven
loans on the servicer's watchlist, representing 26.5% of the
current pool balance. The watchlist loans include the largest loan
in the pool, Hill7 Office (Prospectus ID#1, 9.9% of the current
pool balance). Excluding defeasance, the pool is most concentrated
with loans collateralized by retail properties, representing 34.7%
of the trust, followed by loans backed by office and lodging
properties, representing 27.9% and 10.5% of the trust,
respectively. In the analysis for this review, Morningstar DBRS
generally stressed office loans (in the form of probability of
default (POD) and/or loan-to-value ratio (LTV) stresses) given the
uncertainties surrounding both tenant and investor demand for the
asset type in the current environment. The resulting
weighted-average expected loss for office loans was approximately
60.0% above the weighted-average pool expected loss.
The largest loan in special servicing, Waterstone 7 Portfolio
(Prospectus ID#8, 3.0% of the current pool balance), is secured by
a portfolio of seven retail properties totaling 279,937 square feet
(sf) across New Hampshire (six properties) and Massachusetts (one
property). The loan transferred to the special servicer in March
2018 because of a nonpermitted equity transfer. The special
servicer reports various issues, which have contributed to the
loan's extended stint in special servicing; however, most recently,
the special servicer noted that a settlement agreement has been
executed that will cure the outstanding events of default.
According to the most recent financial reporting, the loan had a
debt service coverage ratio (DSCR) of 1.54 times (x) and the
property had an occupancy rate of 95.0% for the trailing six months
(T-6) ended June 30, 2023. These figures compare with the YE2022
DSCR of 1.29x and occupancy of 83.7% and the issuance DSCR of 1.28x
and occupancy of 93.6%. Based on the August 2023 appraisal report,
the property's value is $23.5 million, a decline from both the
November 2022 and March 2022 values of $24.2 million and $26.2
million, respectively, and ultimately a 32.7% decline from the
issuance value of $34.9 million. Morningstar DBRS applied a
stressed LTV adjustment based on the most recent appraisal, as well
as a stressed POD, resulting in an expected loss that is
approximately 3x the pool's expected loss.
The Hill7 Office loan is a $101 million pari passu loan split
across the subject transaction and the Morningstar DBRS-rated CGCMT
2016-C3 transaction. The loan is secured by a LEED Gold certified,
Class A office building in Seattle's central business district.
Built in 2015, the subject houses headquarter operations for two
tenants; HBO Code Labs (39.3% of the net rentable area (NRA), lease
expiring in May 2025), and Redfin Corporation (Redfin; 39.6% of the
NRA, lease expiring in August 2027). The loan was added to the
servicer's watchlist after the guarantor and one of the loan
sponsors, Hudson Pacific Properties, L.P. (HPP), was downgraded by
Moody's in July 2023. The downgrade rationale cited concerns about
HPP's available cash flow and potential need to rely on asset sales
to cover their expenses. The loan documents required that, should
HPP no longer be rated investment grade, a letter of credit equal
to the guaranty provided for future leasing obligations due at the
time of closing would be posted. The servicer has confirmed all
leasing obligations have been fulfilled and, as such, that a
Guarantor Downgrade Sweep Event has not occurred. The other loan
sponsor, Canada Pension Plan Investment Board, continues to be
rated AAA by Morningstar DBRS, most recently confirmed with a
Stable trend in July 2023.
In addition to concerns with one of the loan sponsors, there are
increased risks for this loan in the exposure to WeWork Inc.
(WeWork; 19.0% of the NRA, lease expiring in January 2030), which
is in place as the third-largest tenant. WeWork filed for
bankruptcy in November 2023 and the servicer has indicated that
negotiations regarding WeWork's lease amendment are under way,
including discussions surrounding reduced rent and a shortened
lease term. The servicer has also confirmed that the WeWork space
is currently fully subleased to Pinterest (9.0% of the NRA,
sublease expiring in June 2024) and Moderna (10.0% of the NRA,
sublease expiring in February 2025). In addition, the
second-largest tenant, Redfin, appears to also be subleasing a
floor to ABC Legal (9.9% of the NRA, sublease expiring in July
2027). Though Redfin does have one more floor being advertised for
sublease, the servicer has confirmed that the company is no longer
actively looking for another tenant for the space. The servicer
also noted that the building is approximately 40% occupied during
the middle of the week (Tuesday through Thursday).
According to the rent roll dated September 2023, the property was
99.6% occupied with an average rental rate of $61.60 per sf (psf),
which is above the Central Seattle submarket's asking rental rate
of $46.01 psf and occupancy rate of 79.6% as of Q4 2023, according
to Reis. The submarket's occupancy is down significantly from the
already low Q4 2022 vacancy rate of 82.2%. Per the most recent
financing statements, the DSCR for the T-9 ended September 30, 2023
period, was 3.70x, compared with issuer's DSCR of 2.68x; cash flow
growth since issuance has primarily been due to the addition of
WeWork in 2018. Given the near-term lease rollover, weak market
fundamentals, and proximity to the 2026 anticipated repayment date,
Morningstar DBRS applied a stressed LTV adjustment and elevated POD
assumption in the analysis for this loan to stress the expected
loss amount well above the base-case figure.
Notes: All figures are in U.S. dollars unless otherwise noted.
CHASE HOME 2024-3: Fitch Assigns 'B+sf' Rating on Class B-5 Certs
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Fitch Ratings has assigned final ratings to Chase Home Lending
Mortgage Trust 2024-3 (Chase 2024-3).
Entity/Debt Rating Prior
----------- ------ -----
Chase 2024-3
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 B+sf 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 2024-3
(Chase 2024-3) as indicated above. The certificates are supported
by 518 loans with a total balance of approximately $588.17 million
as of the cutoff date. The scheduled balance as of the cut-off date
is $587.67 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, 100.0% 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 10.4% 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.
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 9.0 months, according to
Fitch (seven 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 81.9%, 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
74.7%, translating to a sustainable loan-to-value (sLTV) ratio of
79.2%, represents moderate borrower equity in the property and
reduced default risk compared with a borrower with a CLTV over
80%.
Of the pool, 100% of the loans are nonconforming. All of the loans
are designated as QM loans.
Of the pool, 100% comprises loans where the borrower maintains a
primary or secondary residence. Single-family homes, and planned
unit developments (PUDs) constitute 90.7% of the pool; condominiums
make up 8.6%; co-ops make up 0.4%; and multifamily homes make up
0.3%. The pool consists of loans with the following loan purposes,
as determined by Fitch: purchases (95.6%), cashout refinances
(0.9%) and rate-term refinances (3.6%). Fitch views favorably that
no loans are for investment properties and the majority of the
mortgages are purchases.
Of the pool, 33.2% is concentrated in California, followed by
Washington and Texas. The largest MSA concentration is in the Los
Angeles-Long Beach-Santa Ana, CA MSA (11.1%), followed by the San
Francisco-Oakland-Fremont, CA MSA (10.8%) and the
Seattle-Tacoma-Bellevue, WA (7.7%). The top three MSAs account for
29.6% 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 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, J.P. Morgan Chase Bank, N.A. (JPMCB), is obligated to
advance delinquent principal and interest (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 that 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 0.95%
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 0.55% 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 41.7% 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
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 0.14% at the 'AAAsf' stress due
to 72.0% due diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 72.0% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
Digital Risk and AMC were engaged to perform the review. Loans
reviewed under this engagement were given compliance, credit and
valuation grades and assigned initial grades for each subcategory.
Minimal exceptions and waivers were noted in the due diligence
reports. Refer to the "Third-Party Due Diligence" section for more
detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
provided was considered comprehensive. The data contained in the
ResiPLS layout data tape were reviewed by the due diligence
companies, and no material discrepancies were noted.
ESG CONSIDERATIONS
Chase 2024-3 has an ESG Relevance Score of '4 [+]' for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in Chase 2024-3, 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.
CHURCHILL MIDDLE IV: S&P Assigns Prelim BB- (sf) Rating E-R Notes
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S&P Global Ratings assigned its preliminary ratings to the class
A-R, A-L-R, B-R, C-R, D-R, and E-R replacement debt and proposed
new class X debt from Churchill Middle Market CLO IV Ltd./Churchill
Middle Market CLO IV LLC, a CLO originally issued in December 2019
that is managed by Churchill Asset Management LLC.
The preliminary ratings are based on information as of March 25,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the April 11, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. At that
time, S&P expects to withdraw its ratings on the original debt and
assign ratings to the replacement debt. However, if the refinancing
doesn't occur, S&P may affirm its ratings on the original debt and
withdraw its 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 debt is expected to be issued at a
slightly higher weighted average cost of debt than the original
debt.
-- The original class A-1, A-2, and A-L debt is expected to be
combined into replacement class A-R and A-L-R debt.
-- The original class D-1 floating-rate debt and class D-2
fixed-coupon debt are expected to be combined into a single
floating spread replacement class D-R debt.
-- The original class E-1 and E-2 debt is expected to be combined
into replacement class E-R debt.
-- The stated maturity, reinvestment period, and non-call period
are expected to be extended by approximately 4.25 years.
-- Class X debt is expected to be issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds during the first 16 payment dates beginning with
the payment date in July 2024.
Replacement and Original Debt Issuances
Replacement debt
-- Class X, $4.61 million: Three-month CME term SOFR + 1.300%
-- Class A-R, $153.00 million: Three-month CME term SOFR + 1.930%
-- Class A-L-R loans, $50.00 million: Three-month CME term SOFR +
1.930%
-- Class B-R, $45.50 million: Three-month CME term SOFR + 2.500%
-- Class C-R (deferrable), $21.00 million: Three-month CME term
SOFR + 3.200%
-- Class D-R (deferrable), $17.50 million: Three-month CME term
SOFR + 5.000%
-- Class E-R (deferrable), $21.00 million: Three-month CME term
SOFR + 8.140%
Original debt
-- Class A-1, $130.00 million: Three-month CME term SOFR + CSA(i)
+ 1.75%
-- Class A-2, $23.00 million: 3.46%
-- Class A-L loans, $50.00 million: Three-month CME term SOFR +
CSA(i) + 1.75%
-- Class B, $38.50 million: Three-month CME term SOFR + CSA(i) +
2.55%
-- Class C (deferrable), $26.20 million: Three-month CME term SOFR
+ CSA(i) + 3.65%
-- Class D-1 (deferrable), $15.40 million: Three-month CME term
SOFR + CSA(i) + 4.75%
-- Class D-2 (deferrable), $3.00 million: 6.53%
-- Class E-1 (deferrable), $11.00 million: Three-month CME term
SOFR + CSA(i) + 8.50%
-- Class E-2 (deferrable), $10.90 million: Three-month CME term
SOFR + CSA(i) + 9.27%
-- Subordinated notes(ii), $48.65 million: Residual
(i)CSA equal to 0.26161%.
(ii)The notional amount of the subordinated notes is expected to
stay the same with the maturity being extended to match the stated
maturity of the replacement debt.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Churchill Middle Market CLO IV Ltd./
Churchill Middle Market CLO IV LLC
Class X, $4.61 million: AAA (sf)
Class A-R, $153.00 million: AAA (sf)
Class A-L-R loans, $50.00 million: AAA (sf)
Class B-R, $45.50 million: AA (sf)
Class C-R (deferrable), $21.00 million: A (sf)
Class D-R (deferrable), $17.50 million: BBB- (sf)
Class E-R (deferrable), $21.00 million: c
CIM TRUST 2021-J1: Moody's Upgrades Rating on Cl. B-5 Certs to Ba2
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 44 bonds from five US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo and agency eligible mortgage loans.
The complete rating actions are as follows:
Issuer: CIM Trust 2020-J2
Cl. B-2, Upgraded to Aa3 (sf); previously on Dec 31, 2020
Definitive Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to Aa3 (sf); previously on Dec 31, 2020
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Dec 31, 2020 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa2 (sf); previously on Dec 31, 2020
Definitive Rating Assigned Ba1 (sf)
Cl. B-5, Upgraded to Baa3 (sf); previously on Dec 31, 2020
Definitive Rating Assigned Ba3 (sf)
Cl. B-IO2*, Upgraded to Aa3 (sf); previously on Dec 31, 2020
Definitive Rating Assigned A2 (sf)
Issuer: CIM Trust 2021-INV1
Cl. A-28, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-29, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-30, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-30*, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-31*, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa1 (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Aug 13, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to Aa3 (sf); previously on Aug 13, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Aug 13, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Aug 13, 2021
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Aug 13, 2021
Definitive Rating Assigned B2 (sf)
Cl. B-X-1*, Upgraded to Aa1 (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to Aa3 (sf); previously on Aug 13, 2021
Definitive Rating Assigned A2 (sf)
Issuer: CIM Trust 2021-J1
Cl. B-1, Upgraded to Aa2 (sf); previously on Mar 4, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa2 (sf); previously on Mar 4, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Mar 4, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to Aa3 (sf); previously on Mar 4, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Mar 4, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Mar 4, 2021
Definitive Rating Assigned Ba1 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Mar 4, 2021 Definitive
Rating Assigned B1 (sf)
Cl. B-IO1*, Upgraded to Aa2 (sf); previously on Mar 4, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-IO2*, Upgraded to Aa3 (sf); previously on Mar 4, 2021
Definitive Rating Assigned A2 (sf)
Issuer: CIM Trust 2021-J2
Cl. B-1, Upgraded to Aa2 (sf); previously on Mar 31, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa2 (sf); previously on Mar 31, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Mar 31, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to Aa3 (sf); previously on Mar 31, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Mar 31, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Mar 31, 2021
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Mar 31, 2021
Definitive Rating Assigned B1 (sf)
Cl. B-IO1*, Upgraded to Aa2 (sf); previously on Mar 31, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-IO2*, Upgraded to Aa3 (sf); previously on Mar 31, 2021
Definitive Rating Assigned A2 (sf)
Issuer: CIM Trust 2021-J3
Cl. B-2, Upgraded to A1 (sf); previously on Jun 4, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to A1 (sf); previously on Jun 4, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Jun 4, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Jun 4, 2021 Definitive
Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Jun 4, 2021 Definitive
Rating Assigned B2 (sf)
Cl. B-X-2*, Upgraded to A1 (sf); previously on Jun 4, 2021
Definitive Rating Assigned A2 (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 pools.
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 transactions' originators and
servicers.
No actions were taken on the other rated classes in these deals
because the expected losses remain commensurate with their current
ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
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.
CITIGROUP 2015-GC29: Fitch Lowers Class F Debt Rating to CCsf
-------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed nine classes of
Citigroup Commercial Mortgage Trust series 2015-GC29 commercial
mortgage pass-through certificates (CGCMT 2015-GC29). Following
their downgrades, Fitch has assigned Negative Rating Outlooks on
two classes. The Rating Outlooks for two of the affirmed classes
were revised to Negative from Stable.
Fitch has also affirmed 13 classes of GS Mortgage Securities Trust
2015-GC32 commercial mortgage pass-through certificates (GSMS
2015-GC32). Fitch has also revised the Outlook to Negative from
Stable on four of the affirmed classes.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2015-GC29
A-3 17323VAY1 LT AAAsf Affirmed AAAsf
A-4 17323VAZ8 LT AAAsf Affirmed AAAsf
A-AB 17323VBB0 LT AAAsf Affirmed AAAsf
A-S 17323VBC8 LT AAAsf Affirmed AAAsf
B 17323VBD6 LT AA-sf Affirmed AA-sf
C 17323VBE4 LT A-sf Affirmed A-sf
D 17323VAA3 LT B+sf Downgrade BB+sf
E 17323VAC9 LT CCCsf Downgrade B+sf
F 17323VAE5 LT CCsf Downgrade B-sf
PEZ 17323VBH7 LT A-sf Affirmed A-sf
X-A 17323VBF1 LT AAAsf Affirmed AAAsf
X-B 17323VBG9 LT AA-sf Affirmed AA-sf
X-D 17323VAL9 LT B+sf Downgrade BB+sf
GSMS 2015-GC32
A-3 36250PAC9 LT AAAsf Affirmed AAAsf
A-4 36250PAD7 LT AAAsf Affirmed AAAsf
A-AB 36250PAE5 LT AAAsf Affirmed AAAsf
A-S 36250PAH8 LT AAAsf Affirmed AAAsf
B 36250PAJ4 LT AAAsf Affirmed AAAsf
C 36250PAL9 LT AA-sf Affirmed AA-sf
D 36250PAM7 LT BBB-sf Affirmed BBB-sf
E 36250PAP0 LT BBsf Affirmed BBsf
F 36250PAR6 LT B+sf Affirmed B+sf
PEZ 36250PAK1 LT AA-sf Affirmed AA-sf
X-A 36250PAF2 LT AAAsf Affirmed AAAsf
X-B 36250PAG0 LT AAAsf Affirmed AAAsf
X-D 36250PAN5 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: The deal-level 'Bsf' rating case
loss has increased since Fitch's prior rating action to 8.8% in
CGCMT 2015-GC29 and 4.6% in GSMS 2015-GC32. The CGCMT 2015-GC29
transaction has five Fitch Loans of Concern (FLOCs; 26.2% of the
pool), including one loan (2.2%) in special servicing. The GSMS
2015-GC32 transaction has nine FLOCs (16.2%), with no loans
currently in special servicing.
CGCMT 2015-GC29: The downgrades on classes D, X-D, E and F reflect
higher pool loss expectations since Fitch's prior rating action,
driven primarily by further performance decline and refinance
concerns on the office FLOCs, including Selig Office Portfolio
(14.2%), Papago Arroyo (3.1%) and specially serviced 400 Plaza
Drive (2.2%) loans. The Negative Rating Outlook on classes C, PEZ,
D and X-D reflect their reliance on FLOCs to repay where downgrades
are possible with continued occupancy and cashflow deterioration,
lack of performance stabilization and/or a prolonged workout of the
FLOCs that default at or prior to maturity.
GSMS 2015-GC32: The affirmations reflect the generally stable pool
performance since Fitch's prior rating action. The Rating Outlook
revisions for classes D, X-D, E and F to Negative from Stable
reflects the higher pool loss expectations since the prior rating
action, which were offset by increased credit enhancement (CE) from
continued amortization, as well as these classes' reliance on FLOCs
to repay, including Hilton Garden Inn Pittsburgh/Southpointe
(3.4%), Selig Office Portfolio (3.1%), Shops at 69th Street (1.2%),
Four Points Sheraton Columbus Airport (0.9%) and Midwest Retail
Portfolio (0.8%).
Largest Contributors to Loss: The largest contributor to overall
loss expectations in CGCMT 2015-GC29 and the second largest
contributor in GSMS 2015-GC32 is the Selig Office Portfolio loan,
secured by a 1,631,457-sf office portfolio consisting of nine
buildings in Seattle, WA. The portfolio consists of older inventory
built between 1971 and 1986. The loan has an upcoming loan maturity
in April 2025.
The largest tenants in the portfolio include Washington State
Ferries (5.4% of NRA; lease expiry in August 2025), ZipWhip (4.6%;
October 2029) and City of Seattle (2.3%; October 2034).
As of September 2023, the occupancy for the portfolio was 77%, down
from 79% at YE 2022, 84% at YE 2021, 93% at YE 2020 and 95% at YE
2019. The rent roll is granular, with no individual tenant
representing more than 1.6% of the portfolio NRA rolling in 2024
and 5.4% in 2025. The servicer-reported NOI DSCR as of Q3 2023 was
2.25x, compared to 2.22x at YE 2022, 2.40x at YE 2021, 2.64x at YE
2020 and 2.35x at YE 2019.
The Seattle CBD submarket has seen a deterioration of performance
fundamentals over the past few years. As of 1Q24 per CoStar, the
office submarket asking rent was $37.79 psf and the vacancy rate
was 24.3%, compared with the subject property at $33.02 psf and
23%, respectively, as of September 2023.
Fitch's 'Bsf' rating case loss of 22.8% (prior to concentration
add-ons) reflects a 10% cap rate, 10% stress to the YE 2022 NOI and
factors a 100% probability of default due to the declining
portfolio occupancy, weak market fundamentals and expected
refinance concerns.
The second largest contributor to overall loss expectations in
CGCMT 2015-GC29 is the Parkchester Commercial loan, secured by a
541,232-sf, mixed-use retail/office property in the Bronx. The
largest tenant, Macy's (31.5% of NRA), recently extended its lease
by five years until March 2029.
Property-level NOI has been declining since issuance mainly due to
increases in expenses, along with the decline in occupancy over the
past year. The servicer-reported NOI DSCR as of Q3 2023 was 0.65x,
compared to 1.20x at YE 2022, 0.84x at YE 2021, 1.31x at YE 2020
and 1.14x at YE 2019. Occupancy per the September 2023 rent roll
was 76.7%, down from 90% at September 2022, 89% at December 2021,
93% at December 2020 and 93% at issuance.
Fitch's 'Bsf' rating case loss of 28.7% (prior to concentration
add-ons) reflects a 9% cap rate, 7.5% stress to the annualized Q3
2023 NOI, and factors a 100% probability of default due to the weak
performance, low DSCR and heightened maturity default risk.
The third largest contributor to overall loss expectations in CGCMT
2015-GC29 is the Papago Arroyo loan, secured by a 279,504-sf
suburban office property in Tempe, AZ. The former largest tenant,
Sonora Quest Laboratories (55% of NRA), vacated the majority of
their space in July 2020 prior to lease expiration in December
2023. Sonora Quest Laboratories provided a lease termination fee of
$976,000 after exercising its early termination option.
Additionally, the previous borrower provided a letter of credit of
$1 million to prevent a trigger event from occurring.
Occupancy as of December 2023 had fallen further to 29.1% from 35%
at September 2022, 47% at June 2021, 46% at December 2020 and 96%
at December 2019. The servicer-reported NOI DSCR remains low as of
Q3 2023 at 0.10x, down from 0.40x at YE 2022, 0.66x at YE 2021,
1.60x at YE 2020 and 2.56x at YE 2019.
Fitch's 'Bsf' rating case loss of 52.4% (prior to concentration
add-ons) reflects a 10.50% cap rate, 10% stress to the YE 2022 NOI,
and factors a 100% probability of default due to the poor property
performance, low DSCR and heightened maturity default risk.
Specially Serviced Loan: The specially serviced loan in CGCMT
2015-GC29 is 400 Plaza Drive, secured by a 258,459-sf suburban
office property in Secaucus, NJ. The loan transferred to special
servicing in January 2024 due to payment default after losing its
largest tenant.
Occupancy at the subject has been depressed since Hartz Mountain
vacated part of its space (approximately 22% of NRA) upon its 2021
lease expiration. The tenant remained at the property until YE
2023, when they vacated the remainder of the space (20.7% of NRA).
Per the September 2023 rent roll, the property was 55% occupied;
however, after factoring Hartz Mountain vacating the remainder of
their space (21% of NRA) at the end of 2023, current occupancy is
estimated to be approximately 34%. Upcoming rollover at the
property includes 13.3% of the NRA in 2024 and 2.3% in 2025. The
servicer-reported NOI DSCR was 1.37x as of September 2023, compared
to 1.63x at YE 2022, 1.35x at YE 2021 and 3.06x at YE 2020.
Fitch's 'Bsf' rating case loss of 29.4% (prior to concentration
add-ons) reflects a 10% cap rate, 40% stress to the YE 2022 NOI,
and factors a 100% probability of default due to the loan's
specially serviced status, low occupancy from loss of a major
tenant and anticipated refinance concerns.
The largest contributor to overall loss expectations in GSMS
2015-GC32 is the Hilton Garden Inn Pittsburgh/Southpointe loan
(3.4%), which is secured by a 175-key limited-service hotel in
Canonsburg, PA. The loan previously transferred to special
servicing in June 2020. A loan modification closed in July 2021,
and the loan was subsequently returned to the master servicer.
The servicer-reported occupancy for the TTM October 2023 period was
42.9%, compared to 56% at September 2022, 34% at July 2020, and 59%
at YE 2019. The servicer-reported NOI DSCR for the TTM October 2023
period was 0.66x, compared to 1.26x at July 2022, 2.63x at YE 2021,
0.59x at YE 2020 and 1.31x at YE 2019. Property-level NOI fell
43.4% between 2022 to 2023, primarily driven by an increase in
operating expenses and a slight decline in revenue.
Fitch's 'Bsf' rating case loss of 34.3% (prior to concentration
add-ons) reflects a 11.5% cap rate, 15% stress to the TTM October
2023 NOI, and factors a 100% probability of default due to the
loan's heightened maturity default risk.
The third largest contributor to overall loss expectations in GSMS
2015-GC32 is the Shops at 69th Street loan, secured by a 128,149-sf
mixed use property located in Upper Darby, PA. Major tenants
include Delaware County Services (41.9% of NRA; lease expiry in
July 2025), Fashion Gallery (15.5%; January 2027) and Old Navy
(9.5%; August 2027). The largest tenant's lease expiration is
co-terminous with the loan's July 2025 maturity.
Per the December 2023 rent roll, the property was 71.3% occupied,
compared to 75% at YE 2022 and YE 2021, and 100% at YE 2020.
Occupancy declined after Harris School of Business (previously 25%
of the NRA) vacated. The servicer-reported NOI DSCR remains low at
0.68x as of Q3 2023, compared to 0.82x at YE 2022, 0.94x at YE 2021
and 1.10x at YE 2020.
Fitch's 'Bsf' rating case of 32.7% (prior to concentration add-ons)
reflects a 9% cap rate, 20% stress to the YE 2022 NOI, and factors
a 100% probability of default due to the lower occupancy and loan's
heightened maturity default risk.
Increased CE: As of the February 2024 distribution date, the pool's
aggregate balance for CGCMT 2015-GC29 has been reduced by 21.4% to
$879.5 million from $1.1 billion at issuance. Twenty-five loans
(28.8% of pool) have been defeased. Four loans (39%) are full-term
interest-only (IO), and the remaining 61% of the pool is
amortizing. Scheduled loan maturities include four loans (2%) in
2024 and 74 loans (98%) in 2025.
As of the February 2024 distribution date, the pool's aggregate
balance for GSMS 2015-GC32 has been reduced by 20.1% to $801.6
million from $1.0 billion at issuance. Thirteen loans (26.2% of
pool) have been defeased. Five loans (7%) are full-term IO, and the
remaining 93% of the pool is amortizing. All loans are scheduled to
mature in 2025.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes rated 'AAAsf' are not expected due to the
position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs and/or more loans than expected
experience performance deterioration and/or default at or prior to
maturity.
Downgrades to in the 'BBBsf', 'BBsf' and 'Bsf' categories are
possible with higher than expected losses from continued
underperformance of the FLOCs and/or with greater certainty of
losses on the specially serviced loans and/or FLOCs.
Downgrades to 'CCCsf' and 'CCsf' rated classes would occur should
additional loans transfer to special servicing and/or default, as
losses be realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE, coupled with
stable-to-improved pool-level loss expectations and improved
performance on the FLOCs.
Upgrades to the 'BBBsf' and 'BBsf' category rated classes would be
limited based on sensitivity to concentrations or the potential for
future concentration. Classes would not be upgraded above 'AA+sf'
if there is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes could occur
only if the performance of the remaining pool is stable, recoveries
on the FLOCs are better than expected, and there is sufficient CE
to the classes.
Upgrades to 'CCCsf' and 'CCsf' are not likely, but may be possible
with better than expected recoveries on specially serviced loans
and/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.
CITIGROUP COMMERCIAL 2013-GC15: DBRS Confirms C Rating on F Certs
-----------------------------------------------------------------
DBRS, Inc. downgraded its credit ratings on two classes of the
Commercial Mortgage Pass-Through Certificates, Series 2013-GC15
issued by Citigroup Commercial Mortgage Trust 2013-GC15 as
follows:
-- Class E to CCC (sf) from B (low) (sf)
-- Class X-C to CCC (sf) from B (sf)
In addition, Morningstar DBRS confirmed the following credit
rating:
-- Class F at C (sf)
All remaining classes now have credit ratings that do not typically
carry a trend in commercial mortgage-backed securities (CMBS)
credit ratings.
The credit ratings downgrade on Class E, and the referenced
notional Class X-C bond, reflects the increased loss projections
related to the five remaining loans in the pool, all of which are
in special servicing and have passed their respective maturities.
In the analysis for this review, Morningstar DBRS assumed a
liquidation scenario for these loans, resulting in a cumulative
projected loss approaching $37.0 million, which would fully erode
the nonrated Class G balance and about a fourth of the Class F
balance. In addition, there is an increased propensity for interest
shortfalls as Class E did not receive full interest between
September 2023 and February 2024 although it was repaid with the
March 2024 remittance. The cumulative interest shortfalls for the
trust totaled $8.3 million, up from $5.3 million at the last review
in March 2023. To date, the trust incurred $13.1 million of losses,
all of which have been contained to the nonrated class. Considering
the deterioration in the credit support and propensity for interest
shortfalls, the credit rating downgrades as well as the credit
rating confirmation on Class F at C (sf) are supported.
The largest loan, 735 Sixth Avenue (Prospectus ID#6; representing
51.9% of the pool), is secured by the 16,500-square-foot (sf)
ground and mezzanine floor retail portion of a 40-story,
multifamily building in the Chelsea neighborhood of Manhattan. The
loan transferred to special servicing in March 2019 for payment
default. Occupancy declined drastically because two major tenants,
David's Bridal (previously 65.5% of the net rentable area (NRA))
and T-Mobile (previously 15.2% of NRA), vacated the property at
lease expiration in October 2018 and November 2018, respectively.
The departure of these two tenants resulted in occupancy decreasing
to 18.8%. According to the servicer, the asset became real estate
owned, effective June 2023, and is not currently being marketed for
sale. The most recent appraisal, dated January 2023, reported an
as-is value of $16.2 million, down 64.4% from the issuance value of
$45.5 million. In its analysis, Morningstar DBRS liquated the loan,
resulting in a loss severity exceeding 85%.
The second-largest loan, Spectrum Office Building (Prospectus
ID#31; representing 17.0% of the pool), is secured by a 130,112-sf
suburban Houston office property built in 1981. The loan
transferred to special servicing in March 2023 for imminent
monetary default. Performance for the property has struggled to
rebound since the largest tenant at issuance, Consolidated
Graphics, Inc. (28.2% of NRA), vacated at its December 2018 lease
expiration. According to servicer reporting, the current occupancy
rate is 65.0%, which has been dropping since issuance when
occupancy was 85.9%. As a result, the loan has been reporting below
breakeven debt service coverage ratios for the past several years.
The most recent appraisal, dated June 2023, reported an as-is value
of $7.7 million, down nearly 60% from the issuance value of $18.0
million. In its analysis, Morningstar DBRS liquidated the loan,
resulting in a loss severity of approximately 50%.
Notes: All figures are in U.S. dollars unless otherwise noted.
CITIGROUP MORTGAGE 2024-RP1: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to the residential
mortgage-backed notes to be issued by Citigroup Mortgage Loan Trust
2024-RP1 (CMLTI 2024-RP1).
Entity/Debt Rating
----------- ------
CMLTI 2024-RP1
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
B LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
PT LT NR(EXP)sf Expected Rating
PT-1 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed notes to be
issued by Citigroup Mortgage Loan Trust 2024-RP1 (CMLTI 2024-RP1)
as indicated above. The transaction is expected to close on March
26, 2024. The notes are supported by 2,651 seasoned performing
loans (SPLs) and reperforming loans (RPLs) with a total balance of
about $487.8 million, including $30.8 million, or 6.3% of the
aggregate pool balance, in noninterest-bearing deferred principal
amounts as of the cut-off date.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional, senior-subordinate, sequential
structure. The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicer will not advance 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 11.3% above a long-term sustainable level (versus
11.1% on a national level as of 3Q23, up 1.7% qoq). Housing
affordability is at its worst levels in decades, driven by both
high interest rates and elevated home prices. Home prices have
increased 5.5% yoy nationally as of December 2023, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
Distressed Performance History and RPL Credit Quality (Negative):
The collateral pool primarily consists of peak-vintage SPLs and
RPLs. The collateral is seasoned at approximately 151 months in
aggregate with 43.7% of the pool by unpaid principal balance (UPB)
being originated before 2010. The remaining 56.3% of loans were
originated between 2010 and 2022.
Of the pool, 2.6% were 30 days delinquent as of the cutoff date and
57% are current but have had delinquencies within the past 24
months. Fitch increased its loss expectations to account for the
delinquent loans and loans with prior delinquencies. Additionally,
96.3% of the loans have a prior modification.
Borrowers have a weaker credit profile (670 FICO, as calculated by
Fitch, based on updated FICO scores provided on the loan level and
a 43.0% debt to income [DTI] ratio). See the Asset Analysis section
for additional information.
Low Leverage (Positive): All loans seasoned over 24 months received
updated property values, translating to a Fitch-derived, weighted
average (WA), current mark-to-market (MtM) combined loan-to-value
ratio (cLTV) of 51.2% and a sustainable LTV (sLTV) of 58.1% at the
base case. Updated broker price opinions (BPOs) were provided on
all loans in the pool and used to calculate the Fitch-derived LTVs.
This reflects low-leverage borrowers and is stronger than in
recently rated SPL/RPL transactions.
Sequential-Pay Structure and No Servicer P&I Advances (Mixed): The
transaction's cash flow is based on a sequential-pay structure
whereby the subordinated classes do not receive principal until the
senior classes are repaid in full. Losses are allocated in
reverse-sequential order. Furthermore, the provision to reallocate
principal to pay interest on the 'AAAsf' and 'AAsf' rated notes
prior to other principal distributions is highly supportive of
timely interest payments to those classes in the absence of
servicer advancing. Interest and interest shortfalls are paid
sequentially.
The servicer will not advance delinquent monthly payments of P&I,
which reduces 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. Under Fitch's updated
criteria approach, Fitch only expects timely interest for 'AAAsf'
rated classes (Global Structured Finance Rating Criteria).
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 42.4%, 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
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10.0% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
for positive rating migration for all of the rated classes.
Specifically, a 10.0% gain in home prices would result in a full
category upgrade for the rated classes excluding those being
assigned ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence review was
completed on 100% of the loans in this transaction. The scope of
the due diligence review was consistent with Fitch criteria for
seasoned collateral. All loans are seasoned at 24 months or more
and are subject to a due diligence scope that primarily tests for
compliance with lending regulations. All loans received an updated
tax and title search and review of servicing comments.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments: increased the LS due to HUD-1
issues, missing modification agreements, as well as delinquent
taxes and outstanding liens. These adjustments resulted in an
increase in the 'AAAsf' expected loss of approximately 21bps.
ESG CONSIDERATIONS
CMLTI 2024-RP1 has an ESG Relevance Score of '4+' for Transaction
Parties & Operational Risk due to due to its strong transaction
counterparties, which has a positive impact on the credit profile,
and is relevant to the ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CITIGROUP MORTGAGE 2024-RP1: Fitch Rates Class B-2 Notes 'B'
------------------------------------------------------------
Fitch Ratings has assigned final ratings to Citigroup Mortgage Loan
Trust 2024-RP1 (CMLTI 2024-RP1).
Entity/Debt Rating Prior
----------- ------ -----
CMLTI 2024-RP1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT AAsf New Rating AA(EXP)sf
A-4 LT Asf New Rating A(EXP)sf
A-5 LT BBBsf New Rating BBB(EXP)sf
M-1 LT Asf New Rating A(EXP)sf
M-2 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
B-5 LT NRsf New Rating NR(EXP)sf
B 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
SA LT NRsf New Rating NR(EXP)sf
PT LT NRsf New Rating NR(EXP)sf
PT-1 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch rates the residential mortgage-backed notes to be issued by
Citigroup Mortgage Loan Trust 2024-RP1 (CMLTI 2024-RP1) as
indicated above. The transaction is expected to close on March 26,
2024. The notes are supported by 2,651 seasoned performing loans
(SPLs) and reperforming loans (RPLs) with a total balance of about
$487.8 million, including $30.8 million, or 6.3% of the aggregate
pool balance, in noninterest-bearing deferred principal amounts as
of the cut-off date.
Distributions of P&I and loss allocations are based on a
traditional, senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicer will not advance delinquent monthly payments of P&I.
There have been no changes to the structure or collateral since the
Presale.
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 11.3% above a long-term sustainable level (versus
11.1% on a national level as of 3Q23, up 1.7% qoq). Housing
affordability is at its worst levels in decades, driven by both
high interest rates and elevated home prices. Home prices have
increased 5.5% yoy nationally as of December 2023, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
Distressed Performance History and RPL Credit Quality (Negative):
The collateral pool primarily consists of peak-vintage SPLs and
RPLs. The collateral is seasoned at approximately 151 months in
aggregate with 43.7% of the pool by unpaid principal balance (UPB)
being originated before 2010. The remaining 56.3% of loans were
originated between 2010 and 2022.
Of the pool, 2.6% were 30 days delinquent as of the cutoff date and
57% are current but have had delinquencies within the past 24
months. Fitch increased its loss expectations to account for the
delinquent loans and loans with prior delinquencies. Additionally,
96.3% of the loans have a prior modification.
Borrowers have a weaker credit profile (670 FICO, as calculated by
Fitch, based on updated FICO scores provided on the loan level and
a 43.0% debt-to-income [DTI] ratio). See the Asset Analysis section
for additional information.
Low Leverage (Positive): All loans seasoned over 24 months received
updated property values, translating to a Fitch-derived, weighted
average (WA), current mark-to-market (MtM) combined loan-to-value
ratio (cLTV) of 51.2% and a sustainable LTV (sLTV) of 58.1% at the
base case. Updated broker price opinions (BPOs) were provided on
all loans in the pool and used to calculate the Fitch-derived LTVs.
This reflects low-leverage borrowers and is stronger than in
recently rated SPL/RPL transactions.
Sequential-Pay Structure and No Servicer P&I Advances (Mixed): The
transaction's cash flow is based on a sequential-pay structure
whereby the subordinated classes do not receive principal until the
senior classes are repaid in full. Losses are allocated in
reverse-sequential order. Furthermore, the provision to reallocate
principal to pay interest on the 'AAAsf' and 'AAsf' rated notes
prior to other principal distributions is highly supportive of
timely interest payments to those classes in the absence of
servicer advancing. Interest and interest shortfalls are paid
sequentially.
The servicer will not advance delinquent monthly payments of P&I,
which reduces 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. Under Fitch's updated
criteria approach, Fitch only expects timely interest for 'AAAsf'
rated classes (Global Structured Finance Rating Criteria).
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 42.4%, 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
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10.0% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
for positive rating migration for all of the rated classes.
Specifically, a 10.0% gain in home prices would result in a full
category upgrade for the rated classes excluding those being
assigned ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence review was
completed on 100% of the loans in this transaction. The scope of
the due diligence review was consistent with Fitch criteria for
seasoned collateral. All loans are seasoned at 24 months or more
and are subject to a due diligence scope that primarily tests for
compliance with lending regulations. All loans received an updated
tax and title search and review of servicing comments.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments: increased the LS due to HUD-1
issues, missing modification agreements, as well as delinquent
taxes and outstanding liens. These adjustments resulted in an
increase in the 'AAAsf' expected loss of approximately 21bps.
ESG CONSIDERATIONS
CMLTI 2024-RP1 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due toits strong transaction
counterparties, which has a negative impact on the credit profile,
and is relevant to the rating[s] in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
COMM 2014-CCRE14: Moody's Lowers Rating on Cl. D Certs to B3
------------------------------------------------------------
Moody's Ratings has affirmed the ratings on two classes and
downgraded the ratings on four classes in COMM 2014-CCRE14 Mortgage
Trust, Commercial Pass-Through Certificates, Series 2014-CCRE14 as
follows:
Cl. B, Downgraded to Baa1 (sf); previously on May 26, 2023
Downgraded to A2 (sf)
Cl. C, Downgraded to Ba1 (sf); previously on May 26, 2023
Downgraded to Baa2 (sf)
Cl. D, Downgraded to B3 (sf); previously on May 26, 2023 Downgraded
to B1 (sf)
Cl. E, Affirmed Caa3 (sf); previously on May 26, 2023 Downgraded to
Caa3 (sf)
Cl. F, Affirmed C (sf); previously on May 26, 2023 Affirmed C (sf)
Cl. PEZ, Downgraded to Baa3 (sf); previously on May 26, 2023
Downgraded to A2 (sf)
RATINGS RATIONALE
The ratings on three P&I classes (Cl. B, Cl. C and Cl. D) were
downgraded due to the increased risk of interest shortfalls and
potential for higher losses driven primarily by the significant
exposure to loans in special servicing. As of the March 2024
remittance statement, six loans, representing 97% of the pool are
in special servicing. The second largest loan, 175 West Jackson
(18% of the pool), has been deemed non-recoverable by the master
servicer and is secured by a distressed office property in Chicago,
IL. Additionally, three other specially servicing loans,
representing 26% of the pool are classified as non-performing
maturity and are 60 or more days delinquent on debt servicer
payments. As a result of the non-recoverability determination and
appraisal reductions interest shortfalls have impacted up to Cl. D
as of the March 2024 remittance statement. Since nearly all the
remaining loans are in special servicing, the interest shortfalls
are expected to continue and may increase if loans remain
delinquent on debt service payments.
The ratings on two P&I classes (Cl. E and Cl. F) were affirmed
because the ratings are consistent with expected recovery of
principal and interest from specially and troubled loans, as well
as losses from previously liquidated loans.
The rating on the exchangeable class, (Cl. PEZ), was downgraded
based on a decline in the credit quality of its referenced
exchangeable classes and principal paydowns of higher quality
referenced exchangeable classes. Cl PEZ originally referenced Cl.
A-M, Cl. B and Cl. C. However, Cl. A-M has paid off in full and Cl.
B and Cl. C are the outstanding referenced classes.
Moody's rating action reflects a base expected loss of 19.5% of the
current pooled balance, compared to 5.1% at Moody's last review.
Moody's base expected loss plus realized losses is now 5.7% of the
original pooled balance, compared to 6.3% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published in July 2022.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 97% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially to the most junior classes and the recovery as a pay
down of principal to the most senior classes.
DEAL PERFORMANCE
As of the March 2024 distribution date, the transaction's aggregate
certificate balance has decreased by 85% to $202 million from $1.38
billion at securitization. The certificates are collateralized by
seven mortgage loans ranging in size from less than 5% to 47% of
the pool.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of four, compared to eight at Moody's last review.
As of the March 2024 remittance report, two loans representing 53%
were current or within their grace period on their debt service
payments, with the remaining five loans all non-performing maturity
balloons.
One loan, constituting 3.3% of the pool, is on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Seven loans have been liquidated from the pool, contributing to an
aggregate realized loss of $38.6 million (for an average loss
severity of 2.8%). Six loans, constituting 97% of the pool, are
currently in special servicing.
The largest specially serviced loan is the 625 Madison Avenue Loan
($95.3 million – 47.1% of the pool), which represents a
pari-passu portion of a $195 million first mortgage loan. The loan
was originally secured by the fee interest in a 0.81-acre parcel of
land located at 625 Madison Avenue between East 58th and East 59th
Street in New York City. However, the loan transferred to special
servicing in July 2023 due to imminent default and subsequently the
Mezzanine Lender foreclosed on the equity collateral. Furthermore,
a modification agreement was executed in December 2023 which
involved, among other items, the termination of the ground lease, a
completion and carry guaranty as well as a $25 million principal
paydown. After being more than 60 days delinquent in late 2023, as
of the March 2024 remittance statement the loan was last paid
through February 2024 and the special servicer indicate they will
continue to monitor the performance of this loan. Based on the
value of the collateral and the executed modification, Moody's does
not anticipate a loss on the mortgage loan.
The second largest specially serviced loan is the 175 West Jackson
Loan ($35.8 million – 17.7% of the pool), which represents a pari
passu portion of a $250 million mortgage loan. The loan is secured
by a Class A, 22-story office building totaling 1.45 million square
feet (SF) and located within the CBD of Chicago, Illinois. The
property's performance has declined steadily since 2015, with
occupancy declining to 55% in December 2023 from 86% in 2015, and
the year-end 2023 net operating income (NOI) was 51% lower than in
2013. The loan first transferred to special servicing in March 2018
for imminent monetary default and was subsequently assumed by
Brookfield Property Group as the new sponsor in connection with the
purchase of the property for $305 million, returning to the master
servicer in August 2018. However, in November 2021, the loan
transferred back to special servicing, and as of the March 2024
remittance statement was last paid through its March 2023 payment
date. The most recent appraisal value was 34% below the outstanding
loan balance. This loan has been deemed non-recoverable by the
master servicer. The special servicer commentary indicates a
receiver was hired to market the property for sale with a potential
loan assumption, and the special servicer is currently in the
process of reviewing offers. Moody's expects a significant loss
from this loan.
The third largest specially serviced loan is the 149 New Montgomery
Loan ($21 million – 10.4% of the pool), which is secured by a
69,000 SF mixed-use property located in San Francisco, CA. The
loan transferred to special servicing in September 2023 for
imminent default, ahead of the November 2023 maturity date.
Property performance has deteriorated since 2020 as a result of
decline in occupancy. The property was 71% occupied as of June
2023, compared to 87% in 2020 and 100% at securitization. The
special servicer is in discussions with the borrower regarding a
possible extension.
The fourth largest specially serviced loan is the 16530 Ventura
Boulevard Loan ($17.7 million – 8.7% of the pool), which is
secured by a 157,000 SF office building located in Encino, CA. The
loan transferred to special servicing in November 2023, ahead of
the January 2024 maturity date as the borrower indicated they
needed additional time to secure refinancing. The special servicer
is conducting ongoing discussions with the borrower regarding next
steps.
The fifth largest loan in special servicing is the La Terraza San
Diego Loan ($13.7 million – 6.8% of the pool), which is secured
by a 78,000 SF, Class A office building in Escondido, CA. The loan
transferred to special servicing in November 2023 due to
borrower-declared imminent monetary default. The largest tenant,
Wells Fargo Bank (34.4% of NRA), had a lease expiration in February
2024 and is not expected to renew. As of September 2023, the
property was 77% leased (inclusive of the Wells Fargo Bank space).
The special servicer and borrower have executed a pre-negotiation
letter and discussions remain ongoing.
The remaining specially serviced loan is secured by a suburban
office property in Central New Jersey. Moody's estimates an
aggregate $39 million loss for the specially serviced loans (45%
expected loss on average).
As of the March 2024 remittance statement cumulative interest
shortfalls were $6.2 million. Moody's anticipates interest
shortfalls will continue because of the exposure to specially
serviced loans and/or modified loans. Interest shortfalls are
caused by special servicing fees, including workout and liquidation
fees, appraisal entitlement reductions (ASERs), loan modifications
and extraordinary trust expenses.
The only loan not in special servicing is the Flint Creek Crossing
Loan ($6.6 million – 3.3% of the pool), which is secured by a
40,000 SF office property located in Barrington, IL, a suburb
northwest of Chicago. The loan matured in January 2024 and the
borrower is exploring their options. Moody's LTV and stressed DSCR
are 129% and 0.82X, respectively, compared to 98% and 1.09X at the
last review.
COMM 2014-UBS5: DBRS Cuts Class E Certs Rating to C
---------------------------------------------------
DBRS Limited downgraded its credit ratings on three classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-UBS5
issued by COMM 2014-UBS5 Mortgage Trust as follows:
-- Class D to CCC (sf) from BB (sf)
-- Class X-B2 to CCC (sf) from BB (high) (sf)
-- Class E to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed its credit ratings on the
remaining classes as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B1 at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
Morningstar DBRS changed the trends on Classes B, C, X-B1, and PEZ
to Negative from Stable. All other trends are Stable, with the
exception of Classes D, E, and X-B2, which have credit ratings that
do not typically carry a trend in commercial mortgage-backed
securities (CMBS) credit ratings.
The credit rating downgrades reflect Morningstar DBRS' ongoing
concerns and increased loss projections related to the loans in
special servicing, two of which, Harwood Center (Prospectus ID#15,
2.9% of the pool) and Seacourt Pavillion (Prospectus ID#16, 2.9% of
the pool), have received updated appraisals indicating further
value deterioration since the prior credit rating action. For this
review, Morningstar DBRS assumed a liquidation scenario for these
loans, resulting in a cumulative projected loss of $35.9 million,
which would fully erode the nonrated Class F and more than half of
the Class E balance. Additionally, as the deal is in wind-down with
the majority of loans scheduled to mature within the next six
months, Morningstar DBRS notes increased refinance risk for a
select number of office-backed loans, which Morningstar DBRS
believes will have difficulty securing replacement financing in the
near to moderate term as performance declines from issuance and
decreased tenant demand have likely eroded property values, further
supporting the Negative trends assigned with this review.
As of the February 2024 remittance, 52 of the original 70 loans
remain in the pool, with a trust balance of $923.6 million,
representing collateral reduction of 34.8% since issuance. Since
Morningstar DBRS' last review, the Campus at Greenhill loan, which
was previously in special servicing, was liquidated from the trust
at a realized loss of approximately $21.9 million, generally in
line with Morningstar DBRS' expectation. To date, the trust has
incurred losses of approximately $50.0 million, depleting the
entirety of the nonrated Class G certificate in addition to
reducing the Class F balance by $6.4 million. There are 20 loans
that are fully defeased, representing 31.2% of the pool balance.
Seventeen loans, representing 18.6% of the pool balance, are on the
servicer's watchlist, primarily for upcoming maturity dates and
five loans, representing 16.0% of the pool balance, are in special
servicing.
The Harwood Center loan is secured by a 724,000-square-foot (sf)
office building in downtown Dallas. The loan transferred to special
servicing in 2020 after the former largest tenant, Omnicom Group
Inc., significantly reduced its footprint by almost 50.0% at the
property as part of a lease extension to 2030 (the tenant currently
occupies 24.7% of net rentable area (NRA)). Occupancy at the
property remains stressed, most recently reported at 70.0% as of
September 2023, compared with 91.0% at YE2021. The loan was last
paid through July 2020 and became real estate owned in November
2021. According to the servicer, the lender and property manager
are working toward leasing up the property while completing a
renovation plan that includes a new amenity floor and white boxing
vacant space for future leases. As of February 2024, approximately
$5.7 million is being held in reserve accounts, while an additional
$14.0 million is being held in other property accounts as noted by
the servicer. The April 2023 appraisal reported a value of $69.8
million, a decrease from the June 2022 value of $75.9 million and a
steep decline from the issuance appraised value of $124.0 million.
According to Reis, office properties in the Dallas central business
district submarket reported a Q4 2023 vacancy rate of 33.0%,
compared with the Q4 2022 vacancy rate of 30.3%. Given the
collateral's depressed value, sustained high vacancy rate, weak
submarket fundamentals, and generally low investor appetite for
this asset type, Morningstar DBRS analyzed this loan with a
liquidation scenario, resulting in a loss severity above 75.0%.
The Seacourt Pavilion loan is secured by a 248,727-sf shopping
center in Toms River, New Jersey, approximately 60 miles east of
Philadelphia. The loan transferred to special servicing in May 2020
for monetary default and was last paid through December 2022. CBRE
is currently the receiver and is marketing the property for sale.
Per the July 2023 rent roll, the property was 78.7% occupied,
relatively in line with the prior year's occupancy rate, but
significantly below the issuance figure of 94.1%. According to the
July 2023 appraisal, the property reported an as-is value of $25.9
million, a considerable decline from the November 2022 and issuance
appraised values of $32.7 million and $40.0 million, respectively.
The debt service coverage ratio (DSCR) at the property has declined
since issuance and has been well below break-even since YE2020.
Morningstar DBRS liquidated the loan in its analysis based on a
haircut to the most recent appraised value, resulting in a loss
severity slightly above 40.0%.
The largest specially serviced loan, State Farm Portfolio
(Prospectus ID#7, 6.0% of the pool) is pari passu with the COMM
2014-UBS3 (rated by Morningstar DBRS), COMM 2014-UBS4 (rated by
Morningstar DBRS), and MSBAM 2014-C16 transactions and is secured
by a portfolio of 14 cross-collateralized, cross-defaulted office
properties in 11 different states. The loan transferred to the
special servicer in September 2023 but remains current on its debt
service payments. Although Morningstar DBRS did not analyze this
loan with a liquidation scenario, given that the current workout
strategy is noted as full payoff, Morningstar DBRS remains cautious
about the loan's prospects of refinance given that the underlying
assets are dark. At issuance, the properties were 100% occupied by
State Farm Mutual Automobile Insurance Company (State Farm) with
all but two of the leases running through 2028. While the leases
remain in place and State Farm continues to make rent payments on
all properties, it has physically vacated every property. The loan
has an anticipated repayment date in April 2024, after which it is
scheduled to hyper amortize until April 2029. Rental income is
currently covering debt service with a reported June 2023 DSCR of
2.12 times (x).
Recent servicer commentary indicates that ongoing discussions
include potential partial defeasance, payoff of the loan,
modification, or property releases. Morningstar DBRS has asked for
further clarification on the noted workout strategies. Although the
evidence of borrower cooperation and various workout strategies are
promising, Morningstar DBRS considers the loan at increased risk of
maturity default given the large exposure to office space in
secondary markets and full vacancy of the underlying assets. Should
this loan default, Morningstar DBRS expects that an updated
appraisal will indicate a considerable value decline.
The largest loan on the servicer's watchlist, Towne Park Ravine I,
II and III (Prospectus ID#10, 4.1% of the pool), is secured by a
three-property, 367,090-sf suburban office park in Kennesaw,
Georgia. The loan was originally added to the servicer's watchlist
in November 2020 after three top-10 tenants vacated the property
upon their lease maturities, driving occupancy and cash flow
downward. Per the most recent reporting, the loan is being
monitored for its upcoming maturity date in August 2024, in
addition to a low occupancy rate, which was 59.0% as of YE2023.
According to the September 2023 rent roll, the former largest
tenant, The Impact Partnership, LLC (25,699 sf; 7.0% of NRA) had a
lease expiration date in October 2023 and based on various online
sources it appears the tenant has moved its headquarters to another
property, approximately 15 miles south of the subject. The largest
remaining tenants at the property are Accelerated Claims, Inc.
(6.3% of NRA), Breckenridge Insurance Services, LLC (5.2% of NRA),
and Hapag-Lloyd Inc. (3.7% of NRA), none of which have a lease
expiration date prior to loan maturity in August 2024. There is a
fair amount of near-term tenant roll over, with leases representing
approximately 13.0% of NRA scheduled to roll within the next 12
months. According to Reis, office properties in the Marietta/E
Cobb/I-75 submarket reported a Q4 2023 vacancy rate of 21.3%,
compared with the Q4 2022 vacancy rate of 21.8%, suggesting the
borrower may face challenges in back-filling vacant space. The
subject property was most recently appraised in June 2014 at a
value of $57.5 million; however, given the sustained decline in
performance coupled with the diminished investor appetite for this
property type and soft submarket conditions, the asset's value has
likely declined significantly. For this review, Morningstar DBRS
applied a stressed loan-to-value ratio and increased the
probability of default in its analysis, resulting in an expected
loss that was more than double the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2014-UBS6: DBRS Confirms C Rating on Class G Certs
-------------------------------------------------------
DBRS Limited confirmed the credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-UBS6
issued by COMM 2014-UBS6 Mortgage Trust as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at B (high) (sf)
-- Class F at CCC (sf)
-- Class G at C (sf)
-- Class X-A at AAA (sf)
-- Class X-B at A (sf)
-- Class X-C at BBB (sf)
-- Class PEZ at A (low) (sf)
The trends on Classes C, D, E, X-B, X-C, and PEZ were changed from
Stable to Negative. Classes F and G have credit ratings that do not
typically carry trends in commercial mortgage-backed securities
(CMBS) credit ratings. The trends on all remaining classes are
stable.
The credit rating confirmations on Classes F and G, which are rated
CCC (sf) and C (sf), respectively, are reflective of Morningstar
DBRS' loss expectations for the loans in special servicing,
representing 7.5% of the current pool balance. In the analysis for
this review, Morningstar DBRS assumed a liquidation scenario for
these loans, resulting in a cumulative projected loss of $33.8
million, which would fully erode the non-rated Class H balance and
a majority of the Class G balance. The Negative trends are
partially reflective of the increased propensity for interest
shortfalls related to the loans in special servicing. In addition,
the majority of remaining loans in the pool are scheduled to mature
in 2024, including several office-backed loans, which Morningstar
DBRS believes will have difficulty securing replacement financing
in the near to moderate term as performance declines from issuance
and decreased tenant demand have likely eroded property values. As
such, these loans were analyzed with stressed scenarios in the
analysis for this review, with the increased expected loss for the
pool as a whole also contributing to the Negative trends assigned
to six classes with this review.
These loans include the 811 Wilshire loan (Prospectus ID#6, 3.9% of
the pool balance), backed by a 20-story office property in Downtown
Los Angeles; the loan is currently on the servicer's watchlist due
to a low occupancy rate, which has been below 60.0% since 2021.
Despite the low occupancy rate, the debt service coverage ratio
(DSCR) continues to report above issuance levels in the last few
years. The servicer's commentary noted that the property, which was
constructed in 1960, was renovated in 2022, suggesting the sponsor
remains committed to stabilizing the property, but the low
occupancy rate, Downtown Los Angeles location, and increased
capitalization rate environment will likely combine for a
significant decline in the as-is value from issuance, complicating
the upcoming maturity in November 2024. The issuance loan-to-value
ratio (LTV) was relatively low, at 57.4%, providing some cushion
against the value deterioration to date. This loan was analyzed
with an increased probability of default (POD) and a stressed
value, with the resulting expected loss in line with the expected
loss for the pool as a whole.
The credit rating confirmations and Stable trends for the remaining
classes in the pool reflect the overall stable performance for most
of the loans in the transaction, as evidenced by the pool's
generally healthy WA DSCR of 2.13 times (x) based on the most
recent year-end financials. As of the February 2024 remittance, 70
of the original 89 loans remain in the pool, representing a
collateral reduction of 28.5% since issuance. Another 27 loans,
representing 22.0% of the pool balance, have been fully defeased.
To date, the trust has incurred $25.8 million of losses, all
contained to the non-rated Class H. Fourteen loans are on the
servicer's watchlist, representing 33.8% of the pool balance. Since
last review, University Edge (Prospectus ID#7, 3.7% of the pool
balance) was returned to the master servicer in May 2023 as a
corrected loan but is currently on the servicer's watchlist for a
low DSCR. The loan is secured by a student housing property in
Akron, Ohio, and performance has been trending downwards in the
last few years, reporting DSCRs near or below break-even. Although
the loan is no longer in special servicing, performance continues
to be depressed and as such, the loan was analyzed with a stressed
POD and LTV based on an updated value provided when the loan was in
special servicing, resulting in an expected loss that was more than
triple the deal average.
The largest specially serviced loan is Highland Oaks Portfolio
(Prospectus ID#8, 3.5% of the pool balance), which is secured by
two Class B office properties in the Chicago suburb of Downers
Grove, Illinois. The loan transferred to special servicing in
February 2023 for imminent monetary default following the departure
of the former largest tenant, Health Care Service Corporation
(Health Care, 55.6% of net rentable area (NRA)) at its December
2022 lease expiration, resulting in occupancy dropping to about
30.0%. The last loan payment received was in February 2023, and the
servicer is pursuing foreclosure. According to the July 2023
appraisal, the property was valued at $9.4 million, which is a
steep decline from the issuance value of $48.1 million and is well
below Morningstar DBRS' projected trust exposure at liquidation of
approximately $36.0 million. According to Reis, office properties
located in the Chicago West submarket reported a Q4 2023 vacancy
rate of 24.7%, an increase from the Q4 2022 vacancy rate of 22.3%
but is expected to decline slightly to 20.2% by 2028. Considering
the soft submarket, low investor appetite for suburban office
property types and the current high interest rate environment, the
ultimate sale price could be significantly below the appraised
value. As such, Morningstar DBRS liquidated the loan in its
analysis with a stressed haircut to the July 2023 appraisal value,
resulting in a loss amount approaching $30.0 million and a loss
severity just under 90.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
CONNECTICUT 2024-R02: DBRS Gives Prov. BB Rating on 1B-2X Notes
---------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings to the
Connecticut Avenue Securities (CAS) Series 2024-R02 Notes (the
Notes) to be issued by Connecticut Avenue Securities Trust 2024-R02
(CAS 2024-R02 or the Issuer):
-- $256.3 million Class 1M-1 at A (high) (sf)
-- $229.8 million Class 1M-2 at BBB (high) (sf)
-- $176.8 million Class 1B-1 at BBB (low) (sf)
-- $88.4 million Class 1B-2 at BB (sf)
-- $76.6 million Class 1M-2A at A (sf)
-- $76.6 million Class 1M-2B at A (low) (sf)
-- $76.6 million Class 1M-2C at BBB (high) (sf)
-- $88.4 million Class 1B-1A at BBB (high) (sf)
-- $88.4 million Class 1B-1B at BBB (low) (sf)
-- $76.6 million Class 1E-A1 at A (sf)
-- $76.6 million Class 1A-I1 at A (sf)
-- $76.6 million Class 1E-A2 at A (sf)
-- $76.6 million Class 1A-I2 at A (sf)
-- $76.6 million Class 1E-A3 at A (sf)
-- $76.6 million Class 1A-I3 at A (sf)
-- $76.6 million Class 1E-A4 at A (sf)
-- $76.6 million Class 1A-I4 at A (sf)
-- $76.6 million Class 1E-B1 at A (low) (sf)
-- $76.6 million Class 1B-I1 at A (low) (sf)
-- $76.6 million Class 1E-B2 at A (low) (sf)
-- $76.6 million Class 1B-I2 at A (low) (sf)
-- $76.6 million Class 1E-B3 at A (low) (sf)
-- $76.6 million Class 1B-I3 at A (low) (sf)
-- $76.6 million Class 1E-B4 at A (low) (sf)
-- $76.6 million Class 1B-I4 at A (low) (sf)
-- $76.6 million Class 1E-C1 at BBB (high) (sf)
-- $76.6 million Class 1C-I1 at BBB (high) (sf)
-- $76.6 million Class 1E-C2 at BBB (high) (sf)
-- $76.6 million Class 1C-I2 at BBB (high) (sf)
-- $76.6 million Class 1E-C3 at BBB (high) (sf)
-- $76.6 million Class 1C-I3 at BBB (high) (sf)
-- $76.6 million Class 1E-C4 at BBB (high) (sf)
-- $76.6 million Class 1C-I4 at BBB (high) (sf)
-- $153.2 million Class 1E-D1 at A (low) (sf)
-- $153.2 million Class 1E-D2 at A (low) (sf)
-- $153.2 million Class 1E-D3 at A (low) (sf)
-- $153.2 million Class 1E-D4 at A (low) (sf)
-- $153.2 million Class 1E-D5 at A (low) (sf)
-- $153.2 million Class 1E-F1 at BBB (high) (sf)
-- $153.2 million Class 1E-F2 at BBB (high) (sf)
-- $153.2 million Class 1E-F3 at BBB (high) (sf)
-- $153.2 million Class 1E-F4 at BBB (high) (sf)
-- $153.2 million Class 1E-F5 at BBB (high) (sf)
-- $153.2 million Class 1-X1 at BBB (high) (sf)
-- $153.2 million Class 1-X2 at BBB (high) (sf)
-- $153.2 million Class 1-X3 at BBB (high) (sf)
-- $153.2 million Class 1-X4 at BBB (high) (sf)
-- $153.2 million Class 1-Y1 at BBB (high) (sf)
-- $153.2 million Class 1-Y2 at BBB (high) (sf)
-- $153.2 million Class 1-Y3 at BBB (high) (sf)
-- $153.2 million Class 1-Y4 at BBB (high) (sf)
-- $76.6 million Class 1-J1 at BBB (high) (sf)
-- $76.6 million Class 1-J2 at BBB (high) (sf)
-- $76.6 million Class 1-J3 at BBB (high) (sf)
-- $76.6 million Class 1-J4 at BBB (high) (sf)
-- $153.2 million Class 1-K1 at BBB (high) (sf)
-- $153.2 million Class 1-K2 at BBB (high) (sf)
-- $153.2 million Class 1-K3 at BBB (high) (sf)
-- $153.2 million Class 1-K4 at BBB (high) (sf)
-- $229.8 million Class 1M-2Y at BBB (high) (sf)
-- $229.8 million Class 1M-2X at BBB (high) (sf)
-- $176.8 million Class 1B-1Y at BBB (low) (sf)
-- $176.8 million Class 1B-1X at BBB (low) (sf)
-- $88.4 million Class 1B-2Y at BB (sf)
-- $88.4 million Class 1B-2X at BB (sf)
Classes 1M-2, 1E-A1, 1E-A2, 1E-A3, 1E-A4, 1E-B1, 1E-B2, 1E-B3,
1E-B4, 1E-C1, 1E-C2, 1E-C3, 1E-C4, 1E-D1, 1E-D2, 1E-D3, 1E-D4,
1E-D5, 1E-F1, 1E-F2, 1E-F3, 1E-F4, 1E-F5, 1-J1, 1-J2, 1-J3, 1-J4,
1-K1, 1-K2, 1-K3, 1-K4, 1M-2Y, 1B-1, 1B-1Y, and 1B-2Y are Related
Combinable and Recombinable Notes (RCR Notes). Classes 1A-I1,
1A-I2, 1A-I3, 1A-I4, 1B-I1, 1B-I2, 1B-I3, 1B-I4, 1C-I1, 1C-I2,
1C-I3, 1C-I4, 1-X1, 1-X2, 1-X3, 1-X4, 1-Y1, 1-Y2, 1-Y3, 1-Y4,
1M-2X, 1B-1X, and 1B-2X are interest-only (IO) RCR Notes.
The A (high) (sf), A (sf), A (low) (sf), BBB (high) (sf), BBB (low)
(sf), and BB (sf) credit ratings reflect 3.80%, 3.37%, 2.93%,
2.50%, 1.50%, and 1.00% of credit enhancement, respectively. Other
than the specified classes above, Morningstar DBRS does not rate
any other classes in this transaction.
The transaction is the 61st benchmark transaction in the CAS
series. The Notes are subject to the credit and principal payment
risk of a certain reference pool (the Reference Pool) of
residential mortgage loans held in various Fannie Mae-guaranteed
mortgage-backed securities. As of the Cut-Off Date, the Reference
Pool consists of 55,685 greater-than-20-year term, fully
amortizing, first-lien, fixed-rate mortgage loans underwritten to a
full documentation standard, with original loan-to-value (LTV)
ratios greater than 60% and less than or equal to 80%. The mortgage
loans were estimated to be originated on or after September 2022
and were acquired by Fannie Mae between April 1, 2023, and July 31,
2023.
On the Closing Date, the Issuer will enter into a Collateral
Administration Agreement (CAA) with Fannie Mae and the Indenture
Trustee. Fannie Mae, as the credit protection buyer, will be
required to make transfer amount payments. The Issuer is expected
to use the aggregate proceeds realized from the sale of the Notes
to purchase certain eligible investments to be held in a securities
account. The eligible investments are restricted to highly rated,
short-term investments. Cash flow from the Reference Pool is not
used to make any payments; instead, a portion of the eligible
investments held in the securities account will be liquidated to
make principal payments to the Noteholders and return amount, if
any, to Fannie Mae upon the occurrence of certain specified credit
events and modification events.
The coupon rates for the Notes are based on the 30-day average
Secured Overnight Financing Rate (SOFR). There are replacement
provisions in place in the event that SOFR is no longer available;
please see the Offering Memorandum (OM) for more details.
Morningstar DBRS did not run interest rate stresses for this
transaction, as the interest is not linked to the performance of
the reference obligations. Instead, the Issuer will use the net
investment earnings on the eligible investments together with
Fannie Mae's transfer amount payments to pay interest to the
Noteholders.
In this transaction, approximately 19.4% of the loans were
originated using property values determined by using Fannie Mae's
Value Acceptance (appraisal waiver) rather than a traditional full
appraisal. Additionally, approximately 0.9% of the loans were
originated using appraisal waiver plus property data collection.
Loans where the appraisal waiver is offered generally have better
credit attributes.
The calculation of principal payments to the Notes will be based on
actual principal collected on the Reference Pool. The scheduled and
unscheduled principal will be combined and only be allocated pro
rata between the senior and nonsenior tranches if the performance
tests are satisfied. For CAS 2024-R02, the minimum credit
enhancement test is set to pass at the Closing Date. This allows
rated classes to receive principal payments from the First Payment
Date, provided the other two performance tests—delinquency test
and cumulative net loss test—are met. Additionally, the nonsenior
tranches will also be entitled to supplemental subordinate
reduction amounts if the offered reference tranche percentage
increases above 5.50%.
The interest payments for these transactions are not linked to the
performance of the reference obligations except to the extent that
modification losses have occurred.
The Notes will be scheduled to mature on the payment date in
February 2044, but will be subject to mandatory redemption prior to
the scheduled maturity date upon the termination of the CAA.
The administrator and trustor of the transaction will be Fannie
Mae. Computershare Trust Company, N.A. (rated BBB and R-2 (middle)
with a Stable trend by Morningstar DBRS) will act as the Indenture
Trustee, Exchange Administrator, Custodian, and Investment Agent.
U.S. Bank National Association (rated AA (high) with a Negative
trend and R-1 (high) with a Stable trend by Morningstar DBRS) will
act as the Delaware Trustee.
The Reference Pool consists of approximately 3.2% of loans
originated under the HomeReady® program. HomeReady® is Fannie
Mae's affordable mortgage product designed to expand the
availability of mortgage financing to creditworthy low- to
moderate-income borrowers.
If a reference obligation is refinanced under the High LTV
Refinance Program, then the resulting refinanced reference
obligation may be included in the Reference Pool as a replacement
of the original reference obligation. The High LTV Refinance
Program provides refinance opportunities to borrowers with existing
Fannie Mae mortgages who are current in their mortgage payments but
whose LTV ratios exceed the maximum permitted for standard
refinance products. The refinancing and replacement of a reference
obligation under this program will not constitute a credit event.
Notes: All figures are in U.S. dollars unless otherwise noted.
CONNECTICUT AVENUE 2024-R02: DBRS Finalizes BB Rating on 2 Classes
------------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
Connecticut Avenue Securities (CAS) Series 2024-R02 Notes (the
Notes) issued by Connecticut Avenue Securities Trust 2024-R02 (CAS
2024-R02 or the Issuer):
-- $256.3 million Class 1M-1 at A (high) (sf)
-- $229.8 million Class 1M-2 at BBB (high) (sf)
-- $176.8 million Class 1B-1 at BBB (low) (sf)
-- $88.4 million Class 1B-2 at BB (sf)
-- $76.6 million Class 1M-2A at A (sf)
-- $76.6 million Class 1M-2B at A (low) (sf)
-- $76.6 million Class 1M-2C at BBB (high) (sf)
-- $88.4 million Class 1B-1A at BBB (high) (sf)
-- $88.4 million Class 1B-1B at BBB (low) (sf)
-- $76.6 million Class 1E-A1 at A (sf)
-- $76.6 million Class 1A-I1 at A (sf)
-- $76.6 million Class 1E-A2 at A (sf)
-- $76.6 million Class 1A-I2 at A (sf)
-- $76.6 million Class 1E-A3 at A (sf)
-- $76.6 million Class 1A-I3 at A (sf)
-- $76.6 million Class 1E-A4 at A (sf)
-- $76.6 million Class 1A-I4 at A (sf)
-- $76.6 million Class 1E-B1 at A (low) (sf)
-- $76.6 million Class 1B-I1 at A (low) (sf)
-- $76.6 million Class 1E-B2 at A (low) (sf)
-- $76.6 million Class 1B-I2 at A (low) (sf)
-- $76.6 million Class 1E-B3 at A (low) (sf)
-- $76.6 million Class 1B-I3 at A (low) (sf)
-- $76.6 million Class 1E-B4 at A (low) (sf)
-- $76.6 million Class 1B-I4 at A (low) (sf)
-- $76.6 million Class 1E-C1 at BBB (high) (sf)
-- $76.6 million Class 1C-I1 at BBB (high) (sf)
-- $76.6 million Class 1E-C2 at BBB (high) (sf)
-- $76.6 million Class 1C-I2 at BBB (high) (sf)
-- $76.6 million Class 1E-C3 at BBB (high) (sf)
-- $76.6 million Class 1C-I3 at BBB (high) (sf)
-- $76.6 million Class 1E-C4 at BBB (high) (sf)
-- $76.6 million Class 1C-I4 at BBB (high) (sf)
-- $153.2 million Class 1E-D1 at A (low) (sf)
-- $153.2 million Class 1E-D2 at A (low) (sf)
-- $153.2 million Class 1E-D3 at A (low) (sf)
-- $153.2 million Class 1E-D4 at A (low) (sf)
-- $153.2 million Class 1E-D5 at A (low) (sf)
-- $153.2 million Class 1E-F1 at BBB (high) (sf)
-- $153.2 million Class 1E-F2 at BBB (high) (sf)
-- $153.2 million Class 1E-F3 at BBB (high) (sf)
-- $153.2 million Class 1E-F4 at BBB (high) (sf)
-- $153.2 million Class 1E-F5 at BBB (high) (sf)
-- $153.2 million Class 1-X1 at BBB (high) (sf)
-- $153.2 million Class 1-X2 at BBB (high) (sf)
-- $153.2 million Class 1-X3 at BBB (high) (sf)
-- $153.2 million Class 1-X4 at BBB (high) (sf)
-- $153.2 million Class 1-Y1 at BBB (high) (sf)
-- $153.2 million Class 1-Y2 at BBB (high) (sf)
-- $153.2 million Class 1-Y3 at BBB (high) (sf)
-- $153.2 million Class 1-Y4 at BBB (high) (sf)
-- $76.6 million Class 1-J1 at BBB (high) (sf)
-- $76.6 million Class 1-J2 at BBB (high) (sf)
-- $76.6 million Class 1-J3 at BBB (high) (sf)
-- $76.6 million Class 1-J4 at BBB (high) (sf)
-- $153.2 million Class 1-K1 at BBB (high) (sf)
-- $153.2 million Class 1-K2 at BBB (high) (sf)
-- $153.2 million Class 1-K3 at BBB (high) (sf)
-- $153.2 million Class 1-K4 at BBB (high) (sf)
-- $229.8 million Class 1M-2Y at BBB (high) (sf)
-- $229.8 million Class 1M-2X at BBB (high) (sf)
-- $176.8 million Class 1B-1Y at BBB (low) (sf)
-- $176.8 million Class 1B-1X at BBB (low) (sf)
-- $88.4 million Class 1B-2Y at BB (sf)
-- $88.4 million Class 1B-2X at BB (sf)
Classes 1M-2, 1E-A1, 1E-A2, 1E-A3, 1E-A4, 1E-B1, 1E-B2, 1E-B3,
1E-B4, 1E-C1, 1E-C2, 1E-C3, 1E-C4, 1E-D1, 1E-D2, 1E-D3, 1E-D4,
1E-D5, 1E-F1, 1E-F2, 1E-F3, 1E-F4, 1E-F5, 1-J1, 1-J2, 1-J3, 1-J4,
1-K1, 1-K2, 1-K3, 1-K4, 1M-2Y, 1B-1, 1B-1Y, and 1B-2Y are Related
Combinable and Recombinable Notes (RCR Notes). Classes 1A-I1,
1A-I2, 1A-I3, 1A-I4, 1B-I1, 1B-I2, 1B-I3, 1B-I4, 1C-I1, 1C-I2,
1C-I3, 1C-I4, 1-X1, 1-X2, 1-X3, 1-X4, 1-Y1, 1-Y2, 1-Y3, 1-Y4,
1M-2X, 1B-1X, and 1B-2X are interest-only (IO) RCR Notes.
The A (high) (sf), A (sf), A (low) (sf), BBB (high) (sf), BBB (low)
(sf), and BB (sf) credit ratings reflect 3.80%, 3.37%, 2.93%,
2.00%, 1.50%, and 1.00% of credit enhancement, respectively. Other
than the specified classes above, Morningstar DBRS does not rate
any other classes in this transaction.
The transaction is the 61st benchmark transaction in the CAS
series. The Notes are subject to the credit and principal payment
risk of a certain reference pool (the Reference Pool) of
residential mortgage loans held in various Fannie Mae-guaranteed
mortgage-backed securities. As of the Cut-Off Date, the Reference
Pool consists of 55,685 greater-than-20-year term, fully
amortizing, first-lien, fixed-rate mortgage loans underwritten to a
full documentation standard, with original loan-to-value (LTV)
ratios greater than 60% and less than or equal to 80%. The mortgage
loans were estimated to be originated on or after September 2022
and were acquired by Fannie Mae between April 1, 2023, and July 31,
2023.
On the Closing Date, the Issuer will enter into a Collateral
Administration Agreement (CAA) with Fannie Mae and the Indenture
Trustee. Fannie Mae, as the credit protection buyer, will be
required to make transfer amount payments. The Issuer is expected
to use the aggregate proceeds realized from the sale of the Notes
to purchase certain eligible investments to be held in a securities
account. The eligible investments are restricted to highly rated,
short-term investments. Cash flow from the Reference Pool is not
used to make any payments; instead, a portion of the eligible
investments held in the securities account will be liquidated to
make principal payments to the Noteholders and return amount, if
any, to Fannie Mae upon the occurrence of certain specified credit
events and modification events.
The coupon rates for the Notes are based on the 30-day average
Secured Overnight Financing Rate (SOFR). There are replacement
provisions in place in the event that SOFR is no longer available;
please see the Offering Memorandum (OM) for more details.
Morningstar DBRS did not run interest rate stresses for this
transaction, as the interest is not linked to the performance of
the reference obligations. Instead, the Issuer will use the net
investment earnings on the eligible investments together with
Fannie Mae's transfer amount payments to pay interest to the
Noteholders.
In this transaction, approximately 19.4% of the loans were
originated using property values determined by using Fannie Mae's
Value Acceptance (appraisal waiver) rather than a traditional full
appraisal. Additionally, approximately 0.9% of the loans were
originated using appraisal waiver plus property data collection.
Loans where the appraisal waiver is offered generally have better
credit attributes. Please see the OM for more details about the
appraisal waiver.
The calculation of principal payments to the Notes will be based on
actual principal collected on the Reference Pool. The scheduled and
unscheduled principal will be combined and only be allocated pro
rata between the senior and nonsenior tranches if the performance
tests are satisfied. For CAS 2024-R02, the minimum credit
enhancement test is set to pass at the Closing Date. This allows
rated classes to receive principal payments from the First Payment
Date, provided the other two performance tests—delinquency test
and cumulative net loss test—are met. Additionally, the nonsenior
tranches will also be entitled to supplemental subordinate
reduction amounts if the offered reference tranche percentage
increases above 5.50%.
The interest payments for these transactions are not linked to the
performance of the reference obligations except to the extent that
modification losses have occurred.
The Notes will be scheduled to mature on the payment date in
February 2044, but will be subject to mandatory redemption prior to
the scheduled maturity date upon the termination of the CAA.
The administrator and trustor of the transaction will be Fannie
Mae. Computershare Trust Company, N.A. (rated BBB and R-2 (middle)
with a Stable trend by Morningstar DBRS) will act as the Indenture
Trustee, Exchange Administrator, Custodian, and Investment Agent.
U.S. Bank National Association (rated AA (high) with a Negative
trend and R-1 (high) with a Stable trend by Morningstar DBRS) will
act as the Delaware Trustee.
The Reference Pool consists of approximately 3.2% of loans
originated under the HomeReady® program. HomeReady® is Fannie
Mae's affordable mortgage product designed to expand the
availability of mortgage financing to creditworthy low- to
moderate-income borrowers.
If a reference obligation is refinanced under the High LTV
Refinance Program, then the resulting refinanced reference
obligation may be included in the Reference Pool as a replacement
of the original reference obligation. The High LTV Refinance
Program provides refinance opportunities to borrowers with existing
Fannie Mae mortgages who are current in their mortgage payments but
whose LTV ratios exceed the maximum permitted for standard
refinance products. The refinancing and replacement of a reference
obligation under this program will not constitute a credit event.
Notes: All figures are in U.S. dollars unless otherwise noted.
CROWN CITY IV: S&P Assigns BB- (sf) Rating on Class D-R Notes
-------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1R, A-J, A-2R, B-1R, B-F, C-1R, C-2R, and D-R replacement debt
and proposed new class X debt from Crown City CLO IV/Crown City CLO
IV LLC, a CLO originally issued in September 2022 that is managed
by Western Asset Management Co. LLC.
The preliminary ratings are based on information as of March 26,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the March 28, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. 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 A-1R, A-J, A-2R, B-1R, B-F, C-1R, C-2R,
and D-R debt are expected to be issued at a lower weighted average
cost of debt; and the class B-F debt is expected to be issued at a
fixed coupon.
-- The replacement class A-1R, A-J, A-2R, B-1R, C-1R, C-2R, and
D-R debt are expected to be issued at a floating spread; and the
class B-F debt is expected to be issued at a fixed coupon.
-- The sequential class A-1R and A-J debt are expected to replace
the existing class A-1 debt.
-- The pro rata class B-1R and B-F debt are expected to replace
the existing class B debt.
-- The sequential class C-1R and C-2R debt are expected to replace
the existing class C debt.
-- The stated maturity, reinvestment period, and noncall period
will be extended by 3.5, 4.5, and 2.0 years, respectively.
-- In connection with the refinancing, the issuer is modifying
some of the provisions related to workout assets.
-- The new proposed class X debt issued in connection with this
refinancing is expected to be paid down using interest proceeds
during the first 12 payment dates, beginning with the July 2024
payment date.
-- The target par amount will be increased from $360.00 million to
$400.00 million.
Replacement And Original Debt Issuances
Replacement debt
-- Class X, $1.00 million: Three-month CME term SOFR + 1.10%
-- Class A-1R, $241.00 million: Three-month CME term SOFR + 1.61%
-- Class A-J, $19.00 million: Three-month CME term SOFR + 1.82%
-- Class A-2R, $44.00 million: Three-month CME term SOFR + 2.25%
-- Class B-1R (deferrable), $10.00 million: Three-month CME term
SOFR + 2.80%
-- Class B-F (deferrable), $14.00 million: 6.52%
-- Class C-1R (deferrable), $21.00 million: Three-month CME term
SOFR + 4.50%
-- Class C-2R (deferrable), $7.00 million: Three-month CME term
SOFR + 5.67%
-- Class D-R (deferrable), $10.00 million: Three-month CME term
SOFR + 7.41%
Original debt
-- Class A-1, $216.00 million: Three-month CME term SOFR + 2.23%
-- Class A-2, $57.50 million: Three-month CME term SOFR + 3.05%
-- Class B (deferrable), $19.00 million: Three-month CME term SOFR
+ 4.15%
-- Class C (deferrable), $20.50 million: Three-month CME term SOFR
+ 5.44%
-- Class D (deferrable), $14.00 million: Three-month CME term SOFR
+ 7.90%
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
Crown City CLO IV/Crown City CLO IV LLC
Class X, $1.00 million: AAA (sf)
Class A-1R, $241.00 million: AAA (sf)
Class A-J, $19.00 million: AAA (sf)
Class A-2R, $44.00 million: AA (sf)
Class B-1R (deferrable), $10.00 million: A (sf)
Class B-F (deferrable), $14.00 million: A (sf)
Class C-1R (deferrable), $21.00 million: BBB+ (sf)
Class C-2R (deferrable), $7.00 million: BBB- (sf)
Class D-R (deferrable), $10.00 million: BB- (sf)
Other Outstanding Notes
Crown City CLO IV/Crown City CLO IV LLC
Subordinated notes, $32.30 million: Not rated
DIAMETER CAPITAL 6: S&P Assigns Prelim BB- (sf) Rating on D Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Diameter
Capital CLO 6 Ltd./Diameter Capital CLO 6 LLC's floating- and
fixed-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Diameter CLO Advisors LLC.
The preliminary ratings are based on information as of March 25,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Diameter Capital CLO 6 Ltd./Diameter Capital CLO 6 LLC
Class A-1, $305.00 million: AAA (sf)
Class A-2A, $62.50 million: AA (sf)
Class A-2B, $10.00 million: AA (sf)
Class B (deferrable), $32.50 million: A (sf)
Class C-1 (deferrable), $23.75 million: BBB (sf)
Class C-2 (deferrable), $6.25 million: BBB- (sf)
Class D (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $43.40 million: Not rated
DRYDEN 115: S&P Assigns BB- (sf) Rating on $20MM Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Dryden 115 CLO
Ltd./Dryden 115 CLO LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by PGIM Inc.
The ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Dryden 115 CLO Ltd./Dryden 115 CLO LLC
Class A-1, $300.0 million: AAA (sf)
Class A-2, $40.0 million: Not rated
Class B, $40.0 million: AA (sf)
Class C-1 (deferrable), $20.0 million: A+ (sf)
Class C-2 (deferrable), $10.0 million: A (sf)
Class D (deferrable), $30.0 million: BBB- (sf)
Class E (deferrable), $20.0 million: BB- (sf)
Subordinated notes, $44.6 million: Not rated
ELLINGTON CLO III: Moody's Lowers Rating on $40MM E Notes to Caa3
-----------------------------------------------------------------
Moody's Ratings has downgraded the rating on the following notes
issued by Ellington CLO III, Ltd.:
US$40,000,000 Class E Secured Deferrable Floating Rate Notes due
2030 (the "Class E Notes") (current outstanding balance of
$45,169,512.82), Downgraded to Caa3 (sf); previously on February 8,
2022 Upgraded to B3 (sf)
Ellington CLO III, Ltd., originally issued in July 2018 and
partially refinanced in April 2021, is a managed cashflow CLO. The
notes are collateralized primarily by a portfolio of broadly
syndicated senior secured corporate loans. The transaction's
reinvestment period ended in July 2022.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The rating action on the Class E notes reflects the specific risks
to the notes posed by par loss observed in the underlying CLO
portfolio. Based on Moody's calculation, the OC ratio for the Class
E notes is currently 96.1% versus October 2023 level of 101.69%. In
addition, according to March 2024 trustee report[1], Class E notes
has approximately $5.2 million cumulative deferring interest
outstanding.
No actions were taken on the Class A-1, Class A-2-R, Class B, Class
C, Class D and Class F 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: $223,382,775
Defaulted par: $61,971,916
Diversity Score: 31
Weighted Average Rating Factor (WARF): 3942
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 4.43%
Weighted Average Coupon (WAC): 10%
Weighted Average Recovery Rate (WARR): 44.59%
Weighted Average Life (WAL): 3.2 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in this rating 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 Rating:
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.
ELMWOOD CLO VIII: S&P Assigns B- (sf) Rating on Class F-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, E-R, and F-R replacement debt from Elmwood CLO VIII
Ltd./Elmwood CLO VIII LLC, a CLO originally issued in March 2021
that is managed by Elmwood Asset Management LLC.
On the March 22, 2024, refinancing date, the proceeds from the
replacement debt was used to redeem the original debt. At that
time, S&P withdrew its ratings on the original debt and assigned
ratings to the replacement debt.
The replacement debt was 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, D-R, and E-R debt was
issued at a higher spread over three-month CME term SOFR than the
original notes.
-- The replacement class F-R debt was issued at the same spread
over three-month CME term SOFR as the original debt.
-- The replacement class A-R, B-R, C-R, D-R, E-R, and F-R debt was
issued at a floating spread, replacing the current floating
spread.
-- The stated maturity and reinvestment period was extended by
3.25 years.
-- The non-call period was extended until April 2026.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $672.00 million: Three-month CME term SOFR + 1.55%
-- Class B-R, $126.00 million: Three-month CME term SOFR + 2.00%
-- Class C-R, $63.00 million: Three-month CME term SOFR + 2.50%
-- Class D-R, $63.00 million: Three-month CME term SOFR + 3.80%
-- Class E-R, $42.00 million: Three-month CME term SOFR + 6.25%
-- Class F-R, $15.75 million: Three-month CME term SOFR + 8.00%
Original debt
-- Class A-1, $576.00 million: Three-month LIBOR + 1.24%
-- Class A-2, $96.00 million: Three-month LIBOR + 1.08%
-- Class B-1, $108.00 million: Three-month LIBOR + 1.55%
-- Class B-2, $18.00 million: Three-month LIBOR + 1.45%
-- Class C-1, $54.00 million: Three-month LIBOR + 1.95%
-- Class C-2, $9.00 million: Three-month LIBOR + 1.80%
-- Class D-1, $54.00 million: Three-month LIBOR + 3.00%
-- Class D-2, $9.00 million: Three-month LIBOR + 2.85%
-- Class E-1, $31.50 million: Three-month LIBOR + 6.00%
-- Class E-2, $5.25 million: Three-month LIBOR + 5.75%
-- Class F-1, $9.00 million: Three-month LIBOR + 8.00%
-- Class F-2, $1.50 million: Three-month LIBOR + 8.00%
-- Subordinated notes, $94.50 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Elmwood CLO VIII Ltd./Elmwood CLO VIII LLC
Class A-R, $672.00 million: AAA (sf)
Class B-R, $126.00 million: AA (sf)
Class C-R (deferrable), $63.00 million: A (sf)
Class D-R (deferrable), $63.00 million: BBB- (sf)
Class E-R (deferrable), $42.00 million: BB- (sf)
Class F-R (deferrable), $15.75 million: B- (sf)
Ratings Withdrawn
Elmwood CLO VIII Ltd./Elmwood CLO VIII LLC
Class A-1 to not rated from 'AAA (sf)'
Class A-2 to not rated from 'AAA (sf)'
Class B-1 to not rated from 'AA (sf)'
Class B-2 to not rated from 'AA (sf)'
Class C-1 to not rated from 'A (sf)'
Class C-2 to not rated from 'A (sf)'
Class D-1 to not rated from 'BBB- (sf)'
Class D-2 to not rated from 'BBB- (sf)'
Class E-1 to not rated from 'BB- (sf)'
Class E-2 to not rated from 'BB- (sf)'
Class F-1 to not rated from 'B- (sf)'
Class F-2 to not rated from 'B- (sf)'
Other Outstanding Debt
Elmwood CLO VIII Ltd./Elmwood CLO VIII LLC
Subordinated notes, $94.50 million: Not rated
EXETER AUTOMOBILE 2024-2: Fitch Gives BB-(EXP) Rating on E Notes
----------------------------------------------------------------
Fitch Ratings expects to assign ratings and Rating Outlooks to
Exeter Automobile Receivables Trust (EART) 2024-2.
Entity/Debt Rating
----------- ------
Exeter Automobile
Receivables
Trust 2024-2
A-1 ST F1+(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-3 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
KEY RATING DRIVERS
Collateral Performance — Subprime Credit Quality: EART 2024-2 is
backed by collateral with subprime credit attributes, including a
weighted average (WA) FICO score of 572, a WA loan-to-value (LTV)
ratio of 114.01% and WA APR of 22.62%. In addition, 97.59% of the
pool is backed by used vehicles and the WA payment-to-income (PTI)
ratio is 11.60%. The pool is consistent with those in recent EART
series transactions.
Forward-Looking Approach to Derive Rating Case Proxy: Fitch
considered economic conditions and future expectations by assessing
key macroeconomic and wholesale market conditions to derive the
series loss proxy. In recognition of continued weak performance for
the 2022 and 2023 securitizations, Fitch adjusted the vintage
ranges to derive the rating case loss proxy for 2024-2 from those
used for 2024-1. Fitch utilized 2006-2008 data from Santander
Consumer — as proxy recessionary static-managed portfolio data
— and 2015-2017 vintage data from Exeter to arrive at a
forward-looking rating case cumulative net loss (CNL) proxy of
22.00% compared with 20.00% in 2024-1.
Payment Structure — Sufficient Credit Enhancement: Initial hard
credit enhancement (CE) levels are 68.65%, 50.85%, 33.20%, 18.75%
and 8.55% for classes A, B, C, D and E, respectively. The class A,
B, C, D and E CE levels are up from the CE levels for prior
transactions. Excess spread is expected to be 13.10%, up from
12.95% per annum in 2024-1. Loss coverage for each class of notes
is sufficient to cover the respective multiples of Fitch's rating
case CNL proxy of 22.00%.
Seller/Servicer Operational Review — Adequate
Origination/Underwriting/Servicing: Exeter demonstrates adequate
abilities as the originator, underwriter and servicer, as evidenced
by historical portfolio and securitization performance. Fitch does
not rate Exeter but deems the company as capable to service this
transaction. In addition, Citibank, N.A., which Fitch rates
'A+'/'F1'/Stable, has been contracted as backup servicer for this
transaction.
Fitch's base-case loss expectation, which does not include a margin
of safety and is not used in Fitch's quantitative analysis to
assign ratings, is 21.00%, based on its Global Economic Outlook and
transaction-based forecast loss projections.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CNL levels that are higher than the rating case and would likely
result in declines of CE and remaining net loss coverage levels
available to the notes. Additionally, unanticipated declines in
recoveries could also result in lower net loss coverage, which may
make certain note ratings susceptible to potential negative rating
actions, depending on the extent of the decline in coverage.
Fitch therefore 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. Fitch also
evaluates the impact of stressed recovery rates on an auto loan ABS
structure and rating impact with a 50% haircut. These analyses are
intended to provide an indication of the rating sensitivity of the
notes to unexpected deterioration of a trust's performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to rising CE levels and consideration for
potential upgrades. If CNL is 20% less than the projected proxy,
the expected subordinate note ratings could be upgraded by up to
one category.
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 comparing or recomputing certain
information with respect to 150 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 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.
FIGRE TRUST 2024-HE1: DBRS Gives Prov. B(low) Rating on F Notes
---------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Mortgage-Backed Notes, Series 2024-HE1 (the Notes) to be issued by
FIGRE Trust 2024-HE1 (FIGRE 2024-HE1):
-- $241.1 million Class A Notes at AAA (sf)
-- $15.2 million Class B Notes as AA (low) (sf)
-- $12.7 million Class C Notes at A (low) (sf)
-- $7.8 million Class D Notes at BBB (low) (sf)
-- $4.8 million Class E Notes at BB (low) (sf)
-- $6.9 million Class F Notes at B (low) (sf)
The AAA (sf) rating on the Class A Notes reflects 20.00% of credit
enhancement provided by subordinate notes. The AA (low) (sf), A
(low) (sf), BBB (low) (sf), BB (low) (sf), B (low) (sf) rating
reflects 14.95%, 10.75%, 8.15%, 6.55%, and 4.25% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of recently originated first-
and junior-lien revolving home equity lines of credit (HELOCs)
funded by the issuance of the Notes. The Notes are backed by 4,792
loans (individual HELOC draws), which correspond to 4,296 HELOC
families (each consisting of an initial HELOC draw and subsequent
draws by the same borrower) with a total unpaid principal balance
of $301,419,049 and a total current credit limit of $325,956,566 as
of the Cut-Off Date (February 29, 2024).
The portfolio, on average, is four months seasoned, though
seasoning ranges from one to 10 months. All of the HELOCs are
current, and 99.8% by balance have been performing since
origination. All of the loans in the pool are exempt from the
Consumer Financial Protection Bureau (CFPB) Ability-to-Repay
(ATR)/Qualified Mortgage (QM) rules because HELOCs are not subject
to the ATR/QM rules.
Figure is a wholly owned, indirect subsidiary of Figure
Technologies, Inc. (Figure Technologies) that was formed in 2018.
Figure Technologies is a financial services and technology company
that leverages blockchain technology for the origination and
servicing of loans, loan payments, and loan sales. In addition to
the home equity line of credit (HELOC) product, Figure has offered
several different lending products within the consumer lending
space, including student loan refinance, unsecured consumer loans,
and conforming first-lien mortgage. In June 2023, the company
launched a wholesale channel for its HELOC product. Figure
originates and services loans in 45 states and the District of
Columbia. As of December 31, 2023, Figure originated, funded, and
serviced more than 112,000 HELOCs totaling approximately $7.9
billion.
Figure is the Originator of most and the Servicer of all HELOCs in
the pool. Other originators in the pool are Guaranteed Rate, Inc.,
Movement Mortgage, LLC, Homepoint Financial Corporation, Synergy
One Lending, Inc., New American Funding, LLC, Homebridge Financial
Services, Inc. and certain other lenders (together, the White Label
Partner Originators). The White Label Partner Originators
originated HELOCs using Figure's online origination applications
under Figure's underwriting guidelines. Also, Figure is the Seller
of all the HELOCs. Morningstar DBRS performed a telephone
operational risk review of Figure's origination and servicing
platform and believes the Company is an acceptable HELOC originator
and servicer with a backup servicer that is acceptable to
Morningstar DBRS.
Figure is the transaction's Sponsor. FIGRE 2024-HE1 is the fourth
rated securitization of HELOCs by the Sponsor. Also,
Figure-originated HELOCs are included in four securitizations
sponsored by Saluda Grade. These transactions' performances to date
are satisfactory.
The transaction includes mostly junior liens (primarily second
liens) and some first-lien HELOCs.
In this transaction, all loans are open-HELOCs that have a draw
period of two, three, four, or five years during which borrowers
may make draws up to a credit limit, though such right to make
draws may be temporarily frozen, suspended, or terminated under
certain circumstances. At the end of the draw term, the HELOC
mortgagors have a repayment period ranging from three to 25 years.
During the repayment period, borrowers are no longer allowed to
draw, and their monthly principal payments will equal an amount
that allows the outstanding loan balance to evenly amortize down.
All HELOCs in this transaction are fixed-rate loans. The HELOCs
have no interest-only payment period, so borrowers are required to
make both interest and principal payments during the draw and
repayment periods. No loans require a balloon payment.
The loans are made mainly to borrowers with prime and near-prime
credit quality who seek to take equity cash out for various
purposes. These HELOCs are fully drawn at origination, as evidenced
by the weighted-average (WA) utilization rate of approximately
96.7% after four months of seasoning on average. For each borrower,
the HELOC, including the initial and any subsequent draws, is
defined as a loan family within which every new credit line draw
becomes a de facto new loan with a new fixed interest rate
determined at the time of the draw by adding the margin determined
at origination to the then current prime rate.
Relative to other HELOCs in Morningstar DBRS-rated deals, the loans
in the pool are all fixed rate, fully amortizing with a shorter
draw period and may have terms significantly shorter than 30 years,
including five- to 10-year maturities.
Certain Unique Factors in HELOC Origination Process
Figure seeks to originate HELOCs for borrowers of prime and
near-prime credit quality with ample home equity. It leverages
technology in underwriting, title searching, regulatory compliance,
and other lending processes to shorten the approval and funding
process and improve the borrower experience. Below are certain
aspects in the lending process that are unique to Figure's
origination platform:
-- To qualify a borrower for income, Figure seeks to confirm the
borrower's stated income using proprietary technology algorithms.
-- The lender uses the FICO 9 credit score model instead of the
classic FICO credit score model used by most mortgage originators.
-- Instead of title insurance, Figure uses an electronic lien
search algorithm to identify existing property liens.
-- Figure uses a property valuation provided by an automatic
valuation model (AVM) instead of a full property appraisal.
The credit impact of these factors is generally loan specific.
Although technologically advanced, the income, employment, and
asset verification methods used by Figure were treated as less than
full documentation in the RMBS Insight model. In addition, DBRS
Morningstar applied haircuts to the provided AVM valuations,
reduced the projected recoveries on junior-lien HELOCs, and
generally stepped up expected losses from the model to account for
a combined effect of these and other factors. Please see the
Documentation Type and Underwriting Guidelines sections of the
related report for details.
Transaction Counterparties
Figure will service all loans within the pool for a servicing fee
of 0.25% per year. Also, Specialized Loan Servicing LLC (SLS) will
act as a Subservicer for loans that default or are 60 or more days
delinquent under the Mortgage Bankers Association (MBA) method. In
addition, Northpointe Bank (Northpointe) will act as a Backup
Servicer for all mortgage loans in this transaction for a fee of
0.01% per year. If Figure fails to remit the required payments,
fails to observe or perform the Servicer's duties, or experiences
other unremedied events of default described in detail in the
transaction documents, servicing will be transferred to Northpointe
from Figure, under a successor servicing agreement. Such servicing
transfer will occur within 45 days of the termination of Figure. In
the event of a servicing transfer, SLS will retain servicing
responsibilities on all loans that were being special serviced by
SLS at the time of the servicing transfer. Morningstar DBRS
performed an operational risk review of Northpointe's servicing
platform and believes the company is an acceptable loan servicer
for Morningstar DBRS-rated transactions.
The Bank of New York Mellon will serve as Indenture Trustee, Paying
Agent, Note Registrar, Certificate Registrar, and REMIC
Administrator. Wilmington Savings Fund Society, FSB will serve as
the Custodian and the Owner Trustee. DV01, Inc. will act as the
loan data agent.
The Sponsor or a majority-owned affiliate of the Sponsor will
acquire and intends to retain an eligible vertical interest
consisting of the required percentage of the Class A, B, C, D, E,
F, and CE Note amounts and Class FR Certificate to satisfy the
credit risk-retention requirements under Section 15G of the
Securities Exchange Act of 1934 and the regulations promulgated
thereunder. The Sponsor or a majority-owned affiliate of the
Sponsor will be required to hold the required credit risk until the
later of (1) the fifth anniversary of the Closing Date and (2) the
date on which the aggregate loan balance has been reduced to 25% of
the loan balance as of the Cut-Off Date, but in any event no longer
than the seventh anniversary of the Closing Date.
Similar to other transactions backed by junior-lien mortgage loans
or HELOCs, in this transaction, any HELOCs, including first and
junior liens, that are 180 days delinquent under the MBA
delinquency method will be charged off.
Draw Funding Mechanism
This transaction uses a structural mechanism similar to other HELOC
transactions to fund future draw requests. The Servicer will be
required to fund draws and will be entitled to reimburse itself for
such draws from the principal collections prior to any payments on
the Notes and the Class FR Certificates.
If the aggregate draws exceed the principal collections (Net Draw),
the Servicer is entitled to reimburse itself for draws funded from
amounts on deposit in the Reserve Account (including amounts
deposited into the Reserve Account on behalf of the Class FR
Certificate holder after the Closing Date).
The Reserve Account is funded at closing initially with a rounded
balance of $1,507,095 (0.50% of the aggregate UPB as of the Cut-Off
Date). Prior to the payment date in March 2029, the Reserve Account
Required Amount will be 0.50% of the aggregate UPB as of the
Cut-Off Date. On and after the payment date in March 2029 (after
the draw period ends for all HELOCs), the Reserve Account Required
Amount will become $0. If the Reserve Account is not at target, the
Paying Agent will use the available funds remaining after paying
transaction parties' fees and expenses, reimbursing the Servicer
for any unpaid fees or Net Draws, and paying the accrued and unpaid
interest on the bonds to build it to the target. The top-up of the
account occurs before making any principal payments to the Class FR
Certificate holder or the Notes. To the extent the Reserve Account
is not funded up to its required amount from the principal and
interest (P&I) collections, the Class FR Certificate holder will be
required to use its own funds to reimburse the Servicer for any Net
Draws.
Nevertheless, the servicer is still obligated to fund draws even if
the principal collections and the Reserve Account are insufficient
in a given month for full reimbursement. In such cases, the
Servicer will be reimbursed on subsequent payment dates first, from
amounts on deposit in the Reserve Account (subject to the deposited
funds), and second, from the principal collections in subsequent
collection periods. Figure, as a holder of the Trust
Certificate/Class FR Certificates, will have an ultimate
responsibility to ensure draws are funded by remitting funds to the
Reserve Account to reimburse the Servicer for the draws made on the
loans, as long as all borrower conditions are met to warrant draw
funding. The Class FR Certificates' balance will be increased by
the amount of any Net Draws funded by the Class FR Certificate
holder. The Reserve Account's required amount will become $0 on the
payment date in March 2029 (after the draw period ends for all
HELOCs), at which point the funds will be released through the
transaction waterfall.
In its analysis of the proposed transaction structure, Morningstar
DBRS does not rely on the creditworthiness of either the Servicer
or Figure. Rather, the analysis relies on the assets' ability to
generate sufficient cash flows, as well as the Reserve Account, to
fund draws and make interest and principal payments.
Additional Cash Flow Analytics for HELOCs
Morningstar DBRS performs a traditional cash flow analysis to
stress prepayments, loss timing, and interest rates. Generally, in
HELOC transactions, because prepayments (and scheduled principal
payments, if applicable) are primary sources from which to fund
draws, Morningstar DBRS also tests a combination of high draw and
low prepayment scenarios to stress the transaction.
Transaction Structure
The transaction employs a pro rata cash flow structure subject to a
Credit Event, which is based on certain performance triggers
related to cumulative losses, delinquencies, and Net WA Coupon
(WAC) Rate. This transaction includes a Net WAC Trigger based on a
simple three-month average of the Net WAC Rate falling below
10.850%, compared with the collateral WAC as reduced by fees and
expenses to calculate Net WAC Rate of 11.171%, as described in the
transaction documents, in the first payment period. Principal
distributions are made sequentially when a Credit Event is in
effect.
Relative to a sequential pay structure, a pro rata structure
subject to sequential trigger (Credit Event) is more sensitive to
the timing of the projected defaults and losses as the losses may
be applied at a time when the amount of credit support is reduced
as the bonds' principal balances amortize over the life of the
transaction.
The excess interest remaining from covering the realized losses is
used to maintain overcollateralization (OC) at the target. The
excess interest can be released to the residual holder if the OC is
built to the OC Target so long as the Credit Event does not exist.
Please see the Cash Flow Structure and Features section of the
related report for more details.
Notable Structural Features
Similar to previous Morningstar DBRS-rated FIGRE transactions, this
deal employs a Delinquency Trigger, a Cumulative Loss Trigger and a
Net WAC Trigger. The effective dates for the triggers may differ
from prior rated transactions. The Delinquency Trigger is
applicable on or after the 12th payment date (March 2025) rather
than being applicable immediately after the Closing Date. The Net
WAC Trigger is only applicable between the 10th payment date
(January 2025) and the 36th payment date (March 2027) instead of
through final maturity. The Cumulative Loss Trigger remains
applicable immediately after the Closing Date, similar to all
previously issued transactions on the FIGRE shelf.
Unlike prior FIGRE securitizations that employed a pro rata pay
structure among all rated notes, this transaction introduces two
more rated classes—Class E and Class F—that receive their
principal payments after the pro rata Class A through Class D notes
are paid in full. The introduction of sequential pay classes
retains credit support that would otherwise be reduced in the
absence of a credit event.
The OC target (4.25% of outstanding balance) and OC floor (1.50% of
Cut-Off Date balance) are lower than in prior FIGRE
securitizations. However, the Class CE notes support B (low)-rated
Class F notes, rather than investment-grade classes in prior deals,
and the Class CE, Class F, and Class E notes support the
investment-grade classes.
Other Transaction Features
For this transaction, other than the Servicer's obligation to fund
any monthly Net Draws, described above, neither the Servicer nor
any other transaction party will fund any monthly advances of P&I
on any HELOC. However, the Servicer is required to make advances in
respect of taxes, insurance premiums, and reasonable costs incurred
in the course of servicing and disposing of properties (servicing
advances) to the extent such advances are deemed recoverable or as
directed by the Controlling Holder (the holder of more than a 50%
interest of the Class CE Notes). For the junior-lien HELOCs, the
Servicer will make servicing advances only if such advances are
deemed recoverable or if the associate first-lien mortgage has been
paid off and such HELOC has become a senior-lien mortgage loan.
The Depositor may, at its option, on or after the earlier of (1)
the payment date on which the balance of the Class A Notes is
reduced to zero or (2) the date on which the total loans' and real
estate owned (REO) properties' balance falls to or below 25% of the
loan balance as of the Cut-Off Date (Optional Termination Date),
purchase all of the loans and REO properties at the optional
termination price described in the transaction documents.
The Depositor, at its option, may purchase any mortgage loan that
is 90 days or more delinquent under the MBA method at the
repurchase price (Optional Purchase) described in the transaction
documents. The total balance of such loans purchased by the
Depositor will not exceed 10% of the Cut-Off Date balance.
The Servicer, at a direction of the Controlling Holder, may direct
the Issuer to sell (and direct the Indenture Trustee to release its
lien on and relinquish its security interest in) eligible
nonperforming loans (those 120 days or more delinquent under the
MBA method) or REO properties (both, Eligible Nonperforming Loans
(NPLs)) to third parties individually or in bulk sales. The
Controlling Holder will have a sole authority over the decision to
sell the Eligible NPLs, as described in the transaction documents.
Notes: All figures are in U.S. dollars unless otherwise noted.
FIRST EAGLE 2016-1: S&P Affirms BB- (sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings raised its ratings on the class B-R and C-R debt
from First Eagle Commercial Loan Funding 2016-1 LLC, a U.S. CLO
transaction. S&P also removed the ratings on the class B-R and C-R
debt from CreditWatch, where it placed them with positive
implications on Jan. 18, 2024. At the same time, S&P affirmed its
ratings on the class A-1a-R, A-1b-R, A-2-R, D-R, and E-R debt from
the same transaction.
The rating actions follow S&P's review of the transaction's
performance using data from the February 2024 trustee report.
S&P said, "Since our December 2019 rating actions, the transaction
has paid down approximately $123.49 million to the class A-1a-R and
A-1b-R debt (on a pro rata basis). These paydowns resulted in
improved reported overcollateralization (O/C) ratios for all
classes since the February 2020 trustee report, which we used for
our previous rating actions." The changes in the reported O/C
ratios are as follows:
-- The class A/B O/C ratio improved to 197.02% from 148.24%.
-- The class C O/C ratio improved to 147.67% from 129.81%.
-- The class D O/C ratio improved to 128.19% from 120.70%.
-- The class E O/C ratio improved to 113.61% from 112.99%.
-- All O/C ratios experienced positive movement due to the lower
balances of the senior debt.
S&P said, "The upgrades reflect the improved credit support
available to the debt at the prior rating levels, while the
affirmations reflect our view that the credit support available is
commensurate with the current rating level. The affirmations also
reflect that the debt passed our cash flow stresses at their
current ratings.
"On a standalone basis, the results of the cash flow analysis
indicated a higher rating on the class C-R, D-R, and E-R debt.
However, because the transaction currently has higher-than-average
exposures to 'CCC' and 'D' rated collateral obligations and the
portfolio credit quality is now more concentrated, our rating
actions reflect additional sensitivity runs that consider such
exposures and offset future potential credit migration in the
underlying collateral.
"In line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis 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 all of the rated
outstanding classes have adequate credit enhancement available at
the rating levels associated with these 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 we will take rating actions as we
deem necessary."
Ratings Raised And Removed From CreditWatch Positive
First Eagle Commercial Loan Funding 2016-1 LLC
Class B-R to 'AAA (sf)' from 'AA (sf)/Watch Pos'
Class C-R to 'AA- (sf)' from 'A (sf)/Watch Pos'
Ratings Affirmed
First Eagle Commercial Loan Funding 2016-1 LLC
Class A-1a-R: AAA (sf)
Class A-1b-R: AAA (sf)
Class A-2-R: AAA (sf)
Class D-R: BBB- (sf)
Class E-R: BB- (sf)
GOLUB CAPITAL 72(B): Fitch Assigns 'BB-sf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Golub
Capital Partners CLO 72(B), Ltd.
Entity/Debt Rating
----------- ------
Golub Capital
Partners
CLO 72(B), Ltd.
A LT NRsf New Rating
A-J LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Golub Capital Partners CLO 72(B), Ltd. (the issuer) is an arbitrage
cash flow collateralized loan obligation (CLO) that will be managed
by OPAL BSL LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $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 24.33, 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
99.83% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 77.51% versus a
minimum covenant, in accordance with the initial expected matrix
point of 77%.
Portfolio Composition (Negative): The largest three industries may
comprise up to 57% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs. The transaction documents permit a higher
industry concentration than that of other recent U.S. CLOs, in line
with other recent CLOs from the same collateral manager, and this
was taken into account in Fitch's stress scenarios.
Portfolio Management (Neutral): The transaction has a 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 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-J, 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-J 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Golub Capital
Partners CLO 72(B), Ltd. In cases where Fitch does not provide ESG
relevance scores in connection with the credit rating of a
transaction, programme, instrument or issuer, Fitch will disclose
in the key rating drivers any ESG factor which has a significant
impact on the rating on an individual basis.
GREAT WOLF 2024-WOLF: DBRS Finalizes B(low) Rating on G Certs
-------------------------------------------------------------
DBRS, Inc. finalized provisional credit ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2024-WOLF (the Certificates) to be issued by Great Wolf Trust
2024-WOLF (the Trust):
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The collateral for the Trust includes the borrower's fee and/or
leasehold interests in eight Great Wolf Lodge resorts, totaling
3,044 keys, 461,521 square feet of indoor water park space and
60,459 square feet of meeting space, located across seven states.
Transaction proceeds of $1.0 billion along with the transaction
sponsor's cash equity of approximately $9.6 million will be used to
repay approximately $702.0 million of existing commercial
mortgage-backed securities debt across the Portfolio, repay
existing construction debt of approximately $287.6 million for the
Manteca and Scottsdale assets, and cover closing costs. Six of the
assets, Mason, Williamsburg, New England, Sandusky, Minneapolis,
and Wisconsin Dells, were previously securitized in the GWT
2019-WOLF transaction and the remaining two assets, Manteca and
Scottsdale, opened in June 2021 and October 2019, respectively. The
debt payoff for the six assets is inclusive of the release price
premiums for those assets. The Morningstar DBRS value of $1.071
billion represents a 26.4% discount to the aggregate appraised
as-is value including intangible business value (IBV)) of $1.456
billion. In addition, the Morningstar DBRS cap rate of 9.93% is
approximately 103 basis points higher than the appraised as-is
value (including IBV) implied cap rate, allowing for a reversion to
the mean in lodging valuation metrics.
The Properties are generally located within drive-to locations that
are within a four-hour drive from major metropolitan areas, which
provide the demand base for these leisure-oriented assets. The
Properties are highly amenitized, providing guests with a complete
family vacation experience, with a combination of indoor waterpark,
as well as lodging and dining options, among additional exclusive
attractions. The sponsor has invested a total of approximately
$94.3 million, or $30,985 per key, in capital improvements to the
Portfolio since 2020, excluding construction costs for the two new
assets in Manteca and Scottsdale. Excluding the two most recently
delivered Properties, Manteca and Scottsdale, which tend to have
lower immediate capital expenditure (capex) needs and have the
latest attractions available from the Great Wolf brand, the
previously securitized six assets received approximately $86.7
million in capital improvements since 2020, equating to $39,532 per
key. The Portfolio benefits from experienced management and
sponsorship, which performs initiatives to help increase ancillary
income, improve operating margins, as well as improve overall guest
experience and satisfaction. For example, management initiated the
Day Pass sales program for waterpark access starting in 2019. As of
YE2023, Day Pass sales accounted for approximately $13.1 million in
revenue, with 204,592 passes sold, which is significantly higher
than the level for the trailing 12-month (T-12) period ended
October 31, 2019, as of the GWT 2019-WOLF securitization, of
$496,198, with 7,981 passes sold. Day Pass sales have dynamic
pricing, which fluctuate based on the occupancy level at each
Property. For example, during high occupancy periods (more demand
for waterpark passes than availability), day passes will be offered
at a premium, in order to drive revenue and minimize impact on
overall guest experience.
The Portfolio reported weighted-average occupancy, average daily
rate (ADR), and revenue per available room (RevPAR) levels of
approximately 81.5%, $266.42, and $217.13, respectively, as of
YE2023. The previously securitized six Properties reported
occupancy, ADR, and RevPAR increases of 7.9%, 8.8%, and 17.4%,
respectively, over their T-12 ended October 2019 performance level.
In 2019, prior to the coronavirus pandemic, the Portfolio reported
occupancy, ADR, and RevPAR levels of 76.5%, $214.79, and $164.39,
respectively (Scottsdale opened in October 2019 and this figure
excludes Manteca, which opened in June 2021 and operated under a
government-enforced occupancy cap from January 2022 to April 2022).
While occupancy declined during the pandemic, the sponsor was
successful in recovering occupancy and ADR to higher than its
pre-pandemic historical average. Morningstar DBRS believes that the
strong 2023 performance is at least partially because of a higher
transient proportion in the hotel segmentation as a result of the
pent-up demand because of the pandemic-related restrictions and,
therefore, Morningstar DBRS believes room rates will normalize.
Morningstar DBRS concluded to a stabilized RevPAR of $207.65, which
is approximately 3.0% less than the YE2022 level and approximately
4.4% below the YE2023 level. Overall, Morningstar DBRS has a
favorable outlook on the Portfolio, during the five-year fully
extended term, given the property's experienced management and
sponsor's continued capex commitment.
Notes: All figures are in U.S. dollars unless otherwise noted.
GROVE FUNDING 2024-1: DBRS Gives Prov. B Rating on Class B-2 Certs
------------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Mortgage Pass-Through Certificates, Series 2024-1 (the
Certificates) to be issued by Grove Funding III Trust 2024-1 (the
Trust or the Issuer):
-- $300.6 million Class A-1 at AAA (sf)
-- $34.7 million Class A-2 at AA (sf)
-- $41.3 million Class A-3 at A (sf)
-- $21.0 million Class M-1 at BBB (sf)
-- $17.7 million Class B-1 at BB (sf)
-- $12.1 million Class B-2 at B (sf)
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Certificates reflects 31.95% of
credit enhancement provided by subordinate Certificates. The AA
(sf), A (sf), BBB (sf), BB (sf), and B (sf) credit ratings reflect
24.10%, 14.75%, 10.00%, 6.00%, and 3.25% of credit enhancement,
respectively.
This transaction is a securitization of a portfolio of fixed- and
adjustable-rate prime, expanded prime, and nonprime first-lien
residential mortgages to be funded by the issuance of the
Certificates. The Certificates are backed by 784 mortgage loans
with a total principal balance of $441,683,784 as of the Cut-Off
Date (February 1, 2024).
The originators for the mortgage pool are Logan Finance Corp.
(Logan; 77.8%), RF Renovo Management Company, LLC (Renovo
Originator; 12.2%), and other originators, each comprising less
than 5.0% of the mortgage loans. The Renovo Originator and Logan
mortgages were originated under the following programs: DSCR, Bank
Statement, Full Doc.
Specialized Loan Servicing LLC (80.6%), RF Mortgage Services
Corporation (12.2%), and Fay Servicing, LLC (7.2%) will service the
loans within the pool as of the Closing Date.
Computershare Trust Company, N.A (rated BBB with a Stable trend by
Morningstar DBRS) will act as Master Servicer. U.S. Bank National
Association (rated AA (high) with a Negative trend by Morningstar
DBRS), will act as Trustee, Securities Administrator, Certificate
Registrar, and Custodian.
As of the Cut-Off Date, 97.0% of the loans are current, while 13
loans (3.0% of the pool) are 30 to 59 days delinquent, according to
the Mortgage Bankers Association delinquency calculation method.
In accordance with the Consumer Financial Protection Bureau (CFPB)
Qualified Mortgage (QM) rules, 49.2% of the loans by balance are
designated as non-QM. Approximately 50.8% of the loans in the pool
made to investors for business purposes are exempt from the CFPB
Ability-to-Repay (ATR) and QM rules.
The Servicers will be required to advance delinquent principal and
interest (P&I) on 30-day delinquent mortgage loans, contingent upon
recoverability determination. Each Servicer is also obligated to
make advances in respect of taxes, insurance premiums, and
reasonable costs incurred in the course of servicing and disposing
of properties. If the applicable Servicer fails to make a required
P&I advance, the Master Servicer will fund such P&I advance until
it is deemed unrecoverable.
The Sponsor, directly or indirectly through a majority-owned
affiliate, will retain an eligible vertical interest in at least
5.0% of the Certificates (except Class R Certificates) issued by
the Issuer to satisfy the credit risk-retention requirements under
Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
On or after the earlier of (1) the Distribution date occurring in
February 2027 or (2) the date when the aggregate stated principal
balance of the mortgage loans is reduced to 30.0% of the Cut-Off
Date balance, the Depositor has the option to purchase all
outstanding certificates at a price equal to the outstanding class
balance plus accrued and unpaid interest, including any cap
carryover amounts. After such purchase, the Depositor then has the
option to complete a qualified liquidation, which requires (1) a
complete liquidation of assets within the Trust and (2) proceeds to
be distributed to the appropriate holders of regular or residual
interests.
The Sponsor will have the option, but not the obligation, to
repurchase any mortgage loan (other than loans under forbearance
plan as of the Closing Date) that becomes 90 or more days
delinquent or are real estate owned (REO) at the repurchase price
(par plus interest), provided that such repurchases in aggregate do
not exceed 10% of the total principal balance as of the Cut-Off
Date.
The Servicing Administrator and each of the Servicer, at its
option, on or after the date on which the balance of the mortgage
loans falls below 10% of the loans balance as of the Cut-Off Date,
may purchase all of the mortgage loans and REO properties at the
optional termination price described in the transaction documents.
The transaction employs a sequential-pay cash flow structure with a
pro rata principal distribution among the senior classes (Classes
A-1, A-2, and A-3) subject to certain performance triggers related
to cumulative losses or delinquencies exceeding a specified
threshold (Trigger Event). After a Trigger Event, principal
proceeds can be used to cover interest shortfalls on the Class A-1
and Class A-2 certificates before being applied sequentially to
amortize the balances of the certificates (IIPP). For all other
classes, principal proceeds can be used to cover interest
shortfalls after the more senior tranches are paid in full (IPIP).
Excess spread can be used to cover realized losses before being
allocated to unpaid Cap Carryover Amounts due to Class A-1 down to
M-1 (and B-1, if issued with fixed rate coupon). On or after March
2028, interest and principal otherwise available to pay the Class
B-3 interest and interest shortfalls may be used to pay the Class A
Cap Carryover amounts. In addition, the Class A-1, A-2, and A-3
coupons step up by 1.00% after the payment date in March 2028
(step-up date).
Notes: All figures are in U.S. dollars unless otherwise noted.
GROVE FUNDING III 2024-1: DBRS Finalizes B Rating on B-2 Certs
--------------------------------------------------------------
DBRS, Inc. finalized the provisional credit ratings on the
following Mortgage Pass-Through Certificates, Series 2024-1 (the
Certificates) issued by Grove Funding III Trust 2024-1 (the Trust
or the Issuer):
-- $300.6 million Class A-1 at AAA (sf)
-- $34.7 million Class A-2 at AA (sf)
-- $41.3 million Class A-3 at A (sf)
-- $21.0 million Class M-1 at BBB (sf)
-- $17.7 million Class B-1 at BB (sf)
-- $12.1 million Class B-2 at B (sf)
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Certificates reflects 31.95% of
credit enhancement provided by subordinate Certificates. The AA
(sf), A (sf), BBB (sf), BB (sf), and B (sf) credit ratings reflect
24.10%, 14.75%, 10.00%, 6.00%, and 3.25% of credit enhancement,
respectively.
This transaction is a securitization of a portfolio of fixed- and
adjustable-rate prime, expanded prime, and nonprime first-lien
residential mortgages to be funded by the issuance of the
Certificates. The Certificates are backed by 784 mortgage loans
with a total principal balance of $441,683,784 as of the Cut-Off
Date (February 1, 2024).
The originators for the mortgage pool are Logan Finance Corp.
(Logan; 77.8%), RF Renovo Management Company, LLC (Renovo
Originator; 12.2%), and other originators, each comprising less
than 5.0% of the mortgage loans. The Renovo Originator and Logan
mortgages were originated under the following programs: DSCR, Bank
Statement, Full Doc.
Specialized Loan Servicing LLC (80.6%), RF Mortgage Services
Corporation (12.2%), and Fay Servicing, LLC (7.2%) will service the
loans within the pool as of the Closing Date.
Computershare Trust Company, N.A (rated BBB with a Stable trend by
Morningstar DBRS) will act as Master Servicer. U.S. Bank National
Association (rated AA (high) with a Negative trend by Morningstar
DBRS), will act as Trustee, Securities Administrator, Certificate
Registrar, and Custodian.
As of the Cut-Off Date, 97.0% of the loans are current, while 13
loans (3.0% of the pool) are 30 to 59 days delinquent, according to
the Mortgage Bankers Association delinquency calculation method.
In accordance with the Consumer Financial Protection Bureau (CFPB)
Qualified Mortgage (QM) rules, 49.2% of the loans by balance are
designated as non-QM. Approximately 50.8% of the loans in the pool
made to investors for business purposes are exempt from the CFPB
Ability-to-Repay (ATR) and QM rules.
The Servicers will be required to advance delinquent principal and
interest (P&I) on 30-day delinquent mortgage loans, contingent upon
recoverability determination. Each Servicer is also obligated to
make advances in respect of taxes, insurance premiums, and
reasonable costs incurred in the course of servicing and disposing
of properties. If the applicable Servicer fails to make a required
P&I advance, the Master Servicer will fund such P&I advance until
it is deemed unrecoverable.
The Sponsor, directly or indirectly through a majority-owned
affiliate, will retain an eligible vertical interest in at least
5.0% of the Certificates (except Class R Certificates) issued by
the Issuer to satisfy the credit risk-retention requirements under
Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
On or after the earlier of (1) the Distribution date occurring in
February 2027 or (2) the date when the aggregate stated principal
balance of the mortgage loans is reduced to 30.0% of the Cut-Off
Date balance, the Depositor has the option to purchase all
outstanding certificates at a price equal to the outstanding class
balance plus accrued and unpaid interest, including any cap
carryover amounts. After such purchase, the Depositor then has the
option to complete a qualified liquidation, which requires (1) a
complete liquidation of assets within the Trust and (2) proceeds to
be distributed to the appropriate holders of regular or residual
interests.
The Sponsor will have the option, but not the obligation, to
repurchase any mortgage loan (other than loans under forbearance
plan as of the Closing Date) that becomes 90 or more days
delinquent or are real estate owned (REO) at the repurchase price
(par plus interest), provided that such repurchases in aggregate do
not exceed 10% of the total principal balance as of the Cut-Off
Date.
The Servicing Administrator and each of the Servicer, at its
option, on or after the date on which the balance of the mortgage
loans falls below 10% of the loans balance as of the Cut-Off Date,
may purchase all of the mortgage loans and REO properties at the
optional termination price described in the transaction documents.
The transaction employs a sequential-pay cash flow structure with a
pro rata principal distribution among the senior classes (Classes
A-1, A-2, and A-3) subject to certain performance triggers related
to cumulative losses or delinquencies exceeding a specified
threshold (Trigger Event). After a Trigger Event, principal
proceeds can be used to cover interest shortfalls on the Class A-1
and Class A-2 certificates before being applied sequentially to
amortize the balances of the certificates (IIPP). For all other
classes, principal proceeds can be used to cover interest
shortfalls after the more senior tranches are paid in full (IPIP).
Excess spread can be used to cover realized losses before being
allocated to unpaid Cap Carryover Amounts due to Class A-1 down to
M-1 (and B-1, if issued with fixed rate coupon). On or after March
2028, interest and principal otherwise available to pay the Class
B-3 interest and interest shortfalls may be used to pay the Class A
Cap Carryover amounts. In addition, the Class A-1, A-2, and A-3
coupons step up by 1.00% after the payment date in March 2028
(step-up date).
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2017-485L: S&P Affirms 'BB' Rating on 2014A Rev. Bonds
------------------------------------------------------------------
S&P Global Ratings revised the outlook to positive from stable and
affirmed its 'BB' rating on Hugo, Minn.'s series 2014A lease
revenue bonds, supported by CS Property Noble LLC and issued for
Noble Academy, Minn.
"The outlook revision reflects our opinion of the school's robust
cash position at more than 600 days' cash on hand, as well as a
trend of solid operations and stable enrollment for the past two
years," said S&P Global Ratings credit analyst Jessica Wood.
S&P could lower the rating if enrollment declines materially,
operations or debt service coverage decline significantly past
fiscal 2024, or the school issues additional new debt during the
outlook period.
S&P could raise the rating if enrollment remains consistent and the
school generates adequate operations and coverage while maintaining
higher cash levels for the rating category.
GS MORTGAGE 2017-GS5: DBRS Confirms B(low) Rating on F Certs
------------------------------------------------------------
DBRS Limited confirmed all credit ratings on the classes of
Commercial Mortgage Pass-Through Certificates, Series 2017-GS5
issued by GS Mortgage Securities Trust 2017-GS5 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class X-C at A (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)
Morningstar DBRS changed the trends on Classes E and F to Negative
from Stable. All other trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction since Morningstar DBRS' last review.
As of the February 2024 remittance, 28 of the original 32 loans
remain in the pool, representing a collateral reduction of 9.6%. In
addition, two loans, representing 4.5% of the current pool balance,
have defeased. The pool consists primarily of office, retail, and
industrial properties representing 40.1%, 19.5%, and 17.8% of the
pool balance, respectively. There are six loans on the servicer's
watchlist and three loans in special servicing, representing 30.4%
and 10.8% of the pool balance, respectively. The Negative trends
reflect the concerns surrounding the three specially serviced loans
and the increased rollover risk for the 700 Broadway loan,
discussed in detail below.
Morningstar DBRS is projecting a loss of $14.2 million for the
smallest of the three loans in special servicing, 604 Mission
Street (Prospectus ID#19, 1.7% of the pool), which is secured by a
26,800-square-foot (sf) Class B office building in San Francisco.
The loan transferred to special servicing in August 2023 for
nonmonetary default related to noncompliance with cash management
but subsequently defaulted on its September 2023 loan payment.
Occupancy and net cash flow (NCF) have been depressed over the past
few years with the trailing nine-month ended period September 30,
2023, financials reporting a negative NCF figure and an occupancy
rate of 38.5%. The servicer is currently pursuing foreclosure and,
according to the December 2023 appraisal, the property was valued
at $5.3 million, which is a significant decline from the issuance
value of $25.0 million and well below the outstanding loan balance
of $16.6 million. For this review, Morningstar DBRS analyzed the
loan with a liquidation scenario, resulting in a loss severity in
excess of 85.0%.
The largest loan in special servicing, (Prospectus ID#7, Writers
Square, 6.2% of the current pool balance) is secured by a
186,233-sf mixed-use property with street-level retail and an
11-story office tower in Denver, Colorado. The loan has been in
special servicing since 2021 because of hardships stemming from the
coronavirus pandemic. In October 2022, a pre-negotiation letter was
executed and based on the most recent update provided by the
special servicer, a reinstatement agreement is being finalized
while the servicer continues to monitor the performance of the
loan.
Occupancy at the subject has been well below issuance levels with
the June 2023 rent roll reporting an occupancy rate of 57.2%. In
addition, tenants representing about 20.0% of net rentable area
(NRA) have leases scheduled to expire in the next 12 months,
including the largest tenant, Blue Moon Digital Inc. (17.2% of
NRA), which has a lease expiration in September 2024. The debt
service coverage ratio (DSCR) has been below break-even since 2019
and considering performance continues to be depressed, this loan
was analyzed with a stressed loan-to-value ratio (LTV) and an
increased probability of default (PoD), resulting in an expected
loss that was almost triple the pool average.
The second-largest specially serviced loan is 20 West 37th Street
(Prospectus ID#16, 2.9% of the pool), which is secured by a
77,100-sf mixed-use property in Midtown Manhattan. The loan was
previously modified in September 2022 resulting from challenges
from the pandemic and was returned to the master servicer, but it
was transferred back to special servicing in January 2024 for legal
action pertaining to the misapplication of funds from another
property owned by the sponsor. As of the February 2024 reporting,
the loan remains current and is cash-managed, although the DSCR has
been well below break-even since 2021, suggesting no excess cash
will be trapped.
As of the most recent financials provided, YE2022, occupancy was
52.6%, compared with the occupancy at issuance of 100.0%. Occupancy
may be further depressed considering one tenant, Colliers
International (7.9% of NRA), had a lease expiration in November
2023. A leasing update was requested from the servicer but has not
yet been provided; however, $355,000 is currently held in a TI/LC
reserve to aid leasing efforts.
According to the October 2022 appraisal, the property was valued at
$35.2 million, a decline from the issuance appraised value of $54.0
million. Morningstar DBRS analyzed the loan with a stressed LTV and
an elevated PoD, resulting in an expected loss of nearly four times
the pool average.
The 700 Broadway loan (Prospectus ID#9, 5.3% of the pool), which is
secured by a 13-story 425,000-sf office building in Denver. The
loan was added to the servicer's watchlist in November 2023 because
of a cash management trigger tied to the near-term lease expiration
of the largest tenant, Elevance Health (86.0% of NRA, expiring
December 2024). The servicer has inquired with the borrower for a
leasing update, but it is worthy to note that the tenant has four
remaining five-year extension options and had invested $20.0
million into the space.
According to the most recent financials, the annualized September
30, 2023, DSCR was 2.45 times (x), compared with the YE2022 figure
of 2.11x and issuance figure of 2.27x. Occupancy remained unchanged
since 2020 at 94.1% but in the event that Elevance Health vacates
its space, occupancy will drop below 10.0%. Of the three tenants
currently at the property, both Elevance Health and Education
Commission (6.5% of NRA) have lease expirations in December 2024,
while the third tenant, Orban, Silberman & Poulos, has a lease
expiring in June 2027, just after the loan maturity in January
2027. According to Reis, Inc., office properties in the Midtown
submarket reported a Q4 2023 vacancy rate of 15.4%, compared with
the Q4 2022 vacancy rate of 17.6%. Given the significant rollover
risk in 2024, Morningstar DBRS analyzed the loan with a stressed
LTV and increased PoD, resulting in an expected loss that was more
than double the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2024-PJ3: Fitch Gives B-(EXP) Rating on Cl. B-5 Certs
-----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by GS Mortgage-Backed Securities Trust 2024-PJ3
(GSMBS 2024-PJ3).
Entity/Debt Rating
----------- ------
GSMBS 2024-PJ3
A-1 LT AAA(EXP)sf Expected Rating
A-1-X LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-11-X LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-13 LT AAA(EXP)sf Expected Rating
A-13-X LT AAA(EXP)sf Expected Rating
A-14 LT AAA(EXP)sf Expected Rating
A-15 LT AAA(EXP)sf Expected Rating
A-15-X LT AAA(EXP)sf Expected Rating
A-16 LT AAA(EXP)sf Expected Rating
A-17 LT AAA(EXP)sf Expected Rating
A-17-X LT AAA(EXP)sf Expected Rating
A-18 LT AAA(EXP)sf Expected Rating
A-19 LT AAA(EXP)sf Expected Rating
A-19-X LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-20 LT AAA(EXP)sf Expected Rating
A-21 LT AAA(EXP)sf Expected Rating
A-21-X LT AAA(EXP)sf Expected Rating
A-22 LT AAA(EXP)sf Expected Rating
A-23 LT AAA(EXP)sf Expected Rating
A-23-X LT AAA(EXP)sf Expected Rating
A-24 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-A LT AAA(EXP)sf Expected Rating
A-3-X LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4A LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5-X LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-7-X LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-9-X LT AAA(EXP)sf Expected Rating
A-R LT NR(EXP)sf Expected Rating
A-X LT AAA(EXP)sf Expected Rating
A16L LT AAA(EXP)sf Expected Rating
A22L LT AAA(EXP)sf Expected Rating
A3L LT AAA(EXP)sf Expected Rating
A4L LT AAA(EXP)sf Expected Rating
B LT BBB-(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-1-A LT AA-(EXP)sf Expected Rating
B-1-X LT AA-(EXP)sf Expected Rating
B-2 LT A-(EXP)sf Expected Rating
B-2-A LT A-(EXP)sf Expected Rating
B-2-X LT A-(EXP)sf Expected Rating
B-3 LT BBB-(EXP)sf Expected Rating
B-3-A LT BBB-(EXP)sf Expected Rating
B-3-X LT BBB-(EXP)sf Expected Rating
B-4 LT BB-(EXP)sf Expected Rating
B-5 LT B-(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
B-X LT BBB-(EXP)sf Expected Rating
TRANSACTION SUMMARY
The transaction is expected to close on March 28, 2024. The notes
are supported by 299 prime loans with a total balance of
approximately $293 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 10.2% above a long-term sustainable level, which is
lower than the projected overvaluation of 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 high interest rates and
elevated home prices, which increased 5.5% yoy nationally as of
December 2023, despite modest regional declines, but are still
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 as the
difference between the cutoff date and origination date. The
average loan balance is $978,328. The collateral comprises
primarily prime-jumbo loans and 92 agency-conforming loans.
Borrowers in this pool have strong credit profiles (a 767 model
FICO) but lower than Fitch observed for earlier vintage prime-jumbo
securitizations. The sustainable loan to value ratio (sLTV) is 79%,
and the mark-to-market (MTM) combined loan to value (CLTV) ratio is
70.5%. Fitch treated 100% of the loans as full documentation
collateral, and 98% of the loans are qualified mortgages (QMs).
Of the pool, 85.8% are loans for which the borrower maintains a
primary residence, while 14.2% are for second homes. Additionally,
70.2% of the loans were originated through a retail channel.
Expected losses in the 'AAAsf' stress amount to 8.50%, similar to
those of prior issuances and other prime-jumbo shelves.
Loan Concentration (Negative): Fitch adjusted the expected losses
due to concentration concerns over small loan counts. Fitch
increased the losses at the 'AAAsf' level by 101 basis points
(bps), due to the low loan count of 299, with a weighted average
number (WAN) of 229. As a loan pool becomes more concentrated, the
pool is at a greater risk of experiencing defaults.
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 3.30% of the
original balance will be maintained for the senior notes and a
subordination floor of 2.30% of the original balance will be
maintained for the subordinate notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0%, in addition to the model projected 41.6% at 'AAA'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by situsAMC, Canopy, Clayton, Consolidated Analytics,
Covius and Digital Risk. 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 33bps reduction to the 'AAAsf'
expected loss.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
GS MORTGAGE 2024-PJ4: Fitch Gives B-(EXP)sf Rating on Cl. B-5 Certs
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by GS Mortgage-Backed Securities Trust 2024-PJ4
(GSMBS 2024-PJ4).
Entity/Debt Rating
----------- ------
GSMBS 2024-PJ4
A-1 LT AAA(EXP)sf Expected Rating
A-1-X LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-11-X LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-13 LT AAA(EXP)sf Expected Rating
A-13-X LT AAA(EXP)sf Expected Rating
A-14 LT AAA(EXP)sf Expected Rating
A-15 LT AAA(EXP)sf Expected Rating
A-15-X LT AAA(EXP)sf Expected Rating
A-16 LT AAA(EXP)sf Expected Rating
A-17 LT AAA(EXP)sf Expected Rating
A-17-X LT AAA(EXP)sf Expected Rating
A-18 LT AAA(EXP)sf Expected Rating
A-19 LT AAA(EXP)sf Expected Rating
A-19-X LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-20 LT AAA(EXP)sf Expected Rating
A-21 LT AAA(EXP)sf Expected Rating
A-21-X LT AAA(EXP)sf Expected Rating
A-22 LT AAA(EXP)sf Expected Rating
A-23 LT AAA(EXP)sf Expected Rating
A-23-X LT AAA(EXP)sf Expected Rating
A-24 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-A LT AAA(EXP)sf Expected Rating
A-3-X LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4A LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5-X LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-7-X LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-9-X LT AAA(EXP)sf Expected Rating
A-R LT NR(EXP)sf Expected Rating
A-X LT AAA(EXP)sf Expected Rating
A16L LT AAA(EXP)sf Expected Rating
A22L LT AAA(EXP)sf Expected Rating
A3L LT AAA(EXP)sf Expected Rating
A4L LT AAA(EXP)sf Expected Rating
B LT BBB-(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-1-A LT AA-(EXP)sf Expected Rating
B-1-X LT AA-(EXP)sf Expected Rating
B-2 LT A-(EXP)sf Expected Rating
B-2-A LT A-(EXP)sf Expected Rating
B-2-X LT A-(EXP)sf Expected Rating
B-3 LT BBB-(EXP)sf Expected Rating
B-3-A LT BBB-(EXP)sf Expected Rating
B-3-X LT BBB-(EXP)sf Expected Rating
B-4 LT BB-(EXP)sf Expected Rating
B-5 LT B-(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
B-X LT BBB-(EXP)sf Expected Rating
TRANSACTION SUMMARY
The classes are supported by 295 prime loans with a total balance
of approximately $301 million as of the cut-off date. The
transaction is expected to close on March 28, 2024.
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 10.7% above a long-term sustainable level. This is
lower than the projected overvaluation of 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 high interest rates and
elevated home prices, which increased 5.5% yoy nationally as of
December 2023, despite modest regional declines, but are still
supported by limited inventory.
High-Quality Mortgage Pool (Positive): The collateral consists of
30-year, fixed-rate mortgage (FRM) fully amortizing loans, along
with one 15-year FRM, seasoned at approximately 10 months in
aggregate, calculated as the difference between the cutoff date and
origination date. The average loan balance is $1,020,219. The
collateral comprises primarily prime-jumbo loans and 90
agency-conforming loans.
Borrowers in this pool have strong credit profiles (a 765 model
FICO) but lower than Fitch observed for earlier vintage prime-jumbo
securitizations. The sustainable loan to value ratio (sLTV) is
79.9%, and the mark-to-market (MTM) combined loan to value (CLTV)
ratio is 70.9%. Fitch treated 100% of the loans as full
documentation collateral, and 99% of the loans are qualified
mortgages (QMs).
Of the pool, 84.2% are loans for which the borrower maintains a
primary residence, while 15.8% are for second homes. Additionally,
65.5% of the loans were originated through a retail channel.
Expected losses in the 'AAAsf' stress amount to 9.75%, 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 lock-out
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 3.75% of the
original balance will be maintained for the senior notes and a
subordination floor of 2.55% of the original balance will be
maintained for the subordinate notes.
Loan Concentration (Negative): Fitch adjusted the expected losses
due to concentration concerns resulting from small loan counts.
Fitch increased the losses at the 'AAAsf' level by 102 bps, due to
the low loan count. The loan count is 295, with a weighted average
number (WAN) of 232. As a loan pool becomes more concentrated,
performance is more vulnerable to idiosyncratic events.
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 41.9% 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,
Covius and Opus. 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 35bps 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: DBRS Finalizes B(high) Rating on B-2 Notes
-----------------------------------------------------------------
DBRS, Inc. finalized the provisional credit ratings on the
Mortgage-Backed Securities, Series 2024-RPL2 (the Notes) issued by
GS Mortgage-Backed Securities Trust 2024-RPL2 (GSMBS 2024-RPL2 or
the Trust) as follows:
-- $237.9 million Class A-1 at AAA (sf)
-- $24.8 million Class A-2 at AA (high) (sf)
-- $262.8 million Class A-3 at AA (high) (sf)
-- $280.5 million Class A-4 at A (high) (sf)
-- $298.0 million Class A-5 at BBB (high) (sf)
-- $17.7 million Class M-1 at A (high) (sf)
-- $17.6 million Class M-2 at BBB (high) (sf)
-- $11.5 million Class B-1 at BB (high) (sf)
-- $9.4 million Class B-2 at B (high) (sf)
The Class A-3, Class A-4, and Class A-5 Notes are exchangeable.
These classes can be exchanged for combinations of initial
exchangeable notes as specified in the offering documents.
The AAA (sf) credit rating on the Notes reflects 32.90% of credit
enhancement provided by subordinated notes. The AA (high) (sf), A
(high) (sf), BBB (high) (sf), BB (high) (sf), and B (high) (sf)
credit ratings reflect 25.90%, 20.90%, 15.95%, 12.70%, and 10.05%
of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming first-lien residential mortgages funded by the
issuance of mortgage-backed notes (the Notes). The Notes are backed
by 2,265 loans with a total principal balance of $373,266,157 as of
the Cut-Off Date (January 31, 2024).
The portfolio is approximately 208 months seasoned and contains
96.3% modified loans. The modifications happened more than two
years ago for 97.5% of the modified loans. Within the pool, 1,174
mortgages have non-interest-bearing deferred amounts, which equates
to approximately 9.4% of the total principal balance. There are no
Government-Sponsored Enterprise Home Affordable Modification
Program and proprietary principal forgiveness amounts included in
the deferred amounts.
As of the Cut-Off Date, 83.7% of the loans in the pool are current.
Approximately 1.0% are in bankruptcy (all bankruptcy loans are
performing) and 16.3% are 30 days delinquent. Approximately 43.2%
of the mortgage loans have been zero times 30 days delinquent (0 x
30) for at least the past 24 months under the Mortgage Bankers
Association (MBA) delinquency method and 55.8% have been 0x30 for
at least the past 12 months under the MBA delinquency method.
The majority of the pool (97.7%) is exempt from the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because the loans were originated as investor
property loans or were originated prior to January 10, 2014, the
date on which the rules became applicable. The loans subject to the
ATR rules are designated as non-QM (2.3%).
The Mortgage Loan Sellers, Goldman Sachs Mortgage Company (GSMC)
and MCLP Asset Company, Inc., acquired the mortgage loans in
various transactions prior to the Closing Date from various
mortgage loan sellers or from an affiliate. GS Mortgage Securities
Corp. (the Depositor) will contribute the loans to the Trust. These
loans were originated and previously serviced by various entities
through purchases in the secondary market.
The Sponsor, GSMC, or a majority-owned affiliate, will retain an
eligible vertical interest in the transaction consisting of an
uncertificated interest (the Retained Interest) in the Trust
representing the right to receive at least 5.0% of the amounts
collected on the mortgage loans, net of the Trust's fees, expenses,
and reimbursements and paid on the Notes (other than the Class R
Notes) and the Retained Interest to satisfy the credit risk
retention requirements under Section 15G of the Securities Exchange
Act of 1934 and the regulations promulgated thereunder.
As of the Closing Date, the mortgage loans will be serviced by
Select Portfolio Servicing, Inc. (36.2%), NewRez LLC doing business
as (dba) Shellpoint Mortgage Servicing (32.6%), Nationstar Mortgage
LLC dba Rushmore Servicing (21.2%), Selene Finance LP (8.7%), and
Fay Servicing, LLC (1.4%). The aggregate servicing fee for each
servicer is 0.165%, 0.110%, 0.135%, 0.080%, and 0.200%,
respectively.
Unlike previous securitizations issued under the GSMBS RPL shelf,
the GSMBS 2024-RPL2 securitization will employ RMS Asset
Management, LLC as the Asset Manager.
There will not be any advancing of delinquent principal or interest
on any mortgages by the related Servicer or any other party to the
transaction; however, the related Servicer is obligated to make
advances in respect to the preservation, inspection, restoration,
protection, and repair of a mortgaged property, which includes
delinquent tax and insurance payments, the enforcement of judicial
proceedings associated with a mortgage loan, and the management and
liquidation of properties (to the extent that the related Servicer
deems such advances recoverable).
Starting with the Payment Date in February 2026 (the Early
Repayment Date), the Controlling Noteholder will have the option to
purchase all remaining loans and other property of the Issuer at a
specified minimum price. The Controlling Noteholder will be the
beneficial owner of more than 50% of the Class B-5 Notes (if no
longer outstanding, the next most subordinate Class of Notes, other
than Class X).
As a loss-mitigation alternative, the Asset Manager may direct the
related Servicer to sell mortgage loans that are in an early or
advanced stage of default or for which foreclosure or default is
imminent to unaffiliated third-party investors in the secondary
whole loan market on arm's-length terms and at fair market value to
maximize proceeds on such loans on a net present value basis.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on the Class
M-1 Notes and more subordinate bonds will not be paid from
principal proceeds until the more senior classes are retired.
Excess interest can be used to amortize the principal of the notes
after paying transaction parties' fees, net weighted-average coupon
(WAC) shortfalls, and making deposits on to the breach reserve
account.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2024-RPL2: DBRS Gives Prov. B(high) Rating on B2 Notes
------------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the
Mortgage-Backed Securities, Series 2024-RPL2 (the Notes) to be
issued by GS Mortgage-Backed Securities Trust 2024-RPL2 (GSMBS
2024-RPL2 or the Trust) as follows:
-- $237.9 million Class A-1 at AAA (sf)
-- $24.8 million Class A-2 at AA (high) (sf)
-- $262.8 million Class A-3 at AA (high) (sf)
-- $280.5 million Class A-4 at A (high) (sf)
-- $298.0 million Class A-5 at BBB (high) (sf)
-- $17.7 million Class M-1 at A (high) (sf)
-- $17.6 million Class M-2 at BBB (high) (sf)
-- $11.5 million Class B-1 at BB (high) (sf)
-- $9.4 million Class B-2 at B (high) (sf)
The Class A-3, Class A-4, and Class A-5 Notes are exchangeable.
These classes can be exchanged for combinations of initial
exchangeable notes as specified in the offering documents.
The AAA (sf) credit rating on the Notes reflects 32.90% of credit
enhancement provided by subordinated notes. The AA (high) (sf), A
(high) (sf), BBB (high) (sf), BB (high) (sf), and B (high) (sf)
credit ratings reflect 25.90%, 20.90%, 15.95%, 12.70%, and 10.05%
of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming first-lien residential mortgages funded by the
issuance of mortgage-backed notes (the Notes). The Notes are backed
by 2,265 loans with a total principal balance of $373,266,157 as of
the Cut-Off Date (January 31, 2024).
The portfolio is approximately 208 months seasoned and contains
96.3% modified loans. The modifications happened more than two
years ago for 97.5% of the modified loans. Within the pool, 1,174
mortgages have non-interest-bearing deferred amounts, which equates
to approximately 9.4% of the total principal balance. There are no
Government-Sponsored Enterprise Home Affordable Modification
Program and proprietary principal forgiveness amounts included in
the deferred amounts.
As of the Cut-Off Date, 83.7% of the loans in the pool are current.
Approximately 1.0% are in bankruptcy (all bankruptcy loans are
performing) and 16.3% are 30 days delinquent. Approximately 43.2%
of the mortgage loans have been zero times 30 days delinquent (0 x
30) for at least the past 24 months under the Mortgage Bankers
Association (MBA) delinquency method and 55.8% have been 0x30 for
at least the past 12 months under the MBA delinquency method.
The majority of the pool (97.7%) is exempt from the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because the loans were originated as investor
property loans or were originated prior to January 10, 2014, the
date on which the rules became applicable. The loans subject to the
ATR rules are designated as non-QM (2.3%).
The Mortgage Loan Sellers, Goldman Sachs Mortgage Company (GSMC)
and MCLP Asset Company, Inc., acquired the mortgage loans in
various transactions prior to the Closing Date from various
mortgage loan sellers or from an affiliate. GS Mortgage Securities
Corp. (the Depositor) will contribute the loans to the Trust. These
loans were originated and previously serviced by various entities
through purchases in the secondary market.
The Sponsor, GSMC, or a majority-owned affiliate, will retain an
eligible vertical interest in the transaction consisting of an
uncertificated interest (the Retained Interest) in the Trust
representing the right to receive at least 5.0% of the amounts
collected on the mortgage loans, net of the Trust's fees, expenses,
and reimbursements and paid on the Notes (other than the Class R
Notes) and the Retained Interest to satisfy the credit risk
retention requirements under Section 15G of the Securities Exchange
Act of 1934 and the regulations promulgated thereunder.
As of the Closing Date, the mortgage loans will be serviced by
Select Portfolio Servicing, Inc. (36.2%), NewRez LLC doing business
as (dba) Shellpoint Mortgage Servicing (32.6%), Nationstar Mortgage
LLC dba Rushmore Servicing (21.2%), Selene Finance LP (8.7%), and
Fay Servicing, LLC (1.4%). The aggregate servicing fee for each
servicer is 0.165%, 0.110%, 0.135%, 0.080%, and 0.200%,
respectively.
Unlike previous securitizations issued under the GSMBS RPL shelf,
the GSMBS 2024-RPL2 securitization will employ RMS Asset
Management, LLC as the Asset Manager.
There will not be any advancing of delinquent principal or interest
on any mortgages by the related Servicer or any other party to the
transaction; however, the related Servicer is obligated to make
advances in respect to the preservation, inspection, restoration,
protection, and repair of a mortgaged property, which includes
delinquent tax and insurance payments, the enforcement of judicial
proceedings associated with a mortgage loan, and the management and
liquidation of properties (to the extent that the related Servicer
deems such advances recoverable).
Starting with the Payment Date in February 2026 (the Early
Repayment Date), the Controlling Noteholder will have the option to
purchase all remaining loans and other property of the Issuer at a
specified minimum price. The Controlling Noteholder will be the
beneficial owner of more than 50% of the Class B-5 Notes (if no
longer outstanding, the next most subordinate Class of Notes, other
than Class X).
As a loss-mitigation alternative, the Asset Manager may direct the
related Servicer to sell mortgage loans that are in an early or
advanced stage of default or for which foreclosure or default is
imminent to unaffiliated third-party investors in the secondary
whole loan market on arm's-length terms and at fair market value to
maximize proceeds on such loans on a net present value basis.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on the Class
M-1 Notes and more subordinate bonds will not be paid from
principal proceeds until the more senior classes are retired.
Excess interest can be used to amortize the principal of the notes
after paying transaction parties' fees, net weighted-average coupon
(WAC) shortfalls, and making deposits on to the breach reserve
account.
Notes: All figures are in U.S. dollars unless otherwise noted.
HARVEST US 2024-1: Fitch Assigns Final BB-sf Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Harvest US CLO 2024-1
Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Harvest US CLO
2024-1 Ltd.
A-1 LT NRsf New Rating NR(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D 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
Harvest US CLO 2024-1 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Investcorp Credit Management US 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 24.27, versus a maximum covenant, in accordance with
the initial expected matrix point of 25. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.63% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.94% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.7%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 42% 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 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D; and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes; and as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Harvest US CLO
2024-1 Ltd. In cases where Fitch does not provide ESG relevance
scores in connection with the credit rating of a transaction,
programme, instrument or issuer, Fitch will disclose in the key
rating drivers any ESG factor which has a significant impact on the
rating on an individual basis.
HILDENE TRUPS 2019-P12B: Moody's Ups $42.7MM B Notes Rating to Ba1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Hildene TruPS Resecuritization 2019-P12B, LLC:
US$52,250,000 Class A Notes due 2033 (the "Class A Notes"),
Upgraded to Aa2 (sf); previously on May 29, 2019 Definitive Rating
Assigned A1 (sf)
US$42,700,000 Class B Notes due 2033 (the "Class B Notes"),
Upgraded to Ba1 (sf); previously on May 29, 2019 Definitive Rating
Assigned Ba2 (sf)
Hildene TruPS Resecuritization 2019-P12B, LLC, issued in May 2019,
is backed by a collection of the Class B-1, Class B-2, and Class
B-3 notes issued by Preferred Term Securities XII, Ltd. (the
"Underlying TruPS CDO"). The Underlying TruPS CDO is a
collateralized debt obligation (CDO) backed mainly by a portfolio
of bank trust preferred securities.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The rating actions are primarily a result of steady improvement the
transaction's over-collateralization (OC) ratios over time.
Based on Moody's calculations, the OC ratios for the Class A and
Class B notes have improved to 170.2% and 117.9%, respectively,
from levels of 164.4% and 116.2% as of March 2023, respectively.
The Underlying TruPs CDO Class A-2, A-3 and A-4 notes will continue
to benefit from the diversion of excess interest and the use of
proceeds from redemptions of any assets in the collateral pool.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the underlying
collateral pool of the Underlying TruPS CDO as having a performing
par (after treating deferring securities as performing if they meet
certain criteria) of $319.9 million, defaulted/deferring par of
$108.6 million, a weighted average default probability of 7.70%
(implying a WARF of 954), and a weighted average recovery rate upon
default of 10%.
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. The
additional scenarios include, among others, deteriorating credit
quality of the portfolio.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs" published in March 2024.
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 portfolio consists primarily
of unrated assets whose default probability Moody's assesses
through credit scores derived using RiskCalc(TM) or credit
estimates. Because these are not public ratings, they are subject
to additional estimation uncertainty.
HINNT LLC 2024-A: Moody's Assigns B3 Rating to Class E Notes
------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to the notes 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, National Association
(Computershare; Baa2) will serve as the backup servicer and
indenture trustee for the transaction.
Issuer: HINNT 2024-A LLC
Timeshare Loan-Backed Notes, Series 2024-A, Class A, Definitive
Rating Assigned Aaa (sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class B, Definitive
Rating Assigned A2 (sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class C, Definitive
Rating Assigned Baa3 (sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class D, Definitive
Rating Assigned Ba2 (sf)
Timeshare Loan-Backed Notes, Series 2024-A, Class E, Definitive
Rating Assigned 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 HICV 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.
INDEPENDENCE PLAZA 2018-INDP: DBRS Confirms B Rating on HRR Certs
-----------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2018-INDP
issued by Independence Plaza Trust 2018-INDP as follows:
-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-NCP at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class X-ENP at B (high) (sf)
-- Class HRR at B (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, evidenced by the underlying
collateral property's strong residential occupancy rate of 95.6% as
of the December 2023 rent roll and healthy debt service coverage
ratio (DSCR) of 1.37 times (x) as of the trailing 12 months ended
(T-12) September 30, 2023.
The loan is secured by the borrower's fee and leasehold interest in
a 1.5 million-square foot mixed-use, retail and multifamily
property in the Tribeca neighborhood of Manhattan. The property
consists of three 39-story apartment towers, connecting townhomes,
and commercial space. The three towers are at 310 Greenwich Street,
40 Harrison Street, and 80 North Moore Street and provide a views
of the city and the Hudson River.
The $675 million trust loan proceeds repaid existing debt of $551.6
million, returned $112.8 million of equity to the sponsor, and
covered closing costs. The loan is interest only (IO) throughout
its seven-year loan term and matures in July 2025.
The property was originally built in 1975 under an affordable
housing initiative for lower- and middle-income families offered
through tax breaks and subsidized mortgages. Since the property
exited the program in June 2004, the borrower has been working to
renovate the rent-regulated apartments as they become available and
re-leasing them at market rates. According to the December 2023
rent roll, 682 units were listed as fair market; 268 units were
Section 8; and 274 units were listed under the Landlord Rental
Assistance Program (LRAP) with average monthly rental rates of
$5,736, $4,589, and $1,888, respectively. This compares with a unit
mix of 671 fair market units, 346 Section 8 units, and 307 LRAP
units with average monthly market rental rates of $5,103, $4,552,
and $1,724, respectively, when the transaction was securitized in
June 2018. According to the Q4 2023 Reis market data for the West
Village/Downtown New York, effective rent per unit is $5,363 with a
4.4% vacancy rate.
The December 2023 occupancy rate for the residential portion of the
property was 95.6%, according to the most recent roll, which is up
from 90.9% as of September 2022 and 84.1% as of September 2021. The
multifamily component represents approximately 80% of the net
rentable area (NRA) while the commercial space represents the
remaining 20% of NRA and accounts for approximately 10% of base
rental revenue. Overall occupancy has decreased slightly to 90.7%
as of September 2023 from 92.5% at YE2022 and 94.3% at YE2021.
The net cash flow (NCF) for the T-12 ended September 30, 2023, was
$39.9 million, an increase from the YE2022 NCF of $37.1 million and
YE2021 NCF of $35.5 million, but still below the Morningstar DBRS
NCF of $43.5 million when ratings were assigned in 2020. However,
revenues have grown since the onset of the pandemic when
concessions were provided and are currently outpacing pre-pandemic
revenues and Morningstar DBRS' expectations. The DSCR has increased
slightly to 1.37x as of September 2023 from 1.28x at YE2022 and
1.22x at YE2021.
In the analysis for this review, Morningstar DBRS derived a value
of $652.3 million based on a haircut to the NCF for the T-12 ended
September 30, 2023, and maintained a capitalization rate of 6.0%.
The resulting Morningstar DBRS loan-to-value ratio (LTV) is 103.5%
on the mortgage loan. Positive qualitative adjustments totaling
5.0% were applied to the LTV sizing to account for the excellent
Tribeca location, good property quality, strong market
fundamentals, and upside potential for below-market units.
The Morningstar DBRS credit rating assigned to Classes C, D, E, and
HRR is higher than the result implied by the LTV sizing benchmarks
by three or more notches. This variance is warranted given
Morningstar DBRS' expectation that the loan will continue to
exhibit stable to improved performance in the near term as units
are renovated, the property's desirable location, strong submarket
fundamentals, and upside potential for below-market units.
Notes: All figures are in U.S. dollars unless otherwise noted.
INVESCO U.S. 2024-1: S&P Assigns 'BB-(sf)' Rating on Cl. E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-1-R, D-2-R, and E-R replacement debt from Invesco U.S. CLO 2024-1
Ltd./Invesco U.S. CLO 2024-1 LLC, a broadly syndicated CLO that is
managed by Invesco CLO Equity Fund 3 L.P., a subsidiary of Invesco
Senior Secured Management Inc. In connection with this refinancing,
the Cayman Islands-based issuer and Delaware-based co-issuer have
been renamed Invesco U.S. CLO 2024-1 Ltd. and Invesco U.S. CLO
2024-1 LLC, respectively, from Lucali CLO Ltd. and Lucali CLO LLC.
This is a refinancing of the issuer's Jan. 7, 2021, transaction
that was under the name Lucali CLO Ltd. S&P Global Ratings provided
ratings on the initial transaction.
On the March 21, 2024, refinancing date, the proceeds from the
replacement debt was used to redeem the original debt. At that
time, we withdrew our ratings on the original class A, B, C, D, and
E debt and assigned ratings to the replacement debt. The class X
notes from the original transaction were previously redeemed
following the final scheduled payment made to the notes on the
January 2024 payment date.
The replacement debt was 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, D-1-R, D-2-R, and E-R
notes were issued at a higher spread over three-month CME term SOFR
than the original class A, B, C, D, and E notes.
-- The stated maturity was extended to April 15, 2037, from the
original Jan. 15, 2033, date.
-- The reinvestment period was extended to April 15, 2029, from
the original Jan. 15, 2024, date.
-- The non-call period was extended to March 21, 2026, from the
original Jan. 15, 2022, date.
-- The weighted average life test date was extended nine years
from the first refinancing date.
-- The transaction was upsized to $500 million from $400 million
following the first refinancing date. A large portion of the
collateral that was upsized was purchased from the open market into
a warehouse, which was merged into the issuer on the first
refinancing date. There will not be an additional effective date,
and the first payment date following the refinancing date will be
July 15, 2024.
-- In connection with the upsize, an additional $15 million of
subordinated notes were issued on the refinancing date.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $320.0 million: Three-month CME term SOFR + 1.55%
-- Class B-R, $60.0 million: Three-month CME term SOFR + 2.10%
-- Class C-R, $30.0 million: Three-month CME term SOFR + 2.55%
-- Class D-1-R, $25.0 million: Three-month CME term SOFR + 3.75%
-- Class D-2-R, $10.0 million: Three-month CME term SOFR + 5.50%
-- Class E-R, $12.5 million: Three-month CME term SOFR + 7.40%
Original debt(i)(ii)
-- Class A, $256.0 million: Adjusted term SOFR(iii) + 1.21%
-- Class B, $48.0 million: Adjusted term SOFR(iii) + 1.60%
-- Class C, $24.0 million: Adjusted term SOFR(iii) + 2.20%
-- Class D, $24.0 million: Adjusted term SOFR(iii) + 3.60%
-- Class E, $14.0 million: Adjusted term SOFR(iii) + 5.54%
-- Subordinated notes, $40.0 million: Not applicable
(i)The class X notes from the original transaction were previously
redeemed following the final scheduled payment made to the notes on
the January 2024 payment date.
(ii)Available credit support for the notes consists of
subordination, overcollateralization, and excess cash flow.
(iii)Adjusted term SOFR is three-month CME term SOFR + 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
Invesco U.S. CLO 2024-1 Ltd./Invesco U.S. CLO 2024-1 LLC
Class A-R, $320.0 million: AAA (sf)
Class B-R, $60.0 million: AA (sf)
Class C-R (deferrable), $30.0 million: A (sf)
Class D-1-R (deferrable), $25.0 million: BBB (sf)
Class D-2-R (deferrable), $10.0 million: BBB- (sf)
Class E-R (deferrable), $12.5 million: BB- (sf)
Ratings Withdrawn
Invesco U.S. CLO 2024-1 Ltd./Invesco U.S. CLO 2024-1 LLC
Class A to not rated from 'AAA (sf)'
Class B to not rated from 'AA (sf)'
Class C to not rated from 'A (sf)'
Class D to not rated from 'BBB- (sf)'
Class E to not rated from 'BB- (sf)'
JP MORGAN 2012-WLDN: DBRS Confirms CCC Rating on Class C Certs
--------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2012-WLDN
issued by J.P. Morgan Chase Commercial Mortgage Securities Trust
2012-WLDN as follows:
-- Class X-A at BB (sf)
-- Class A at BB (low) (sf)
-- Class B at B (low) (sf)
-- Class C at CCC (sf)
All trends are Stable, with the exception of Class C, which has a
rating that does not typically carry a trend in commercial
mortgage-backed securities (CMBS) ratings. The credit rating
confirmations and Stable trends reflect the overall performance of
the underlying collateral, as evidenced by the property's stable
occupancy and cash flow, which remain in line with Morningstar
DBRS' expectations at the last rating action in May 2023.
The fixed-rate loan is secured by the fee-simple interest in the
Walden Galleria, a 1.3 million square-foot (sf) super-regional
shopping mall located in Cheektowaga, New York. The mall is
currently anchored by JCPenney (collateral) and Macy's
(noncollateral), and major tenants include Dick's Sporting Goods
(on a ground lease), Regal Cinemas, Dave & Buster's, and Zara,
among others. Sears (noncollateral) and Lord & Taylor were anchor
tenants at issuance, but they closed their stores at the subject
property in 2018 and 2020, respectively. Primark opened a 34,000-sf
store in the former Sears space in April 2023. More recently, J.C.
Penny and Dick's Sporting Goods extended their leases to January
2029 and April 2029, respectively. The loan sponsor is The Pyramid
Companies, the largest privately held shopping mall developer in
the Northeastern U.S.; its affiliate, Pyramid Management Group,
LLC, provides management services.
The loan was originally structured with a 10-year term. In February
2022, the loan transferred to special servicing for a second time
because of imminent maturity default as the loan was not able to
secure refinancing ahead of its May 2022 maturity date. A
modification was approved in May 2022, and the terms included an
extension through November 2024, with an additional six-month
extension option, conditional upon the loan balance being the
lessor of $225.0 million or 80.0% of its appraised value (a new
appraisal to be ordered 90 days prior to the new November 2024
maturity). Additional terms included the conversion of loan
payments to interest-only (IO), and a cash trap that will remain in
effect until the loan is paid in full. The loan was returned to the
master servicer in September 2022. Since then, the loan has
continued to perform in accordance with the modification terms. The
March 2024 loan balance of $226.7 million represents a collateral
reduction of 16.0%, as a result of loan amortization prior to the
modification and principal curtailments.
Despite the mall's cash flow declines since the start of the
COVID-19 pandemic, which were predominantly driven by several
anchor and non-anchor tenants that filed for bankruptcy and/or
vacated, property operations have remained sufficient to cover debt
service payments since 2021. The financial statement for the
trailing nine months ended September 30, 2023, indicated an
annualized net cash flow (NCF) of $23.8 million. Although this
figure is below the YE2022 NCF of $25.2 million and the YE2021 NCF
of $30.6 million, it is higher than the NCF of $21.6 million
previously derived by Morningstar DBRS. The decline from 2022 is
predominantly driven by a 14.1% increase in real estate taxes, as
well as a 23.3% decrease in percentage rent and 17.7% decrease in
other income. Additionally, the higher YE2021 NCF was partially
attributed to the collection of deferred rents from 2020.
According to the September 2023 rent roll, the property was 89.3%
occupied, an improvement from the January 2023 and YE2021 figures
of 81.7% and 71.3%, respectively. Morningstar DBRS counted more
than 30 tenants, representing 11.0% of the net rentable area (NRA),
that have lease expirations through the next 12 months, including
DSW (1.8% of NRA; lease expiration in September 2024) and Apple
(0.6% of the NRA; lease expiration in January 2025). Morningstar
DBRS believes a portion of these tenants will renew and/or extend
their leases given recent leasing activity and the mall's stable
sales history. According to a recent update provided by the
servicer, the in-line sales (excluding Apple) for the YE2023 period
were $510 per square foot (psf), which represents stable and
improving in-line sales relative to prior in-line sales figures.
In line with the previous rating action, in the analysis for this
review, Morningstar DBRS considered the August 2022 appraised value
of $219.0 million. The appraised value represents loan-to-value
ratio (LTV) of 103.8% on the current loan balance, and an implied
capitalization rate of 10.9% based on the annualized NCF of $23.8
million. Morningstar DBRS maintained a positive qualitative
adjustment to the final LTV sizing benchmarks used for this credit
rating analysis, totaling 0.25% for market fundamentals to reflect
the property's dominant position in the market, with a higher
appraisal value psf and total mall size relative to its
competitors, according to the August 2022 appraisal.
Notes: All figures are in U.S. dollars unless otherwise noted.
JP MORGAN 2019-ICON: DBRS Confirms B(low) Rating on G Certs
-----------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2019 - ICON
issued by J.P. Morgan Chase Commercial Mortgage Securities Trust
2019-ICON as follows:
-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-B at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
In addition, Morningstar DBRS changed the trends on Classes F and G
to Negative from Stable. All other trends are Stable.
The trend changes to Negative reflect the increased credit risk to
the bonds following the underlying loans' transfer to special
servicing in February 2024. The transfer was initiated after the
borrower was unable to secure takeout financing and defaulted at
its January 2024 maturity date. Although the portfolio's cash flow
as of September 2023 remains in line with issuance expectations
based on aggregated reporting from the Investor Reporting Package,
Morningstar DBRS is concerned over the potential for value
deterioration given the current interest rate and capitalization
(cap) rate environment. In the event that the sponsor decides to
stop supporting the loans, this value volatility suggests trust
losses are possible in a liquidation scenario. Morningstar DBRS
updated its loan-to-value ratio (LTV) sizing to reflect this
concern, which resulted in a Morningstar DBRS value and LTV of
$164.7 million and 104.5%, respectively.
Following the release of the smallest loan in the pool in October
2023, the trust is now secured by 17 separate nonrecourse,
first-lien mortgage loans totalling $172.0 million, which include
nine multifamily properties and eight mixed-use properties with 347
residential and 17 commercial units in Manhattan and Brooklyn, New
York. The trust debt consists of $58.5 million of Trust A Notes and
$83.9 million of Trust B Notes. The Trust A Notes are pari passu
with $30.0 million of companion notes that were securitized in the
JPMCC 2019-COR5 transaction (not rated by Morningstar DBRS). The
sponsor gradually acquired the 18-property portfolio at a total
cost of $160.5 million and invested an additional $55.6 million in
capital improvements for a total cost basis of $216.0 million at
the time of issuance. The properties have potential for additional
revenue bumps if rent-restricted units are legally vacated and
converted into market-rate units. Morningstar DBRS has never given
credit to this upside in its analysis. All loans had five-year,
interest-only (IO) loan terms with a maturity date in January 2024
and are not cross-collateralized or cross-defaulted. Each borrower
is a special-purpose entity sponsored by Icon Realty Management,
LLC, a real estate investment and management firm headquartered in
New York.
Despite the transfer to special servicing, aggregate portfolio cash
flows have continued to increase every year since 2020, most
recently being reported at $11.9 million for the trailing 12 months
ended (T-12) September 30, 2023, according to servicer reporting,
equating to a whole-loan debt service coverage ratio (DSCR) of 1.28
times (x). This represents an 11.9% increase over the YE2022 net
cash flow (NCF) of $10.7 million and a 10.6% increase over the
Morningstar DBRS cash flow derived when ratings were assigned in
2020. As of September 2023, the portfolio's weighted average
occupancy was reported to be 95.5%, up from 90.7% as of YE2022,
with individual property occupancies ranging from 68.0% to 100.0%.
Special servicer commentary notes that discussions are ongoing with
the borrower regarding a possible two-year loan extension. As a
condition to the maturity extension, it is expected that principal
paydown will be necessary to satisfy certain debt yield and LTV
hurdles.
Although the collateral's performance remains in line with
Morningstar DBRS' expectations, upward pressure on interest rates
and cap rates in the last year, as well as the inability of the
borrower to secure takeout financing, suggests that the portfolio's
value has declined. In the analysis for this review, Morningstar
DBRS updated its LTV sizing for the loan, applying a cap rate of
7.25% to the T-12 September 2023 NCF of $11.9 million. The
resulting Morningstar DBRS value of $164.7 million represents a
whole loan LTV of 104.5%, a 43.6% haircut to the issuance appraised
value of $292.1 million, and a 4.7% haircut to the previous
Morningstar DBRS value of $172.8 million derived when ratings were
assigned in 2020. Morningstar DBRS maintained a positive
qualitative adjustment to the LTV sizing benchmarks totaling 4.5%
to account for the collateral's lack of significant cash flow
volatility, illustrated by stable reporting over the past several
years, and strong market fundamentals due to the portfolio's
location throughout Manhattan and Brooklyn. Given that the
portfolio is neither cross-defaulted nor cross-defaulted, to
further test the durability of the ratings, Morningstar DBRS
conducted a recoverability analysis based on the individual loan
amounts and using the same 7.25% cap rate. Out of the 17 remaining
loans, 10 loans had LTVs in excess of 100.0% based on Morningstar
DBRS' derived values. In absence of additional equity infusion,
losses incurred on the weaker-performing assets may erode the first
loss piece, further supporting the trend changes to Negative.
Notes: All figures are in U.S. dollars unless otherwise noted.
JP MORGAN 2024-3: Moody's Assigns (P)B3 Rating to Cl. B-5 Certs
---------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to 31 classes of
residential mortgage-backed securities (RMBS) to be issued by J.P.
Morgan Mortgage Trust 2024-3 and sponsored by J.P. Morgan Mortgage
Acquisition Corp.
The securities are backed by a pool of prime jumbo (79.0% by
balance) and GSE-eligible (21.0% by balance) residential mortgages
aggregated by JPMMAC, including loans aggregated by Redwood
Residential Acquisition Corporation (Redwood; 15.5% by loan
balance), MAXEX Clearing LLC (MAXEX; 10.0% by loan balance),
Oceanview Dispositions, LLC (Oceanview, 0.8% by loan balance) and
Verus Mortgage Trust 1A (Verus, 0.5% by loan balance) and
originated and serviced by multiple entities.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2024-3
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-2-A, Assigned (P)Aaa (sf)
Cl. A-2-X*, Assigned (P)Aa1 (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-A, Assigned (P)Aaa (sf)
Cl. A-3-X*, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4-A, Assigned (P)Aaa (sf)
Cl. A-4-X*, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-A, Assigned (P)Aaa (sf)
Cl. A-5-X*, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-6-A, Assigned (P)Aaa (sf)
Cl. A-6-X*, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-A, Assigned (P)Aaa (sf)
Cl. A-7-X*, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-8-A, Assigned (P)Aaa (sf)
Cl. A-8-X*, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aa1 (sf)
Cl. A-9-A, Assigned (P)Aa1 (sf)
Cl. A-9-X*, Assigned (P)Aa1 (sf)
Cl. A-X-1*, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (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 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
0.70%, in a baseline scenario-median is 0.52% and reaches 3.99% at
a stress level consistent with Moody's Aaa ratings.
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.
JP MORGAN 2024-3: Moody's Assigns B3 Rating to Cl. B-5 Certs
------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to 31 classes of
residential mortgage-backed securities (RMBS) issued by J.P. Morgan
Mortgage Trust 2024-3 and sponsored by J.P. Morgan Mortgage
Acquisition Corp.
The securities are backed by a pool of prime jumbo (79.0% by
balance) and GSE-eligible (21.0% by balance) residential mortgages
aggregated by JPMMAC, including loans aggregated by Redwood
Residential Acquisition Corporation (Redwood; 15.5% by loan
balance), MAXEX Clearing LLC (MAXEX; 10.0% by loan balance),
Oceanview Dispositions, LLC (Oceanview, 0.8% by loan balance) and
Verus Mortgage Trust 1A (Verus, 0.5% by loan balance) and
originated and serviced by multiple entities.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2024-3
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-2-A, Definitive Rating Assigned Aaa (sf)
Cl. A-2-X*, Definitive Rating Assigned Aa1 (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3-A, Definitive Rating Assigned Aaa (sf)
Cl. A-3-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-4-A, Definitive Rating Assigned Aaa (sf)
Cl. A-4-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-5-A, Definitive Rating Assigned Aaa (sf)
Cl. A-5-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6-A, Definitive Rating Assigned Aaa (sf)
Cl. A-6-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7-A, Definitive Rating Assigned Aaa (sf)
Cl. A-7-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-8-A, Definitive Rating Assigned Aaa (sf)
Cl. A-8-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aa1 (sf)
Cl. A-9-A, Definitive Rating Assigned Aa1 (sf)
Cl. A-9-X*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (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 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
0.70%, in a baseline scenario-median is 0.52% and reaches 3.99% at
a stress level consistent with Moody's Aaa ratings.
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.
JP MORGAN 2024-CES1: Fitch Assigns 'B-(EXP)' Rating on B-2 Certs
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings to J.P. Morgan Mortgage
Trust 2024-CES1 (JPMMT 2024-CES1).
Entity/Debt Rating
----------- ------
JPMMT 2024-CES1
A-1A LT AAA(EXP)sf Expected Rating
A-1B LT AAA(EXP)sf Expected Rating
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA-(EXP)sf Expected Rating
A-3 LT A-(EXP)sf Expected Rating
M-1 LT BBB-(EXP)sf Expected Rating
B-1 LT BB-(EXP)sf Expected Rating
B-2 LT B-(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-3-X LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
backed by 100% closed end second lien loans on residential
properties to be issued by J.P. Morgan Mortgage Trust 2024-CES1
(JPMMT 2024-CES1), as indicated above. This is the first
transaction to be rated by Fitch that includes 100% closed end
second lien loans off the JPMMT shelf.
The pool consists of 4,350 nonseasoned, performing, closed end
second lien loans with a current outstanding balance (as of the
cutoff date) of $315.98 million. The main originator in the
transaction is Rocket Mortgage LLC. All other originators make up
less than 10% of the pool. The loans are serviced by Rocket
Mortgage LLC (RPS2/Stable) and Specialized Loan Servicing, LLC
(RPS2+/Stable).
Distributions of interest and principal are based on a sequential
structure, while losses are allocated reverse sequentially starting
with the most subordinate class.
The servicers, Rocket Mortgage LLC and Specialized Loan Servicing,
LLC will not be advancing delinquent (DQ) monthly payments of
principal and interest (P&I).
The collateral is comprised of 100% fixed-rate loans. The class
A-1A, class A-1B, class A-2, class A-3 and class M-1 certificates
with respect to any distribution date prior to the distribution
date (and the related accrual period) will be an annual rate equal
to the lesser of (i) the applicable fixed rate set forth for such
class of certificates and (ii) the Net WAC for such distribution
date. The pass-through rate on the class B-1 and class B-2
certificates with respect to any distribution date and the related
accrual period will be an annual rate equal to the lesser of (i)
the applicable fixed rate set forth for such class of certificates
and (ii) the Net WAC for such distribution date. The pass-through
rate on the class B-3 certificates with respect to any distribution
date and the related accrual period will be an annual rate equal to
the Net WAC for such distribution date. 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 12.0% 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.
High-Quality Prime Mortgage Pool (Positive): The pool consists of
4,350 performing, fixed-rate loans secured by closed end second
liens on primarily one- to four-family residential properties
(including planned unit developments), two to four family homes,
condominiums and a townhouse, totaling $315.98 million. The loans
were made to borrowers with strong credit profiles and relatively
low leverage.
The loans are seasoned at an average of eleven months, according to
Fitch, and eight months, per the transaction documents. The pool
has a WA original FICO score of 740, as determined by Fitch,
indicative of very high credit-quality borrowers. About 39.5% 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 68.4%, as determined by Fitch,
translates to a sustainable loan-to-value (sLTV) ratio of 76.2%.
The transaction documents stated a WA original LTV of 16.1% and a
WA original CLTV of 68.2%. 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, 89.2% were originated
by a retail channel with the remaining 10.8% originated by a broker
or correspondent channel. Based on Fitch's documentation review, it
considered 96.1% of the loans to be fully documented.
Of the pool, 99.9% comprise loans where the borrower maintains a
primary or secondary residence, and the remaining 0.1% are investor
loans. Single-family homes, planned unit developments (PUDs), a
townhouse and single-family attached dwellings constitute 97.7% of
the pool; condominiums make up 2.2%, while multifamily homes make
up 0.1%. The pool consists of loans with the following loan
purposes, according to Fitch: cashout refinances (99.9%) and
purchases (0.1%). The transaction documents also show 99.9% of the
pool to be cashouts.
None of the loans in the pool are over $1.0 million.
Of the pool loans, 17.1% are concentrated in California. The
largest MSA concentration is in the Atlanta-Sandy Springs-Marietta,
GA (11.7%), followed by the Los Angeles-Long Beach-Santa Ana, CA
(4.8%) and the New York-Northern New Jersey-Long Island, NY-NJ-PA
(4.4%). The top three MSAs account for 21% of the pool. As a
result, no probability of default (PD) penalty was applied for
geographic concentration.
Due to the fact that the majority of the loans are fully documented
loans with high FICOs, Fitch's prime loan loss model was used for
the analysis of this pool.
Second Lien Collateral (Negative): The entirety of the collateral
pool consists of closed end second lien loans originated by Rocket
Mortgage LLC 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.
Sequential Structure with No Advancing of DQ P&I (Mixed): The
proposed structure is a sequential structure in which principal is
distributed first pro rata to the A-1-A and A-1-B, then
sequentially to the A-2, A-3, M-1, B-1, B-2, and B-3 classes.
Interest is prioritized in the principal waterfall and any unpaid
interest amounts are paid prior to principal being paid.
The transaction has monthly excess cash flow that is used to repay
any realized losses that incurred and then unpaid interest
shortfalls.
A realized loss will occur if the collateral balance is less than
the unpaid balance of the outstanding classes. Realized losses will
be allocated reverse sequentially with the losses being allocated
first to B-3. Once the A-2 class is written off principal will be
allocated to fist to A-1-B and then to A-1-A.
The transaction will have subordination and excess spread providing
credit enhancement and protection from losses.
180 Day Charge Off Feature/Best Execution (Positive): With respect
to any mortgage loan that is one hundred eighty (180) or more days
delinquent (or earlier, in accordance with the related servicer's
servicing practices) (other than due to such mortgage loan being or
becoming subject to a forbearance plan), the related servicer will
perform an equity analysis review and provide a written copy of
such review to the controlling holder. In accordance with the
related servicing agreement, the controlling holder will be
required to give written instruction to the related servicer (i)
that such mortgage loan be designated a charged off loan (each such
mortgage loan, a "charged off loan") or (ii) instructing the
related servicer to continue monitoring the lien status of such
mortgage loan, in which case, the related servicer will provide the
controlling holder with prompt written notice if such servicer
obtains actual knowledge that the associated first lien mortgage
loan is subject to payoff, foreclosure, short sale or similar
event.
Fitch views the fact that the servicer is conducting an equity
analysis to determine the best execution strategy for the
liquidation of severely delinquent loans to be a positive as the
servicer and controlling holder are acting in the best interest of
the noteholders to limit losses on the transaction. If the
controlling holder decides to write off the losses at 180 days, it
compares favorably to a delayed liquidation scenario, whereby the
loss occurs later in the life of the transaction and less excess is
available. In its cash flow analysis, Fitch assumed that the loans
would be written off at 180 days since this is the most likely
scenario is a stressed case when there is limited equity in the
home.
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 42.8% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
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. The third-party due diligence described in
Form 15E focused on three areas: compliance review, credit review,
and data integrity. Fitch considered this information in its
analysis and, as a result, Fitch decreased its loss expectations by
0.69% 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 under this
engagement were given compliance and credit reviews and assigned
initial and final 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 the auditor (Deloitte), and no material discrepancies
were noted.
ESG CONSIDERATIONS
JPMMT 2024-CES1 has an ESG Relevance Score of '4+' for Transaction
Parties and Operational Risk. Operational risk is well controlled
for in JPMMT 2024-CES1, including strong R&W, transaction due
diligence, an 'Above Average' aggregator, and a large portion of
the pool being originated by an 'Above Average' originator which
results in a reduction in expected losses. This has a positive
impact on the credit profile and is relevant to the rating 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.
JP MORGAN 2024-VIS1: S&P Assigns Prelim 'B-' Rating on B-2 Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to J.P. Morgan
Mortgage Trust 2024-VIS1's mortgage pass-through certificates
series 2024-VIS1.
The certificate issuance is an RMBS transaction backed by primarily
unseasoned, first-lien, fixed- and adjustable-rate, fully
amortizing, and interest-only residential mortgage loans. The loans
are secured by single-family residences, townhouses, planned-unit
developments, two- to four-unit multifamily homes, and condominiums
to both prime and nonprime borrowers. The mortgage pool consists of
1,320 business-purpose investment-property loans with a principal
balance of approximately $324.08 million as of the cutoff date.
The preliminary ratings are based on information as of March 25,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, mortgage aggregator and
mortgage originators, and representation and warranty framework;
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(i) Assigned
J.P. Morgan Mortgage Trust 2024-VIS1
Class A-1, $203,847,000: AAA (sf)
Class A-2, $29,491,000: AA- (sf)
Class A-3, $38,728,000: A- (sf)
Class M-1, $20,579,000: BBB- (sf)
Class B-1, $14,746,000: BB- (sf)
Class B-2, $10,532,000: B- (sf)
Class B-3, $6,158,322: NR
Class A-IO-S, $159,118,367(ii): NR
Class XS, $324,081,322(iii): NR
Class A-R, not applicable: NR
(i)The collateral and structural information in this report reflect
the preliminary private placement memorandum dated March 25, 2024.
The preliminary ratings address the ultimate payment of interest
and principal and do not address payment of the cap carryover
amounts.
(ii)The notional amount equals the loans' aggregate unpaid
principal balance of the mortgage loans serviced by Shellpoint
Mortgage Servicing as of the cutoff date.
(iii)The notional amount equals the aggregate stated principal
balance of loans in the pool as of the cutoff date.
NR--Not rated.
JPMBB COMMERCIAL 2015-C27: DBRS Cuts Class D Certs Rating to C
--------------------------------------------------------------
DBRS Limited downgraded ratings on six classes of Commercial
Mortgage Pass-Through Certificates, Series 2015-C27 issued by JPMBB
Commercial Mortgage Securities Trust 2015-C27 as follows:
-- Class B to BBB (high) (sf) from AA (low) (sf)
-- Class C to BB (high) (sf) from BBB (high) (sf)
-- Class D to C (sf) from CCC (sf)
-- Class X-B to A (low) (sf) from AA (sf)
-- Class X-C to BBB (low) (sf) from A (low) (sf)
-- Class EC to BB (high) (sf) from BBB (high) (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-3A1 at AAA (sf)
-- Class A-3A2 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class X-A at AAA (sf)
The trends on Classes A-S, B, C, X-A, X-B, X-C, and EC are
Negative. Classes D, E, and F no longer carry a trend given the C
(sf) credit rating. The trends on all remaining classes are
Stable.
The credit rating downgrades and Negative trends reflect
Morningstar DBRS' increased loss projections since the last credit
rating actions, primarily attributed to the 717 14th Street loan
(Prospectus ID#4, 6.4% of the pool), which is collateralized by a
Class B office building in Washington, D.C. With this review,
Morningstar DBRS considered liquidation scenarios for that loan and
the transaction's other specially serviced loan, resulting in total
implied losses exceeding $70.0 million (with an average loan level
loss severity exceeding 60.0%). Those scenarios suggest losses
would be incurred by the Class D certificate, eroding support for
the certificates above, particularly the Class B and C
certificates, supporting the downgrade for Class C and Negative
trends for both classes.
The Negative trend assigned to Class A-S generally reflects the
liquidated loss projections for the two specially serviced loans
and Morningstar DBRS' concerns surrounding the refinance prospects
for select loans in the pool, most notably for the largest loan in
the pool, The Club Row Building (Prospectus ID#1, 18.8% of the
pool). Morningstar DBRS considered the refinance prospects for the
remaining loans in the pool, most of which mature in 2025, by
estimating the current value (based on the in-place cash flows and
market cap rates implied by recent transaction activity) and the
likely metrics required for a replacement loan (based on recently
closed commercial mortgage-backed securities (CMBS) loans for the
same or similar property types). Based on that analysis, the Club
Row Building had a significant refinance gap. As the Class A-S
certificate is likely reliant on the full repayment of that loan in
order to be fully repaid, the Negative trend was warranted.
In addition to the increase in projected losses from the liquidated
loans and other loans showing value declines from issuance, the
rating downgrades and C (sf) ratings on the most junior rated
tranches are also reflective of the expectation that interest
shortfalls could continue to grow. As of the February 2024
remittance, interest shortfalls total $6.7 million, an increase
from $4.1 million during the March 2023 review, with shortfalls
continuing to be reported up through the Class D certificate.
According to the February 2024 remittance, 35 of the original 44
loans remain in the pool, representing a collateral reduction of
30.1% since issuance. Five loans, representing 5.3% of the pool,
are fully defeased. There are 13 loans, representing 46.4% of the
pool on the servicer's watchlist, including the largest loan in the
pool, and two loans, representing 18.9% of the pool in special
servicing. The transaction is concentrated by property type with
eight loans, representing 38.4% of the pool, secured by office
collateral, including the largest loan and the aforementioned
specially serviced 717 14th Street loan. All but one of the
nondefeased loans, including all eight office loans, are scheduled
to mature by February 2025, with a select few non-specially
serviced loans exhibiting increased refinance risk. As the
transaction is in the ninth year since issuance, with most loans
coming due within the next 12 months, the analysis for this review
generally focused on the recoverability prospects for the remaining
loans in the pool.
The 717 14th Street loan is secured by a 114,204-square-foot office
property in Washington, D.C. The loan was transferred to special
servicing in February 2023 for imminent monetary default after the
borrower was unable to fund operating shortfalls. At issuance, the
building was fully occupied by various D.C. government entities,
General Services Administration - U.S. Department of the Treasury,
and CVS, which are all investment-grade tenants. Following the
departure of DC Auditors in August 2022, occupancy declined to
64.4%, and, in March 2023, the DC Office of the Inspector General
(10.0% of the net rentable area (NRA)) vacated, resulting in
occupancy declining to 54.6% as of the June 2023 rent roll.
According to Reis, the subject's submarket reported a vacancy rate
of 23.1% for Class B office properties as of YE2023.
Although the property is close to the White House, the lack of
demand for Class B office space and high submarket vacancy rate
have contributed to the absence of leasing activity in the last few
years. At the current leased rate, Morningstar DBRS estimates that
the debt service coverage ratio (DSCR) could fall to under 0.70
times (x). The loan is currently paid through June 2023 and a
receiver has been appointed, with an updated appraisal currently in
process. Given the significant vacancy, Class B construction, and
lack of investor appetite for office properties, Morningstar DBRS
believes the collateral's current value is significantly impaired
compared with its issuance value of $56.0 million. Morningstar DBRS
analyzed this loan with a liquidation scenario, based on a
significant haircut to the issuance valuation, resulting in a loss
severity in excess of 70.0%.
The largest specially serviced loan in the pool, The Branson at
Fifth (Prospectus ID#3, 12.5% of the pool), is secured by a
mixed-use (multifamily and retail) property in Midtown Manhattan,
New York. The loan was transferred to special servicing for a
second time in September 2021 because of monetary default and was
last paid through March 2022. Performance has been depressed since
2019 when the collateral property's largest commercial tenant,
Domenico Vacca, vacated ahead of its lease expiry. According to the
June 2023 rent roll, the multifamily portion was 96.4% occupied
with an average rental rate of $6,008 per unit. There is one
commercial tenant signed to a month-to-month lease and, according
to the special servicer commentary, there are currently no viable
prospects for the remainder of the commercial space. Despite the
healthy performance for the multifamily portion of the collateral,
the loan continues to underperform, most recently reporting a DSCR
of 0.08x as of Q2 2023. As noted at issuance, the majority of the
total property cash flows came from the commercial space. According
to special servicer commentary, the borrower has proposed a loan
modification and maturity extension, with the proposal reportedly
contemplating a multi-year loan maturity extension as well as
additional reserve deposits to an interest reserve and capital
improvement reserve. An updated appraisal as of September 2023
valued the property at $38.9 million, in line with the October 2022
appraised value of $38.2 million and a -67.3% variance from the
issuance value of $119.0 million. Although the sponsor appears
committed and is potentially willing to inject additional equity,
given the severe as-is value decline and lack of leasing activity
for the commercial space, Morningstar DBRS analyzed this loan with
a liquidation scenario, resulting in a loss severity in excess of
65.0%.
Morningstar DBRS remains concerned about the refinancing prospects
for several loans being monitored on the servicer's watchlist,
including The Club Row Building and 4141 North Scottsdale Road
(Prospectus ID#9, 4.1% of the pool), both of which are secured by
office properties that have experienced large vacancies and cash
flow declines in recent years. The Club Row Building, secured by a
Class B office building in Midtown Manhattan, was added to the
servicer's watchlist in November 2023 for a cash trap activation
because the DSCR fell below 1.10x during the T-12 period ended June
30, 2023. Occupancy declined to 73.0% as of September 2023 from
86.3% in 2020 following the departure of several tenants. Notably,
the property had exposure to WeWork (7.6% of NRA), which filed for
bankruptcy in November 2023 and placed the subject lease on its
rejection list. The tenant has since vacated its space, reducing
the subject's occupancy to 65.4%. The loan most recently reported a
Q3 2023 DSCR of 1.51x; however, when excluding WeWork's rent,
Morningstar DBRS estimates the DSCR could fall to approximately
1.10x. Re-leasing the property could prove difficult given the
subject's Class B construction and declining demand for office
space; there are reserves in place to fund costs should leases be
signed, with $2.5 million in a rollover reserve and $635,000 in
lockbox receipts reported for February 2024. Morningstar DBRS
estimates the as-is value has fallen significantly from issuance,
with a balloon loan-to-value ratio well over 100.0%, suggesting a
refinance at maturity in January 2025 appears unlikely.
The 4141 North Scottsdale Road loan is secured by a Class A,
low-rise, suburban office building in Scottsdale, Arizona. The loan
was previously specially serviced but was returned to the master
servicer in April 2023 after the sponsor brought the loan current.
It is being monitored on the servicer's watchlist for low DSCR
following the departure of the property's largest tenant in 2022.
The property remains 16.6% occupied as of September 2023, but
despite the very low in-place occupancy, the sponsor has continued
to make principal and interest payments out-of-pocket. The property
was most recently appraised in August 2022 at a value of $29.5
million, representing an 18.3% decline from the issuance value of
$36.1 million but still in excess of the current loan amount of
$24.1 million. The Scottsdale submarket remains soft, reporting a
YE2023 vacancy rate of 18.9%, according to Reis. In the absence of
any significant leasing activity, a loan modification or loan
extension will likely be required as the loan matures in February
2025. Given the declining office market since the property's last
appraisal in August 2022, Morningstar DBRS believes the current
as-is value of the property is not sufficient to cover the current
loan amount and, should the sponsor ultimately decide to hand back
the keys to the lender, a loss to the trust is likely.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMCC COMMERCIAL 2014-C20: DBRS Confirms C Rating on 3 Classes
--------------------------------------------------------------
DBRS Limited downgraded the ratings on three classes of Commercial
Mortgage Pass-Through Certificates, Series 2014-C20 issued by JPMCC
Commercial Mortgage Securities Trust 2014-C20 as follows:
-- Class C to BB (sf) from BBB (high) (sf)
-- Class EC to BB (sf) from BBB (high) (sf)
-- Class D to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class G at C (sf)
Morningstar DBRS changed the trends on Classes B, C, X-B, and EC to
Negative from Stable. Classes D, E, F, and G have ratings that do
not typically carry trends in commercial mortgage-backed securities
(CMBS) ratings. All other classes have Stable trends.
As of the February 2024 remittance, only 14 of the original 37
loans remain outstanding with a pool balance of $313.1 million,
representing a collateral reduction of 64.3% since issuance. Of the
remaining loans, three, representing 7.3% of the pool balance, have
fully defeased.
The credit rating downgrades and trend changes reflect Morningstar
DBRS' concerns regarding a number of loans at increased risk of
maturity default. All but two of the remaining loans in the pool
are scheduled to mature within the next six months. While
Morningstar DBRS expects the majority of loans will repay from the
pool, a concentrated number of loans exhibit increased default risk
given weak credit metrics. Outside of the two loans in special
servicing, an additional three loans, representing 15.4% of the
pool balance in aggregate, have been identified by Morningstar DBRS
as being at risk for maturity default. Should these loans default
as they near their respective maturity dates, Morningstar DBRS'
loss projections may increase to reflect additional adverse
selection supporting the credit rating downgrades and Negative
trends. Additionally, Morningstar DBRS' ratings are constrained by
the expectation of accruing interest shortfalls prior to repayment,
which has also contributed to Morningstar DBRS' downgrades and
trend changes. Interest shortfalls currently total $6.5 million, up
from a total interest shortfall amount of $4.6 million at the time
of the last rating action. Unpaid interest continues to accrue
month over month, driven by special servicing fees and interest
shortfalls deemed non-recoverable from the second-largest loan in
special servicing.
The largest loan in special servicing, 200 West Monroe (Prospectus
ID#6; 14.7% of the pool balance) is secured by a 23-story, Class B
office property in Chicago. The loan has been monitored for
performance declines related to occupancy losses over the last
several years and transferred to special servicing with the
February 2024 remittance. The loan was last paid through December
2023, and the borrower is reportedly unwilling to fund operating
shortfalls at this time. According to the September 2023 rent roll,
the property was 66.8% occupied, down from 72% at YE2022 and 84.2%
at issuance. Cash flow has also been in decline year over year, and
the loan reported a debt service coverage ratio (DSCR) of 0.21
times (x) at YE2023. The in-place tenant roster is considered
granular, with no tenant representing more than 5.3% of the net
rentable area (NRA). Leases representing approximately 11.0% of the
NRA are scheduled to expire by YE2024. According to a Reis report
from Q4 2023, office properties within the Central Loop submarket
reported a vacancy rate of 14.1%, remaining in line with the 14.2%
reported last year. Although there have been no updated appraisals
since issuance, Morningstar DBRS expects the property value has
declined significantly since issuance given the declining occupancy
rate and cash flow, and soft submarket. In its analysis,
Morningstar DBRS liquidated the loan from the pool based on a
conservative haircut to the issuance appraised value, suggesting a
projected loss severity approaching 70%.
The second-largest loan in special servicing, Lincolnwood Town
Center (Prospectus ID#4; 14.1% of the pool balance) is backed by a
regional mall in the northern Chicago suburb of Lincolnwood,
Illinois. The property became real estate owned in August 2021.
Recent communication with the servicer indicates the subject is
under contract to be sold. The most recent appraisal reported by
the servicer, dated April 2023, valued the property at $15.0
million, in line with the May 2022 appraised value of $15.2
million, but a drastic decline from the issuance value of $89.1
million. In its analysis, Morningstar DBRS' liquidation scenario
for this loan considered outstanding advances and expected servicer
fees, suggesting a projected loss in excess of 80%.
The largest of the three additional loans Morningstar DBRS
identified as being at increased risk of maturity default is
Westminster Mall (Prospectus ID#11; 7.8% of the pool balance),
which is secured by a regional mall in Orange County, California,
and is on the servicer's watchlist for performance declines
following the loss of former noncollateral anchor Sears. More
recently, the loan has also been flagged for its upcoming loan
maturity in April 2024. Per the servicer, the borrower received a
payoff quote for November 2023 but was unable to repay the loan.
The empty noncollateral anchor boxes have reportedly been acquired
by Shopoff Realty Investments, and media sources indicate
Westminster City Council had approved initial plans for the
redevelopment of those two sites in December 2022. According to the
most recent financials, occupancy was reported at 75.1% as of
September 2023, down from 84.2% at YE2022 and 95.0% at issuance.
The property is not cash flowing, with the year to date September
30, 2023, DSCR reported to be -0.36x, compared with the YE2022 DSCR
of 0.23x. Despite these performance declines, the loan has been
kept current by the sponsor, Washington Prime Group. Morningstar
DBRS expects the sponsor's commitment is likely related to the
redevelopment value of the property in the long term. However,
Morningstar DBRS believes the loan is at high risk of maturity
default. This concern was a contributing factor in the credit
rating actions described above.
Notes: All figures are in U.S. dollars unless otherwise noted.
MAGNETITE LTD XII: Moody's Cuts $11.86MM F-R Notes Rating to Caa1
-----------------------------------------------------------------
Moody's Ratings has assigned a rating to one class of CLO
refinancing notes (the "Refinancing Notes") issued by Magnetite
XII, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$376,306,220 Class A-R4 Senior Secured Floating Rate Notes due
2031 (the "Class A-R4 Notes"), Assigned Aaa (sf)
Additionally, Moody's has taken rating actions on the following
outstanding notes:
US$52,290,000 Class B-RR-A Senior Secured Floating Rate Notes due
2031 (the "Class B-RR-A Notes"), Upgraded to Aaa (sf); previously
on September 1, 2023 Upgraded to Aa1 (sf)
US$12,960,000 Class B-RRR-B Senior Secured Fixed Rate Notes due
2031 (the "Class B-RRR-B Notes"), Upgraded to Aaa (sf); previously
on September 1, 2023 Upgraded to Aa1 (sf)
US$29,660,000 Class C-RR Deferrable Mezzanine Floating Rate Notes
due 2031 (the "Class C-RR Notes"), Upgraded to Aa3 (sf); previously
on September 1, 2023 Upgraded to A1 (sf)
US$38,560,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2031 (the "Class D-R Notes"), Upgraded to Baa1 (sf); previously
on September 6, 2018 Assigned Baa3 (sf)
US$11,860,000 Class F-R Deferrable Mezzanine Floating Rate Notes
due 2031 (the "Class F-R Notes"), Downgraded to Caa1 (sf);
previously on September 6, 2018 Assigned B3 (sf)
A comprehensive review of all credit ratings for the respective
transactions have 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.
BlackRock Financial Management, Inc. (the "Manager") will continue
to direct the acquisition and disposition of certain assets on
behalf of the Issuer.
The Issuer previously issued six other classes of secured notes,
one class of subordinated notes and one class of preferred shares
which will remain outstanding.
In addition to the issuance of the Refinancing Notes, a few other
changes to transaction features will occur in connection with the
refinancing. These include: extensions of non-call period; and
updates to the definition of "Reference Rate" to adopt Term SOFR as
the initial benchmark interest rate for the Refinancing Notes.
Moody's upgrade rating actions on the Class B-RR-A Notes, Class
B-RRR-B Notes, Class C-RR Notes and Class D-R Notes are primarily a
result of the refinancing, which increases excess spread available
as credit enhancement to the rated notes. No action was taken on
the Class E-R notes because its expected loss remain commensurate
with its 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.
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 Moody's calculation, the OC
ratio for the Class F-R notes is at 104.37%, versus August 2023
level of 105.25%. The OC ratio decrease is partly driven by
additional $4.27 million of defaulted assets in January 2024.
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: $575,905,001
Defaulted par: $5,134,993
Diversity Score: 77
Weighted Average Rating Factor (WARF): 2873
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.56%
Weighted Average Coupon (WAC): 8.00%
Weighted Average Recovery Rate (WARR): 47.71%
Weighted Average Life (WAL): 4.09 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.
MAPS 2019-1: S&P Affirms CCC+ (sf) Rating on Class C Notes
----------------------------------------------------------
S&P Global Ratings raised eight ratings and affirmed one rating on
four aircraft ABS transactions. The ratings on the notes were also
removed from CreditWatch with positive implications, where they
were placed on Dec. 27, 2023.
The upgrades primarily reflect the significant increase in the
respective notes' credit enhancement due to principal repayments
backed by strong collateral collections (base rent, maintenance
reserves, end-of-lease payment, and sale of aircraft) and sustained
stable portfolio performance since S&P's last review. The
affirmation reflects its view that there has been no significant
change in performance and the credit enhancement is sufficient at
the current rating level.
The sections below provide more transaction-specific details from
this review. All statistics reported herein are as of the February
2024 payment date.
Blackbird Capital Aircraft Lease Securitization Ltd. 2016-1
(BBIRD)
S&P Global Ratings raised its ratings on the class A and B notes to
A+ (sf) and A- (sf) from A (sf) and BBB (sf), respectively.
The upgrades reflect the transaction's sustained stable
performance, the significant paydown in the last several months,
and the resulting decline in the loan-to-value (LTV) ratios. The
notes (including the class AA notes) have been paid down in
aggregate by approximately $148 million since our last review in
September 2023.
The recent sale of the 2017-vintage Boeing 787-9 aircraft, which
was on lease to Air Canada, enabled the transaction to pay off the
class AA notes in its entirety and substantially pay down the class
A and B notes on the November 2023 payment date.
The portfolio is currently backed by 16 aircraft that were
manufactured between 2006 and 2016. Based on the appraised
half-life value as of September 2023, the aircraft have a weighted
average age of 11.1 years and a remaining lease term of 3.1 years.
All of the aircraft are currently on lease, with one lease expiring
in the next 12 months.
In December 2023, as part of a larger settlement, BBIRD received
USD 24.2 million in cash in settlement of its local Russian
insurance claim in respect to the Airbus 321-200 aircraft with MSN
6548 that was on lease to Russia-based S7 Airlines at the onset of
the conflict in February 2022. The pool had already written off
this aircraft at an earlier stage. Effective upon receipt of the
insurance settlement proceeds, BBIRD transferred the aircraft title
to the local Russian insurance company.
S&P said, "Under our cash flow analysis, both classes passed at a
higher rating level. However, we considered the relatively high LTV
ratio for the class A notes and that the class B notes are still
behind on their scheduled principal payments. In general, we also
considered the replacement framework and the rating threshold
associated with the liquidity facility provider after the class AA
notes are paid off while determining the ratings assigned herein.
"We also note that if our rating of the liquidity provider and/or
the bank account provider were to be lowered below a certain level
or if either provider is replaced by a counterparty with a lower
rating, it could lead to a potential change in the notes' rating
based on the application of our counterparty risk criteria."
MAPS 2019-1 Ltd.
S&P Global Ratings raised its ratings on the class A and B notes to
A+ (sf) and BB- (sf) from BBB-(sf) and B- (sf), respectively. S&P
affirmed the rating on the class C notes at CCC+ (sf).
The upgrades reflect the transaction's sustained stable
performance, the significant paydown in the last several months,
and the resulting decline in the LTV ratios. The affirmation
reflects S&P's view that there has been no significant change in
performance and the credit enhancement is sufficient at the current
rating level.
As a result of the sale of two narrowbody aircraft and the strong
lease rent and end-of-lease cashflows, the class A notes received a
significant amount of principal payment (approximately $67 million)
since S&P's last review in July 2023, bringing the class A notes
back to their scheduled targeted principal balance.
The class B notes received minimal principal payments
(approximately $0.3 million) since S&P's last review, and the class
C notes continue to defer and capitalize their unpaid interest. The
class C notes are significantly behind on their scheduled principal
payments.
The portfolio is backed by 11 aircraft manufactured between 2006
and 2012, with a weighted average age of approximately 13.7 years
and a remaining lease term of 3.6 years. All aircraft are on lease,
with no lease expirations in the next 12 months.
At the start of the Russia-Ukraine conflict, MAPS 2019-1 Ltd. had
four aircraft on lease to airlines based in Russia, three of which
have been written off. S&P does not forecast any lease rent cash
flow from these aircraft that were written down. The fourth
aircraft was repossessed by the servicer and subsequently sold.
S&P said, "Under our cash flow analysis, the class A and B notes
passed at a higher rating level. However, we considered the
still-high LTV ratio relative to the age of the portfolio, the fact
that the class B notes are still behind on their scheduled
principal payments, and the results of our additional cashflow
stress runs, in determining the rating.
"We also note that if our rating of the liquidity provider and/or
the bank account provider were to be lowered below a certain level
or if either provider is replaced by a counterparty with a lower
rating, it could lead to a potential change in the notes' rating
based on the application of our counterparty risk criteria."
START Ltd.
S&P Global Ratings raised its rating on the class A notes from
START Ltd. to A (sf) from BBB+ (sf), on the B notes to BBB (sf)
from BB- (sf), and on the class C notes to B (sf) from B- (sf).
The upgrades reflect the transaction's sustained stable
performance, the significant paydown in the last several months,
and the resulting decline in the LTV ratios.
As a result of the sale of one narrowbody aircraft and the strong
lease rent cashflow and a significant end-of-lease payment, the
class A and B notes received a significant amount of principal
payment (approximately $64 million in aggregate) since S&P's last
review in May 2023; as a result of which the class A notes are back
on their scheduled targeted principal balance and the class B notes
are only slightly behind their targeted amount.
The class C notes have not received any amount of principal since
S&P's last review and continue to defer and capitalize their unpaid
interest. The class C notes are significantly behind on their
scheduled principal payments as they are fully subordinated to all
interest and required principal payments on the class A and B
notes.
The portfolio is currently backed by 19 narrowbody aircraft
manufactured between 2006 and 2013, with an average age of 13.3
years and a remaining lease term of 3.8 years. All of the aircraft
are currently on lease, and three aircraft are due to come off
lease in the next 12 months.
Under our cash flow analysis, all three classes passed at a higher
rating level. However, we considered the still-high LTV ratio
relative to the age of the portfolio, the structural subordination
and the fact that the class B and C notes are still behind on their
scheduled principal payments, and the results of our additional
cashflow stress runs in determining the rating.
Zephyrus Capital Aviation Partners 2018-1 Ltd.
S&P Global Ratings raised its rating on the class A notes to BBB
(sf) from BBB- (sf) from Zephyrus Capital Aviation Partners 2018-1
Ltd..
The upgrade reflects the transaction's sustained stable
performance, the significant paydown in the last several months,
and the resulting decline in the LTV ratio.
As a result of the sale of one widebody aircraft in the third
quarter of 2023 and the strong lease rent cashflow, the class A
notes received a significant amount of principal payment
(approximately $88 million) since S&P's last review in May 2023,
bringing the class A notes back to their scheduled targeted
principal balance.
The portfolio is currently backed by ten aircraft that were
manufactured between 2004 and 2009, as well as two widebody
engines, with an average age of approximately 18 years (excluding
the engines). At the onset of the Russia-Ukraine conflict, one
aircraft was on lease to a Russian lessee. S&P does not forecast
any cash flows from this aircraft, and it is not included in our
calculations or statistics. All of the remaining assets are
currently on lease, with no aircraft leases expiring in the next 12
months.
Three former executives at Zephyrus Aviation Capital LLC (Zephyrus)
that recently left the company were covered by a keyman provision
under the servicing agreement, which could trigger a servicer
termination event under that agreement. As of March 13, 2024,
pursuant to the provisions of the servicing agreement, the board of
directors of the Irish borrower by way of unanimous director
approval has waived the right to terminate the agreement, and
Zephyrus will continue to act as the servicer.
S&P said, "Under our cash flow analysis, the class A notes passed
at a higher rating level. We considered the relatively older nature
of the aircraft portfolio and the associated disposition-related
risks, the management changes discussed above, and the
corresponding application of the operational risk criteria while
determining the rating.
"We will continue to monitor the transactions and review whether
the ratings assigned are consistent with the credit enhancement
available to support the respective notes."
Ratings Raised And Removed From CreditWatch Positive
Blackbird Capital Aircraft Lease Securitization Ltd. 2016-1
Class A to A+ (sf) from A (sf)/Watch Pos
Class B to A- (sf) from BBB (sf)/Watch Pos
MAPS 2019-1 Ltd.
Class A to A+ (sf) from BBB- (sf)/Watch Pos
Class B to BB- (sf) from B- (sf)/Watch Pos
START Ltd.
Class A to A (sf) from BBB+ (sf)/Watch Pos
Class B to BBB (sf) from BB- (sf)/Watch Pos
Class C to B (sf) from B- (sf)/Watch Pos
Zephyrus Capital Aviation Partners 2018-1 Ltd.
Class A to BBB (sf) from BBB- (sf)/Watch Pos
Rating Affirmed And Removed From CreditWatch Positive
MAPS 2019-1 Ltd.
Class C: CCC+ (sf)
MARATHON STATIC 2022-18: Fitch Affirms BB+sf Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Marathon
Static CLO 2022-18 Ltd. refinancing notes. Fitch has also affirmed
ratings for the class B-2, C and E notes. The Rating Outlooks
remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Marathon Static
CLO 2022-18 Ltd
A-1-R 56586PAN8 LT PIFsf Paid In Full AAAsf
A-1-R2 56586PAW8 LT AAAsf New Rating
A-2-R 56586PAQ1 LT PIFsf Paid In Full AAAsf
B-1-R 56586PAS7 LT PIFsf Paid In Full AA+sf
B-1-R2 56586PAY4 LT AA+sf New Rating
B-2 56586PAG3 LT AA+sf Affirmed AA+sf
C 56586PAJ7 LT A+sf Affirmed A+sf
D-R 56586PAU2 LT PIFsf Paid In Full BBB+sf
D-R2 56586PBA5 LT A-sf New Rating
E 56587DAA2 LT BB+sf Affirmed BB+sf
TRANSACTION SUMMARY
Marathon Static CLO 2022-18, Ltd. is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Marathon Asset
Management, L.P., that originally closed in August 2022. The CLO's
secured notes were partially refinanced on Sept. 19, 2023 (the
first refinancing date) and a subsequent second partial refinancing
on March 21, 2024 (the second refinancing date) from the proceeds
of new secured notes.
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 (CE) and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
100% first-lien senior secured loans and has a weighted average
recovery assumption of 76.2%.
Portfolio Composition (Positive): The largest three industries
comprise 32.5% of the portfolio balance in aggregate while the top
five obligors represent 4.69% 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 does not have a
reinvestment period; however, the issuer has the ability to extend
the weighted average life of the portfolio as a result of maturity
amendments. Fitch's analysis was based on a stressed portfolio
incorporating potential maturity amendments on the underlying loans
as well as a one-notch downgrade on the Fitch Issuer Default Rating
Equivalency Rating for assets with a Negative Outlook on the
driving rating of the obligor. The shorter risk horizon means the
transaction is less vulnerable to underlying price movements,
economic conditions and asset performance.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
KEY PROVISION CHANGES
The refinancing is being implemented via the refinancing
supplemental indenture, which amended certain provisions of the
transaction. The changes include but are not limited to:
- The non-call period for the second refinancing notes will end in
September 2024.
- The class A-2-R balance has been combined with class A-1-R2 (one
class A note).
FITCH ANALYSIS
Marathon Static CLO 2022-18, Ltd. is a static pool CLO. The issuer
is not permitted to purchase any loans after the closing date
(other than rescue financing assets). As such, there are no
collateral quality tests or concentration limitations, and Fitch's
analysis is based on the latest portfolio from the trustee.
The portfolio presented to Fitch by the arranging bank on March 6,
2024 (February trustee report data) includes 186 assets from 180
primarily high yield obligors. The portfolio balance, including the
amount of positive cash, was approximately $347 million. As per the
February trustee report, the transaction passes all of its coverage
tests.
The weighted average rating factor of the current portfolio is 'B'.
Fitch has an explicit rating, credit opinion or private rating for
43.1% of the current portfolio par balance; ratings for 56.9% of
the portfolio were derived from using Fitch's Issuer Default Rating
(IDR) equivalency map. Defaulted assets, assets without a public
rating or a Fitch credit opinion represent 0.6% of the current
portfolio par balance.
In lieu of a traditional stress portfolio, Fitch ran a maturity
extension scenario on the current portfolio to account for the
issuer's ability to extend the WAL of the portfolio to 4.6 years as
a result of maturity amendments. The scenario also considers a
one-notch downgrade on the Fitch IDR Equivalency Rating for assets
with a Negative Outlook on the derived rating of the obligor, as
described in Fitch's CLO and Corporate CDO Rating Criteria.
Fitch generated projected default and recovery statistics of the
Fitch Stressed Portfolio (FSP) using its portfolio credit model
(PCM). The PCM default and recovery rate outputs for the FSP at the
'AAAsf' rating stress were 45.0% and 40.9%, respectively. The PCM
default and recovery rate outputs for the FSP at the 'AA+sf' rating
stress were 44.2% and 50.0%, respectively. The PCM default and
recovery rate outputs for the FSP at the 'A+sf' rating stress were
39.1% and 59.6%, respectively. The PCM default and recovery rate
outputs for the FSP at the 'A-sf' rating stress were 35.8% and
59.5%, respectively. The PCM default and recovery rate outputs for
the FSP at the 'BB+sf' rating stress were 27.5% and 74.5%,
respectively.
In the analysis of the current portfolio, the class A-1-R2, B-1-R2,
B-2, C, D-R2 and E notes passed the 'AAAsf', 'AA+sf', 'AA+sf',
'A+sf', 'A-sf' and 'BB+sf' rating thresholds in all nine cash flow
scenarios with minimum cushions of 20.3%, 8.6%, 8.6%, 9.6%, 3.2%
and 17.3%, respectively.
In the analysis of the maturity extension scenario, the class
A-1-R2, B-1-R2, B-2, C, D-R2 and E notes passed the 'AAAsf',
'AA+sf', 'AA+sf', 'A+sf', 'A-sf' and 'BB+sf' rating thresholds in
all nine cash flow scenarios with minimum cushions of 18.9%, 8.4%,
8.4%, 7.8%, 1.6%, and 15.8%, respectively.
The Stable Outlook on the class A-1-R2, B-1-R2, B-2, C, D-R2 and E
notes reflects the expectation that the notes have a sufficient
level of credit protection to withstand potential deterioration in
the credit quality of the portfolio.
The class B-1-R2, B-2 and E notes are rated one notch below their
model-implied ratings (MIR), respectively. This reflects
insufficient break-even default rate cushion on Fitch-stressed
portfolio at the MIRs and below-average CE relative to similar
static transactions at the higher rating level.
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 'AA+sf' and 'AAAsf' for class A-1-R2, between
'BBB+sf' and 'AA+sf' for class B-1-R2 and class B-2, between
'BB+sf' and 'A+sf' for class C, between 'B+sf' and 'BBB+sf' for
class D-R2, between less than 'B-sf' and 'BB+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R2, 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, 'AAsf' for
class D-R2; and 'Asf' 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Marathon Static CLO
2022-18 Ltd. In cases where Fitch does not provide ESG relevance
scores in connection with the credit rating of a transaction,
program, instrument or issuer, Fitch will disclose in the key
rating drivers any ESG factor which has a significant impact on the
rating on an individual basis.
MCF CLO IX: S&P Assigns Prelim BB- (sf) Rating on Cl. E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the
replacement class A-1-RR, B-RR, C-RR, D-RR, and E-R notes and the
replacement class A-L-RR and B-L loans from MCF CLO IX Ltd./MCF CLO
IX LLC, a CLO transaction originally issued in June 2019 and
refinanced for a first time in February 2022 that is managed by
Apogem Capital LLC, a subsidiary of New York Life Insurance Co.
The preliminary ratings are based on information as of March 26,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the March 28, 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 A-1-RR, A-L-RR, B-RR, C-RR, D-RR, and E-R
notes and the class A-L-RR loans are expected to be issued at
higher spreads over three-month SOFR than the corresponding
original debt tranches.
-- The replacement class A-RR, A-L-RR, B-RR, C-RR, D-RR, and E-RR
notes and the class A-L-RR loans are expected to be issued at
floating spreads, replacing the floating spreads on the current
debt tranches.
-- In connection with the refinancing, the issuer is adding class
B-L loans, pro rata to the class B-RR notes, to the capital
structure, while also removing the class A-2 notes, subordinate to
the class A-1 notes and loans, from the structure.
-- The reinvestment period and stated maturity will each be
extended by approximately 4.75 years.
-- In connection with the refinancing, the issuer is adding
provisions related to workout assets.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1-RR, $125.50 million: Three-month CME term SOFR +
2.00%
-- Class A-L-RR, $50.00 million: Three-month CME term SOFR +
2.00%
-- Class B-RR, $22.50 million: Three-month CME term SOFR + 2.70%
-- Class B-L, $15.00 million: Three-month CME term SOFR + 2.70%
-- Class C-RR (deferrable), $18.00 million: Three-month CME term
SOFR + 3.25%
-- Class D-RR (deferrable), $15.00 million: Three-month CME term
SOFR + 5.25%
-- Class E-R (deferrable), $18.00 million: Three-month CME term
SOFR + 8.06%
Subordinated notes, $38.78 million: Residual
Original debt
-- Class A-1-R, $81.98 million: Three-month CME SOFR + 1.50%
-- Class A-1L-R, $39.04 million: Three-month CME SOFR + 1.50%
-- Class A-2-R, $20.00 million: Three-month CME SOFR + 1.75%
-- Class B-R, $20.00 million: Three-month CME SOFR + 2.00%
-- Class C-R, $29.00 million: Three-month CME SOFR + 2.70%
-- Class D-R, $17.00 million: Three-month CME SOFR + 3.85%
-- Class E, $21.00 million: Three-month CME SOFR + 7.90%
-- Subordinated notes, $38.78 million: Residual
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
MCF CLO IX Ltd./MCF CLO IX LLC
Class A-1-RR, $125.50 million: AAA (sf)
Class A-L-RR, $50.00 million: AAA (sf)
Class B-RR, $22.50 million: AA (sf)
Class B-L, $15.00 million: AA (sf)
Class C-RR (deferrable), $18.00 million: A (sf)
Class D-RR (deferrable), $15.00 million: BBB- (sf)
Class E-R (deferrable), $18.00 million: BB- (sf)
Other Outstanding Ratings
MCF CLO IX Ltd./MCF CLO IX LLC
Class A-1-R, $81.98 million: AAA (sf)
Class A-1L-R, $39.04 million: AAA (sf)
Class A-2-R, $20.00 million: AAA (sf)
Class B-R, $20.00 million: AA (sf)
Class C-R, $29.00 million: A (sf)
Class D-R, $17.00 million: BBB- (sf)
Class E, $21.00 million: BB- (sf)
Subordinated notes, $38.78 million: Not rated
MULTI SECURITY 2005-RR4: DBRS Confirms CCC Rating on N Certs
------------------------------------------------------------
DBRS Limited confirmed the Commercial Mortgage-Backed Securities
Pass-Through Certificates, Series 2005-RR4, Class N issued by Multi
Security Asset Trust LP, Series 2005-RR4 (MSAT 2005-RR4) at CCC
(sf). There is no trend, as the Class N certificate has a credit
rating that does not typically carry a trend in commercial
mortgage-backed securities (CMBS) ratings.
The Class H certificate of PMAC 1999-C1 (not rated by Morningstar
DBRS) is the only remaining bond that contributes to the MSAT
2005-RR4 structure, and the rating confirmation reflects
Morningstar DBRS' unchanged recoverability expectations for the one
remaining loan in that transaction. Since Morningstar DBRS' last
rating action, one other loan within that same transaction, Post
Haste Plaza (previously 6.8% of the pool balance), was liquidated
in October 2023 with a loss of $0.2 million. The remaining loan in
the transaction, Regal Cinemas, Inc. (100.0% of the current pool
balance), is secured by a single-tenant movie theatre in
Fredericksburg, Virgina. The loan transferred to special servicing
after the tenant became delinquent on its rent payments as a result
of the Coronavirus Disease (COVID-19) pandemic, and eventually
became REO in December 2021. Following its loan maturity in June
2023, the loan has since been deemed a nonperforming matured
balloon. While the Regal Cinema's lease is co-terminus with the
loan's maturity, the tenant remains in occupancy per sources
online.
A November 2022 appraisal valued the property at $7.0 million,
which is substantially greater than the November 2020 value of $3.1
million, and approximately 14.6% below the issuance value of $8.2
million. In spite of the significant increase in value from 2020,
Morningstar DBRS believes a significant loss at resolution is
likely and given the class below the contributed certificate to the
subject transaction, Class O, has now been reduced by more than
85.0% as of February 2024, there isn't much cushion against loss
for the subject transaction, supporting the CCC (sf) rating.
Notes: All figures are in U.S. dollars unless otherwise noted.
NASSAU LTD 2022-I: Fitch Assigns 'BB+sf' Rating on Class E Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Nassau
2022-I Ltd. refinancing notes. Fitch has also upgraded the class D
and E notes. The Rating Outlooks remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Nassau 2022-I Ltd.
A-1 63171LAA2 LT PIFsf Paid In Full AAAsf
A-1R LT AAAsf New Rating
A-2 63171LAB0 LT PIFsf Paid In Full AAAsf
A-2R LT AAAsf New Rating
B 63171LAC8 LT PIFsf Paid In Full AA+sf
B-R LT AAAsf New Rating
C 63171LAD6 LT PIFsf Paid In Full A+sf
C-R LT A+sf New Rating
D 63171LAE4 LT BBB+sf Upgrade BBB-sf
E 63171MAA0 LT BB+sf Upgrade BB-sf
TRANSACTION SUMMARY
Nassau 2022-I Ltd. is an arbitrage cash flow collateralized loan
obligation (CLO) managed by NGC CLO Manager LLC, that originally
closed in January 2023. The CLO's secured notes were partially
refinanced on March 19, 2024 (the first refinancing date) from the
proceeds of new secured notes.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
100% first-lien senior secured loans and has a weighted average
recovery assumption of 75.37%.
Portfolio Composition (Positive): The largest three industries
comprise 33.3% of the portfolio balance in aggregate while the top
five obligors represent 5.9% 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 does not have a
reinvestment period; however, the issuer has the ability to extend
the weighted average life of the portfolio as a result of maturity
amendments. Fitch's analysis was based on a stressed portfolio
incorporating potential maturity amendments on the underlying loans
as well as a one-notch downgrade on the Fitch Issuer Default Rating
(IDR) Equivalency Rating for assets with a Negative Outlook on the
driving rating of the obligor. The shorter risk horizon means the
transaction is less vulnerable to underlying price movements,
economic conditions and asset performance.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
KEY PROVISION CHANGES
The refinancing is being implemented via the refinancing
supplemental indenture, which amended certain provisions of the
transaction. The changes include but are not limited to:
- The non-call period for the refinancing notes will end in
September 2024.
FITCH ANALYSIS
Nassau 2022-I Ltd. is a static pool CLO. The issuer is not
permitted to purchase any loans after the closing date (other than
rescue financing assets). As such, there are no collateral quality
tests or concentration limitations, and Fitch's analysis is based
on the latest portfolio from the trustee.
The portfolio presented to Fitch from the trustee report as of Feb.
5, 2024 includes 214 assets from 199 primarily high yield obligors.
The portfolio balance, including the amount of positive cash, was
approximately $315.2 million. As per the February trustee report,
the transaction passes all of its coverage tests. Fitch reviewed
the March trustee report and deemed the differences to be rating
immaterial when compared to the February trustee report.
The weighted average rating factor of the current portfolio is
'B'/'B-'. Fitch has an explicit rating, credit opinion or private
rating for 43.3% of the current portfolio par balance; ratings for
56.7% of the portfolio were derived from using Fitch's IDR
equivalency map.
In lieu of a traditional stress portfolio, Fitch ran a maturity
extension scenario on the current portfolio to account for the
issuer's ability to extend the WAL of the portfolio to 4.75 years
as a result of maturity amendments. The scenario also considers a
one-notch downgrade on the Fitch IDR Equivalency Rating for assets
with a Negative Outlook on the derived rating of the obligor, as
described in Fitch's CLO and Corporate CDO Rating Criteria.
Fitch generated projected default and recovery statistics of the
Fitch Stressed Portfolio (FSP) using its portfolio credit model
(PCM). The PCM default and recovery rate outputs for the FSP at the
'AAAsf' rating stress were 47.0% and 40.2%, respectively. The PCM
default and recovery rate outputs for the FSP at the 'A+sf' rating
stress were 40.8% and 59.1%, respectively. The PCM default and
recovery rate outputs for the FSP at the 'BBB+sf' rating stress
were 34.6% and 68.5%, respectively. The PCM default and recovery
rate outputs for the FSP at the 'BB+sf' rating stress were 28.9%
and 74.0%, respectively.
In the analysis of the current portfolio, the class A-1R, A-2R,
B-R, C-R, D and E notes passed the 'AAAsf', 'AAAsf', 'AAAsf',
'A+sf', 'BBB+sf' and 'BB+sf' rating thresholds in all nine cash
flow scenarios with minimum cushions of 25.2%, 17.6%, 8.2%, 11.3%,
6.2% and 10.3%, respectively. In the analysis of the maturity
extension scenario, the class A-1R, A-2R, B-R, C-R, D and E notes
passed the 'AAAsf', 'AAAsf', 'AAAsf', 'A+sf', 'BBB+sf' and 'BB+sf'
rating thresholds in all nine cash flow scenarios with a minimum
cushions of 21.5%, 14.8%, 5.6%, 9.4%, 3.7% and 6.4%, respectively.
The Stable Outlook on the class A-1R, A-2R, B-R, C-R, D and E notes
reflects the expectation that the notes have a sufficient level of
credit protection to withstand potential deterioration in the
credit quality of the portfolio.
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 A-1R, between 'AAsf' and 'AAAsf' for
class A-2R, between 'A-sf' and 'AAAsf' for class B-R, between
'BB+sf' and 'A+sf' for class C-R, between less than 'B-sf' and
'BBBsf' for class D; and between less than 'B-sf' and 'BB+sf' for
class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1R, class A-2R
and B-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 'AA+sf' for class C-R, '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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Nassau 2022-I Ltd.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
NATIONAL COLLEGIATE 2007-A: Moody's Cuts Rating on C Notes to Caa3
------------------------------------------------------------------
Moody's Ratings has downgraded Class B and Class C issued by
National Collegiate Trust 2007-A. The underlying collateral for
this transaction includes private student loans, which are not
guaranteed by the US government.
The complete rating actions are as follows:
Issuer: National Collegiate Trust 2007-A
Cl. B, Downgraded to Caa2 (sf); previously on Jun 14, 2023
Downgraded to Ba1 (sf)
Cl. C, Downgraded to Caa3 (sf); previously on Jun 14, 2023
Downgraded to Ba2 (sf)
RATINGS RATIONALE
The downgrade action is primarily driven by the increased risk that
the notes will not fully pay down by their legal final maturity
dates, due to negative excess spread in the deal. The maturity date
for these notes is November 2034.
The transaction waterfall allows for fixed amount of fees, $35,000
in trustee fee and up to $150,000 in admin fee to be paid per
annum, resulting in negative excess spread on the small pool
balance of about $8.6 million as of January 2024. The 12-month
average monthly realized excess spread has ranged from about -0.4%
to -1.3% for the past year.
As a result of the negative excess spread, parity for the deal has
remained steady at 103-104% since 2022 despite the deal entering
full turbo in May 2022. This parity considers the reserve account
into asset parity calculation. However, as of February 2024
distribution date, the ratio of pool over notes balance has
decreased to about 94% from 97% as of June 2022 distribution.
The rating action also considers the recent performance of the pool
and Moody's expected losses on the pool. Moody's expected lifetime
default as a percentage of original pool balance is 20.80% and
Moody's remaining default as a percentage of current pool balance
is 3.95%.
No action was taken on the other rated class in this deal because
its expected loss remain commensurate with its current rating,
after taking into account the updated performance information,
structural features, credit enhancement and other qualitative
considerations.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating US Private Student Loan-Backed Securities"
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 up. Losses could decline below Moody's expectations.
Down
Levels of credit protection that are lower than necessary to
protect investors against current expectations of loss could drive
the ratings down. Losses could increase above Moody's expectations.
NAVESINK CLO 2: S&P Assigns Prelim BB- (sf) Rating on Cl. E Loans
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Navesink CLO
2 Ltd./Navesink CLO 2 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by ZAIS Leveraged Loan Master Manager
LLC.
The preliminary ratings are based on information as of March 22,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Navesink CLO 2 Ltd./Navesink CLO 2 LLC
Class A-1, $168.00 million: AAA (sf)
Class A-2, $100.00 million: AAA (sf)
Class B, $40.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D-1 (deferrable), $14.00 million: BBB (sf)
Class D-J (deferrable), $10.00 million: BBB- (sf)
Class E (deferrable), $10.00 million: BB- (sf)
Subordinated notes, $32.00 million: Not rated
NAVIENT STUDENT 2014-1: Fitch Lowers Rating on Two Tranches to Bsf
------------------------------------------------------------------
Fitch Ratings has affirmed the ratings of both outstanding classes
of Navient Student Loan Trust 2014-8. The Rating Outlooks remain
Stable.
Fitch has downgraded the ratings of all outstanding classes of
Navient Student Loan Trust (Navient) 2014-1 and 2015-1. Following
the downgrade, the Outlooks for the class A-3 and B notes of
Navient 2014-1 are Stable, while the Outlooks for the class A-4
notes of Navient 2014-1 and all the outstanding notes of Navient
2015-1 are Negative.
Entity/Debt Rating Prior
----------- ------ -----
Navient Student
Loan Trust 2014-8
A-3 63939DAC9 LT AA+sf Affirmed AA+sf
B 63939DAD7 LT Asf Affirmed Asf
Navient Student
Loan Trust 2015-1
A-2 63939FAB6 LT BBBsf Downgrade Asf
B 63939FAC4 LT BBBsf Downgrade Asf
Navient Student
Loan Trust 2014-1
A-3 63938EAC8 LT Bsf Downgrade BBsf
A-4 63938EAD6 LT BBBsf Downgrade Asf
B 63938EAE4 LT Bsf Downgrade BBsf
TRANSACTION SUMMARY
Navient 2014-1: The transaction continues to face increased
maturity risk due to the increasing remaining term, now at 193
months from 184 months at the prior review. The class A-3 and B
notes do not pass Fitch's base case cash flow stresses. Fitch
downgraded the notes to 'Bsf' from 'BBsf', which is one category
higher than their current model-implied 'CCCsf' ratings and is
consistent with Fitch's Federal Family Education Loan Program
(FFELP) criteria. The downgrade is supported by qualitative factors
such as Navient's ability to call the notes upon reaching 10% pool
factor and the revolving credit agreements established by Navient,
which allow the servicer to purchase loans from the trust. The
Outlooks for the notes are Stable following the downgrades.
The class A-4 notes have been downgraded to 'BBBsf' from 'Asf',
consistent with the downgrade of the class A-3 notes. The rating of
this class is maintained at no more than two rating categories
above the preceding senior notes, consistent with Fitch's rating
criteria. The Outlook for the notes is Negative following the
downgrade, reflecting the possibility of further negative rating
pressure in the next one to two years if maturity risk increases.
Navient 2014-8: The affirmations of the outstanding notes reflect
the stable cashflow modelling for the transaction, in line with
Fitch's expectations since the last review. The class A-3 notes
pass all credit stresses and maturity stresses up to 'AAsf'. The
notes have low maturity risk in cashflow modelling at their current
rating as their legal final maturity date is over 25 years away.
Fitch affirmed the A-3 notes at 'AA+sf', which is within one
category of the model-implied rating and is consistent with Fitch's
FFELP criteria. The Rating Outlook remains Stable.
The class B notes pass all maturity stresses and credit stresses up
to 'BBBsf'. The Negative Outlook for the notes reflects the
possibility of further negative rating pressure in the next one to
two years if credit risk increases, particularly if CDR decrease
toward the increased sustainable assumption over the next review
cycle.
Navient 2015-1: Both class A-2 and B notes have been downgraded to
'BBBsf' from 'Asf' due to increased maturity risk for the
transaction in Fitch's cashflow modelling. The weighted average
remaining term increased to 194 months from 185 months at the last
review. The model-implied ratings are 'BBsf' and 'BBBsf' for the
class A-2 and B notes, respectively.
The ratings are within two rating categories, the tolerance of the
model-implied rating for surveillance for maturity stress failure
with more than seven years remaining to maturity with a legal final
maturity date for the class A-2 notes of April 25, 2040. The
Outlooks for the class A-2 and B notes are Negative following the
downgrades, reflecting the possibility of further negative rating
pressure in the next one to two years if maturity risk for the A-2
class increases.
Default rates increased sharply since the last review, and
therefore Fitch has increased the sustainable constant default rate
(sCDR) assumptions for each transaction to: 4.50%, 6.50%, and 5.50%
from 3.20%, 5.30%, and 4.80% for Navient 2014-1, 2014-8, and
2015-3, respectively. The degree of the increase was determined by
recent performance along with pre-pandemic CDR performance. In
addition, Fitch increased the sustainable constant prepayment rate
(sCPR) to 10.00% from 9.00% and 9.50% for Navient 2014-8 and
2015-1, respectively.
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: Navient 2014-1: Based on
transaction-specific performance to date, Fitch assumes a
cumulative default rate of 32.75% under the base case scenario and
a default rate of 87.13% under the 'AA' credit stress scenario.
After applying the default timing curve per criteria, the effective
default rate is unchanged from the cumulative default rate.
Fitch is revising the sustainable constant default rate (sCDR)
upwards to 4.50% from 3.20% and maintaining the sustainable
constant prepayment rate (sCPR; voluntary and involuntary
prepayments) of 11.00% in cash flow modelling. Defaults have risen
above historic levels and the 31-60 days past due (DPD), and the
91-120 DPD have increased and are currently 4.22% for 31 DPD and
1.43% for 91 DPD compared to 3.65% and 1.31% one year ago for 31
DPD and 91 DPD, respectively. Fitch applies the standard default
timing curve in its credit stress cash flow analysis. The claim
reject rate is assumed to be 0.25% in the base case and 1.65% in
the 'AA' case.
The trailing-twelve-month (TTM) levels of deferment, forbearance,
and income-based repayment (IBR; prior to adjustment) are 5.82%
(5.35% at Feb. 28, 2023), 16.89% (16.37%) and 26.92% (25.00%).
These assumptions are used as the starting point in cash flow
modelling and subsequent declines or increases are modelled as per
criteria. The borrower benefit is approximately 0.08%, based on
information provided by the sponsor.
Navient 2014-8: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 51.75% under the base
case scenario and a default rate of 100.00% under the 'AA' credit
stress scenario, with an effective default rate of 99.80% after
applying the default curve, as per criteria. Fitch is revising the
sCDR upwards to 6.50% from 5.30% along with the sCPR to 10.00% from
9.00% in cash flow modelling.
Defaults have risen above historic levels and 31-60 days past due
(DPD) and the 91-120 DPD have increased and are currently 5.35% for
31 DPD and 2.22% for 91 DPD compared to 4.65% and 2.07% one year
ago for 31 DPD and 91 DPD, respectively. However, prepayments and
consolidation remain high despite the end of the Public Service
Loan Forgiveness waiver in October 2022. Fitch applies the standard
default timing curve in its credit stress cash flow analysis. The
claim reject rate is assumed to be 0.25% in the base case and 1.65%
in the 'AA' case.
The TTM levels of deferment, forbearance, and IBR are 5.92% (6.04%
at Feb. 28, 2023), 20.64% (19.43%) and 24.43% (22.17%). These
assumptions are used as the starting point in cash flow modelling
and subsequent declines or increases are modelled as per criteria.
The borrower benefit is approximately 0.03%, based on information
provided by the sponsor.
Navient 2015-1: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 51.75% under the base
case scenario and a default rate of 100.00% under the 'AA' credit
stress scenario, with an effective default rate of 99.69% after
applying the default curve, as per criteria. Fitch has revised the
sCDR upwards to 5.50% from 4.80% along with the sCPR to 10.00% from
9.50% in cash flow modelling.
Defaults have risen above historic levels and the 31-60 days past
due (DPD), and the 91-120 DPD have increased and are currently
4.41% for 31 DPD and 2.53% for 91 DPD compared to 3.93% and 2.20%
one year ago for 31 DPD and 91 DPD, respectively. Prepayments and
consolidation remain high despite the end of the Public Service
Loan Forgiveness waiver in October 2022. Fitch applies the standard
default timing curve in its credit stress cash flow analysis. The
claim reject rate is assumed to be 0.25% in the base case and 1.65%
in the 'AA' case.
The TTM levels of deferment, forbearance, and IBR are 5.08% (4.90%
at Feb. 28, 2023), 19.49% (18.72%) and 25.81% (23.86%). These
assumptions are used as the starting point in cash flow modelling
and subsequent declines or increases are modelled as per criteria.
The borrower benefit is approximately 0.03%, 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, 97.42%,
90.38%, and 86.33% of the student loans in Navient 2014-1, 2014-8,
and 2015-1, respectively, are indexed to SOFR, and the balance of
the loans are indexed to the 91-day T-Bill rate. All the notes in
the three transactions are indexed to 30-day Average SOFR plus the
spread adjustment of 0.11448%. Fitch applies its standard basis and
interest rate stresses to the transactions as per criteria.
Payment Structure: Credit enhancement (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 101.27%,
101.01%, and 101.52% for Navient 2014-1, 2014-8, and 2015-1,
respectively. Liquidity support is provided by a reserve accounts
currently sized their floors of $748,891, $1,019,764, and $992,722
for Navient 2014-1, 2014-8 and 2015-1, respectively. The
transactions will continue to release cash as long as the target OC
is maintained.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient is an acceptable
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans. Fitch was notified that Navient entered
into a binding letter of intent on Jan. 29, 2024 that will
transition the student loan servicing to MOHELA, a student loan
servicer for government and commercial enterprises with previous
experiencing servicing FFELP student loans. The transition to
MOHELA is not expected to interrupt the servicing activities.
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 Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below 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
Current Ratings: class A-3 'Bsf'; class A-4 'BBBsf'; class B
'Bsf'.
Current Model-Implied Ratings: class A-3 'BBBsf' (Credit Stress) /
'CCCsf' (Maturity Stress); class A-4 'BBBsf' (Credit Stress) /
'Asf' (Maturity Stress); class B 'BBBsf' (Credit Stress) / 'CCCsf'
(Maturity Stress).
Credit Stress Rating Sensitivity
- Default increase 25%: class A-3 'Bsf'; class A-4 'BBBsf'; class B
'Bsf'.
- Default increase 50%: class A-3 'Bsf'; class A-4 'BBBsf'; class B
'Bsf';
- Basis Spread increase 0.25%: class A-3 'Bsf'; class A-4 'BBBsf';
class B 'Bsf';
- Basis Spread increase 0.5%: class A-3 'Bsf'; class A-4 'BBBsf';
class B 'Bsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A-3 'CCCsf'; class A-4 'Bsf'; class B
'CCCsf';
- CPR decrease 50%: class A-3 'CCCsf'; class A-4 'CCCsf'; class B
'CCCsf';
- IBR Usage increase 25%: class A-3 'CCCsf'; class A-4 'BBBsf';
class B 'CCCsf'
- IBR Usage increase 50%: class A-3 'CCCsf'; class A-4 'BBsf';
class B 'CCCsf'
- Remaining Term increase 25%: class A-3 'CCCsf'; class A-4 'Bsf';
class B 'CCCsf'
- Remaining Term increase 50%: class A-3 'CCCsf'; class A-4 'BBsf';
class B 'CCCsf'
Navient Student Loan Trust 2014-8
Current Ratings: class A-3 'AA+sf'; class B 'Asf'
Current Model-Implied Ratings: class A-3 'AAsf' (Credit Stress) /
'AA+sf' (Maturity Stress); class B 'BBBsf' (Credit Stress) /
'AA+sf' (Maturity Stress)
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'AAsf'; class B 'BBsf';
- Default increase 50%: class A 'AAsf'; class B 'BBsf';
- Basis Spread increase 0.25%: class A 'AAsf'; class B 'BBBsf';
- Basis Spread increase 0.5%: class A 'AAsf'; class B 'BBsf'.
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 'AA+sf'; class B 'Asf';
- Remaining Term increase 50%: class A 'AA+sf'; class B 'BBsf'.
Navient Student Loan Trust 2015-1
Current Ratings: class A-2 'BBBsf'; class B 'BBBsf'.
Current Model-Implied Ratings: class A-2 'BBBsf' (Credit Stress) /
'BBsf' (Maturity Stress); class B 'BBBsf' (Credit Stress) / 'AA+sf'
(Maturity Stress).
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'BBBsf'; class B 'BBsf';
- Default increase 50%: class A 'BBBsf'; class B 'BBsf';
- Basis Spread increase 0.25%: class A 'BBBsf'; class B 'BBBsf';
- Basis Spread increase 0.5%: class A 'BBBsf'; class B 'BBsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'CCCsf'; class B 'BBBsf';
- CPR decrease 50%: class A 'CCCsf'; class B 'BBBsf';
- IBR Usage increase 25%: class A 'Bsf'; class B 'BBBsf';
- IBR Usage increase 50%: class A 'Bsf'; class B 'BBBsf'.
- Remaining Term increase 25%: class A 'CCCsf'; class B 'BBBsf';
- Remaining Term increase 50%: class A 'CCCsf'; class B 'BBBsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Navient Student Loan Trust 2014-1
Credit Stress Rating Sensitivity
- Default decrease 25%: class A-3 'Asf'; class A-4 'Asf'; class B
'Asf'.
- Default decrease 50%: class A-3 'CCCsf'; class A-4 'Asf'; class B
'CCCsf'.
- Basis Spread decrease 0.25%: class A-3 'BBBsf'; class A-4
'BBBsf'; class B 'BBBsf'.
- Basis Spread decrease 0.5%: class A-3 'BBBsf'; class A-4 'BBBsf';
class B 'BBBsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A-3 'Asf'; class A-4 'AAsf'; class B
'Asf'.
- CPR decrease 50%: class A-3 'AAsf'; class A-4 'AAAsf'; class B
'AAsf'.
- IBR Usage decrease 25%: class A-3 'Bsf'; class A-4 'Asf'; class B
'Bsf'.
- IBR Usage decrease 50%: class A-3 'AAsf'; class A-4 'BBsf'; class
B 'AAsf'
- Remaining Term decrease 25%: class A-3 'BBsf'; class A-4 'AAAsf';
class B 'BBsf'
- Remaining Term decrease 50%: class A-3 'AAAsf'; class A-4
'AAAsf'; class B 'AAAsf'
Navient Student Loan Trust 2014-8
Credit Stress Sensitivity
-Default decrease 25%: class A 'AA+sf'; class B 'AA+sf';
- Basis Spread decrease 0.25%: class A 'AAsf'; class B 'BBBsf'.
Maturity Stress Sensitivity
- CPR increase 25%: class A 'AA+sf'; class B 'AA+sf';
- IBR usage decrease 25%: class A 'AA+sf'; class B 'AA+sf';
- Remaining Term decrease 25%: class A 'AA+sf'; class B 'AA+sf'.
Navient Student Loan Trust 2015-1
Credit Stress Sensitivity
- Default decrease 25%: class A 'BBBsf'; class B 'AAsf';
- Basis Spread decrease 0.25%: class A 'BBBsf'; class B 'BBBsf'.
Maturity Stress Sensitivity
- CPR increase 25%: class A 'Asf'; class B 'AA+sf';
- IBR usage decrease 25%: class A 'BBsf'; class B 'AA+sf';
- Remaining Term decrease 25%: class A 'AAsf'; 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.
NEUBERGER BERMAN 54: Fitch Assigns 'BB-sf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Neuberger
Berman Loan Advisers CLO 54, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Neuberger Berman Loan
Advisers CLO 54, Ltd.
A LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
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'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.76, 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
97.98% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.13% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 46% 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 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Neuberger Berman
Loan Advisers CLO 54, Ltd. In cases where Fitch does not provide
ESG relevance scores in connection with the credit rating of a
transaction, program, instrument or issuer, Fitch will disclose in
the key rating drivers any ESG factor which has a significant
impact on the rating on an individual basis.
NYT 2019-NYT: Fitch Affirms 'BB-sf' Rating on Class F Notes
-----------------------------------------------------------
Fitch Ratings has affirmed 17 classes from three U.S. CMBS single
asset, single borrower (SASB) transactions backed by office
properties located in Manhattan. The Rating Outlooks across all
three transactions remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
NYT 2019-NYT
A 62954PAA8 LT AAAsf Affirmed AAAsf
B 62954PAG5 LT AA-sf Affirmed AA-sf
C 62954PAJ9 LT A-sf Affirmed A-sf
D 62954PAL4 LT BBB-sf Affirmed BBB-sf
E 62954PAN0 LT BB-sf Affirmed BB-sf
F 62954PAQ3 LT BB-sf Affirmed BB-sf
X-EXT 62954PAE0 LT BBB-sf Affirmed BBB-sf
SLG Office Trust
Commercial Mortgage
Pass Through
Certificates,
Series 2021-OVA
A 78449RAA3 LT AAAsf Affirmed AAAsf
B 78449RAE5 LT AA-sf Affirmed AA-sf
C 78449RAG0 LT A-sf Affirmed A-sf
D 78449RAJ4 LT BBB-sf Affirmed BBB-sf
X 78449RAC9 LT AA-sf Affirmed AA-sf
Hudson Yards
2019-30HY
Mortgage Trust
A 44421GAA1 LT AAAsf Affirmed AAAsf
B 44421GAE3 LT AA-sf Affirmed AA-sf
C 44421GAG8 LT A-sf Affirmed A-sf
D 44421GAJ2 LT BBB-sf Affirmed BBB-sf
X 44421GAC7 LT AA-sf Affirmed AA-sf
TRANSACTION SUMMARY
The three transactions, SLG Office Trust Commercial Mortgage Pass
Through Certificates, Series 2021-OVA (One Vanderbilt), NYT
2019-NYT Mortgage Trust (New York Time Building), and Hudson Yards
2019-30HY Mortgage Trust (30 Hudson Yards), are each secured by an
individual office property located in Manhattan.
KEY RATING DRIVERS
The affirmations and Stable Outlooks reflect continued stable
performance since issuance, the trophy- and high-asset quality of
these properties in prime locations, and strong institutional
sponsorship.
SLG 2021-OVA: One Vanderbilt is a 77-story office tower, newly
constructed in 2020 that is LEED Gold and Platinum certified, which
has a positive impact on the ESG score for Waste & Hazardous
Materials Management; Ecological Impacts. The collateral consists
of 1.6 million square feet (sf) of office and lower-level retail
space located adjacent to Grand Central Station and provides direct
underground connections to the transportation hub. The building
also includes an observation deck which encompasses the top three
floors and provides panoramic views of Manhattan. Fitch assigned a
property quality grade of 'A' at issuance.
As of the December 2023 rent roll, collateral occupancy has
stabilized at 97.8% after the initial lease-up period
post-construction. The reported revenue in 2023 of the observation
deck was in line with projections from issuance. The most recent
servicer-reported YTD September 2023 net cash flow (NCF) debt
service coverage ratio (DSCR) was 1.93x, compared to 1.57x at YE
2022 for the interest-only (IO) loan.
The updated Fitch sustainable NCF of $139.4 million, which is 4%
below Fitch's issuance NCF of $145.1 million, reflects leases in
place as of the most recently available December 2023 rent roll.
Fitch's lower NCF is largely attributed to higher leasing cost
assumptions that reflect current office market conditions. Fitch
maintained the 6% cap rate from issuance given the exceptional
asset quality and irreplaceable location of the building.
The $3.0 billion mortgage loan has high Fitch leverage, with total
debt of $1,820 psf and a Fitch stressed DSCR, loan-to-value (LTV)
and debt yield (DY) of 0.66x, 129.2% and 4.6%, respectively.
Through 'BBB-sf', Fitch's DSCR, LTV and DY are 0.99x, 86.5% and
6.9%.
NYT 2019-NYT: The New York Times Building is a 52-story office
building constructed in 2007. The collateral consists of the ground
floor retail and office condominium units spanning floors 28-52.
The property is located across the street from the Port Authority
Bus Terminal and adjacent to the Times Square subway station. Fitch
assigned a property quality grade of 'A-' at issuance.
Occupancy for the collateral has improved to 98.4% as of the
December 2023 rent roll, with Datadog (45% of NRA) backfilling
space formerly occupied by Osler Hoskin (8.6% of NRA), Goodwin
Proctor (8.5%) and Clearbridge (13.3%), in phases as these tenants
vacate. The most recent servicer-reported YTD September 2023 NCF
DSCR was 1.23x, compared to 2.61x at YE 2022 for the IO,
floating-rate loan.
The updated Fitch sustainable NCF of $42.8 million, which is 3.9%
below Fitch's issuance NCF of $44.5 million, reflects leases in
place as of the most recently available December 2023 rent roll.
Fitch's lower NCF is largely attributed to higher vacancy and
leasing cost assumptions that reflect softening office market
conditions. Fitch increased the cap rate to 7.25% from 7% at
issuance based on comparable properties and the deteriorating
office outlook.
The $515.0 million mortgage loan has a Fitch DSCR, LTV and DY of
0.98x, 90.3% and 8.3%, respectively, and debt of $697 psf. The
total debt package includes a $120.0 million B-note and $115.0
million mezzanine loan, resulting in a total debt Fitch DSCR, LTV
and DY of 0.67x, 131.5% and 5.7%, respectively.
HY 2019-30HY: 30 Hudson Yards is a 90-story office tower
constructed in 2019 that is LEED Gold Core & Shell certified, which
has a positive impact on the ESG score for Waste & Hazardous
Materials Management; Ecological Impacts. The collateral
encompasses floors 16 through 51 and is fully leased to by a single
tenant, Warner Bros. Discovery, fka WarnerMedia. Fitch assigned a
property quality grade of 'A' at issuance.
The tenant entity, which is rated 'BBB-'/Stable by Fitch as of
March 7, 2023, has invested approximately $700 million ($478 psf)
on the fit-out of its space. The lease was structured with a
contraction option for up to 452,869 sf of the total space (30.9%
of NRA). According to the servicer, this contraction option has
expired; the tenant has not exercised any of the contraction space,
but is currently marketing these spaces for sub-lease. The most
recent servicer-reported YE 2022 NCF DSCR of 2.28x was in line with
YE 2021 for the IO loan.
The updated Fitch sustainable NCF of $110.0 million, which is 4.1%
below Fitch's issuance NCF of $114.7 million, incorporates
scheduled in-place rents through the 2024 reporting period, as well
as higher vacancy and leasing cost assumptions that reflect
softening office market conditions. Fitch increased the cap rate to
7.25% from 7% at issuance based on comparable properties and the
deteriorating office outlook.
The whole $1.43 billion mortgage loan has a Fitch DSCR, LTV and DY
of 0.93x, 94.3% and 7.7%, respectively, and debt of $977 psf.
Through 'BBB-sf', Fitch's DSCR, LTV and DY are 1.04x, 84.3% and
8.6%.
Loan Maturities: The SLG 2021-OVA and HY 2019-30HY transactions
were structured with fixed-rate, IO loans with 10-year terms
maturing in July 2031 and July 2029, respectively, with coupons of
2.86% and 3.35%. In its analysis, Fitch applied an upward LTV
hurdle adjustment due to the low coupon.
The NYT 2019-NYT transaction was structured as a floating-rate, IO
loan with an initial two-year term, with five, one-year extension
options. The initial maturity date was Dec. 9, 2020; however, the
borrower has exercised its fourth one-year extension option through
December 2024. The fourth extension option included a 0.25%
increase in the loan's spread.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades, although not expected given the trophy- and high-asset
quality of these properties in prime locations, are possible with a
significant and sustained decline in asset occupancy and/or
property NCF.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would be possible with significant and sustained
improvements in performance and NCF, but may limited due to
headwinds in the office sector and weakening fundamentals.
CRITERIA VARIATION
Fitch's analysis included a variation from the published "CMBS
Large Loan Rating Criteria" in the SLG 2021-OVA transaction. The
analysis includes a property quality hurdle adjustment of 15.0%
(LTV), which is 2.5% (LTV) higher than permitted as per the
criteria. Fitch considers the property to be an exceptionally
high-quality trophy asset in an irreplaceable central Manhattan
location with access to Grand Central.
The property is also expected to benefit from its experienced
institutional ownership and has achieved stabilized occupancy,
among other factors. Fitch's ratings are between one and three
notches higher than they would be without the criteria variation.
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
Hudson Yards 2019-30HY Mortgage Trust has an ESG Relevance Score of
'4 [+]' for Waste & Hazardous Materials Management; Ecological
Impacts due to the collateral's sustainable building practices
including Green building certificate credentials, which has a
positive impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
SLG Office Trust Commercial Mortgage Pass Through Certificates,
Series 2021-OVA has an ESG Relevance Score of '4 [+]' for Waste &
Hazardous Materials Management; Ecological Impacts due to the
collateral being a newly constructed trophy office tower designed
to be LEED Gold and LEED Platinum Core & Shell certified, with
large, column free floor plates, floor-to-ceiling windows and state
of the art systems, which has a positive impact on the credit
profile, and is relevant to the ratings in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
OCP CLO 2024-32: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to OCP CLO
2024-32 Ltd./OCP CLO 2024-32 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 Onex Credit Partners LLC, a
subsidiary of Onex Corp.
The preliminary ratings are based on information as of March 27,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
OCP CLO 2024-32 Ltd./OCP CLO 2024-32 LLC
Class A-1, $256 million: AAA (sf)
Class A-2, $16 million: AAA (sf)
Class B-1, $24 million: AA (sf)
Class B-2, $8 million: AA (sf)
Class C (deferrable), $24 million: A (sf)
Class D-1 (deferrable), $24 million: BBB- (sf)
Class D-2 (deferrable), $4 million: BBB- (sf)
Class E (deferrable), $12 million: BB- (sf)
Subordinated notes, $40 million: Not rated
OLYMPIC TOWER 2017-OT: Fitch Lowers Rating on Cl. E Certs to 'Bsf'
------------------------------------------------------------------
Fitch Ratings has downgraded and assigned Negative Outlooks to
seven classes of Olympic Tower 2017-OT Mortgage Trust Commercial
Mortgage Pass-Through Certificates (Olympic Tower 2017-OT).
Entity/Debt Rating Prior
----------- ------ -----
Olympic Tower 2017-OT
Mortgage Trust
A 68162MAA0 LT AAsf Downgrade AAAsf
B 68162MAG7 LT A-sf Downgrade AA-sf
C 68162MAJ1 LT BBB-sf Downgrade A-sf
D 68162MAL6 LT BBsf Downgrade BBB-sf
E 68162MAN2 LT Bsf Downgrade BB-sf
X-A 68162MAC6 LT AAsf Downgrade AAAsf
X-B 68162MAE2 LT A-sf Downgrade AA-sf
KEY RATING DRIVERS
The downgrades reflect a lower Fitch sustainable property net cash
flow (NCF) since issuance due to reduced rental revenue
expectations on the retail portion of the property from an overall
decline in rents, including the execution of a below-market rate
lease on the former Versace space, and additional vacancies,
coupled with increasing expenses and weaker submarket fundamentals.
Fitch's analysis also incorporated a higher stressed capitalization
rate of 7.50%, up from 7% at issuance, to factor office sector and
submarket performance concerns.
The Negative Outlooks reflect possible further downgrades should
NCF deteriorate beyond Fitch's view of sustainable performance,
including limited leasing progress at re-tenanting the retail
vacancies with market rate leases. As the property is currently in
a state of transition, Fitch will continue to monitor leasing
activity as well as the sales volume for tenants with percentage
rent.
The property consists of the leasehold interest in the office and
retail portions within 21 stories of a 52-story high-end mixed-use
property and three adjacent buildings located on Fifth Avenue in
Midtown Manhattan. While the subject's retail submarket has long
been considered a premier shopping district, several high-profile
tenants have vacated the area in the last few years. Occupancy at
the property had been historically strong, averaging over 97% since
2008 before declining to near 90% in 2022.
Lower Fitch NCF; Occupancy Declines; Retail Performance Concerns:
The property was 90.2% leased as of the September 2023 rent roll,
compared with 89.8% in December 2022 and 97.4% in December 2021.
The office portion of the property was 88.1% leased and the retail
portion was 97.9% leased. The occupancy decline in 2022 was
attributed to an office tenant, MSD Capital (8.2% NRA), vacating at
its lease expiration in March 2022.
While retail tenants at the property account for 28% of the NRA,
they comprise over 60% of the property's total base rent. The
overall average in-place base rent, including the new lease
executed with Skims Body for the former Versace space, has declined
significantly to $427 psf from $558 psf at the last rating action
and $532 psf around the time of issuance.
Fitch's updated sustainable property NCF of $55.5 million is 12.9%
below Fitch's issuance NCF of $63.7 and 7.6% below Fitch's NCF of
$60 million at the last rating action, reflecting the declining
retail base rents and increasing expenses, particularly real estate
taxes. Fitch's analysis incorporates additional stresses to dark
tenancy, subleased space and tenants with near-term lease
expirations, as well as higher leasing cost assumptions.
Skims Body recently signed a new five-year lease, with one
five-year option, for the former Versace space at the property,
totaling 20,000 sf (3.7% NRA), at a significantly below-market base
rental rate, which is in excess of 75% below what Versace was
initially paying at the time of issuance. The Skims Body lease also
includes a percentage rent component. The tenant's lease is
estimated to start at the earlier of the store opening for business
or Feb. 1, 2025. The Versace store at the property had been closed
for several years ahead of its lease maturity in December 2023.
Armani Exchange (2% NRA, 4% base rent) vacated its space ahead of
lease expiration in June 2024. Per the servicer, there are
currently no known replacement tenants. Fitch's analysis assumed a
lease up of this space at a conservative below-market rental rate.
Jimmy Choo (0.4% NRA, 0.9% base rent, through 2028) has subleased
its space to Bond No. 9 for the remainder of the term. Fitch's
analysis factored in the sublease rental rate for this space.
H. Stern (previously 1.6% NRA, 5% base rent) vacated the ground
floor retail space, with LVMH Watch & Jewelry (0.4% NRA, 3.1% base
rent; through June 2033) backfilling a portion of that space. H.
Stern (1.2% NRA, 0.2% base rent) still has a lease on the second
floor at a significantly reduced rental rate with an upcoming
expiration in December 2024; Fitch's analysis assumed the tenant
would be vacating that space at lease expiration.
During Fitch's recent site inspection of the property, the retail
space occupied by Furla (0.4% NRA, 5.5% base rent, through 2030)
was dark. In November 2020, Furla filed Chapter 11 bankruptcy in
the U.S. and emerged from bankruptcy in February 2021. Furla has
also closed multiple store locations in Canada. Fitch's analysis
incorporated a 25% stress to the Furla rent to account for the dark
space at the property and tenancy concerns.
The servicer-reported September 2023 NCF debt service coverage
ratio (DSCR) was 1.52x, compared with 1.53x in 2022, 1.71x in 2021,
1.53x in 2020 and 1.63x in 2019 for the interest-only loan.
High Quality Asset; Prime Office and Retail Location: The property
consists of approximately 419,945 rentable sf of class A office
space within the Plaza submarket and 116,044 rentable sf of retail
space along Fifth Avenue, between East 51st and East 52nd Streets
in Midtown Manhattan. The property's public spaces re-opened in
early 2019 after a multi-million-dollar renovation.
The property is leased to a mix of office and retail tenants and
serves as the U.S. headquarters for the NBA (38.1% of NRA, 24.1%
base rent, through 2035), Richemont North America (25.3% NRA, 13.1%
base rent, through July 2028) and as a flagship location for its
subsidiary Cartier (10.3% NRA, 32.7% base rent, through July 2037).
The property is also home to other luxury retailers, including Tag
Heuer, Longchamp, and Bond No. 9.
Full Term, Interest-Only Loan: The loan is interest only for the
10-year term, maturing May 2027, with a fixed rate coupon of 3.95%.
In its analysis, Fitch applied an upward loan-to-value (LTV) hurdle
adjustment due to the low coupon.
Fitch Leverage: The $760 million mortgage loan has a Fitch stressed
DSCR and loan-to-value of 0.86x and 102.7%, respectively, and debt
of $1,418 psf. The total debt package includes mezzanine financing
in the amount of $240 million that is not included in the trust.
Experienced Sponsorship and Property Management: The sponsorship is
a joint venture between OMERS Administration Corporation and Crown
Acquisitions, Inc. Oxford Properties Group is the global real
estate investment, development and management arm of OMERS, and had
over $87 billion of assets under management, as of June 2023.
Oxford manages a portfolio that totals approximately 162 million sf
of office, retail, industrial, multifamily and hotels in Canada,
Western Europe and the U.S. Crown Acquisitions ownership interests
include over 40 assets located in major markets such as New York,
London and Miami.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades are possible should property NCF, occupancy and/or
market conditions deteriorate beyond Fitch's view of sustainable
performance, including limited leasing progress, if new leases are
signed at rates significantly below market rates, particularly for
the Giorgio Armani space that expires in June 2024, and/or with
weak sales performance for Skims Body with a percentage rent lease
component affecting overall retail rental revenues for the
property.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are not likely given that Fitch's current ratings reflect
a longer-term view of sustainable property performance but may be
possible with significant and sustained improvement in Fitch NCF
from positive leasing momentum resulting in higher retail rental
rates than expected and improving submarket fundamentals that
support loan refinancing prospect.
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.
ONE MARKET 2017-1MKT: S&P Lowers Class E Notes Rating to 'B+ (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes and affirmed
our ratings on five other classes of commercial mortgage
pass-through certificates from One Market Plaza Trust 2017-1MKT, a
U.S. CMBS transaction. At the same time, S&P withdrew its rating on
the class X-CP certificates from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a fixed-rate, interest-only (IO) mortgage loan secured by the
borrower's fee simple and leasehold interests in a class A office
property located at 1 Market Street in San Francisco's South
Financial District office submarket.
Rating Actions
The downgrades on classes E, F, and HRR reflect:
-- S&P's revised expected-case valuation, which is 17.9% lower
than the valuation it derived in its last published review in
February 2020. Although the collateral property is currently 95.8%
leased, S&P used higher vacancy, tenant-improvement costs, and
capitalization rate assumptions to account for the concentrated
tenant rollover risk in 2025 and 2026 and significantly weakened
office submarket fundamentals, which is reinforced by companies
continuing to embrace remote and hybrid work arrangements.
-- S&P's belief that, despite reporting between a 93.0% and 98.0%
occupancy rate since 2017, the property's vacancy rate may increase
in line with current submarket metrics. According to the September
2023 rent roll, 21 tenants, comprising approximately 61.8% of the
net rentable area (NRA), have leases that expire from 2024 through
2026. In addition, approximately 17.5% of the property's NRA is
currently being marketed for sublease, according to CoStar. CoStar
projects that vacancy rates for four- and five-star office
properties in the subject property's submarket will remain elevated
for the next several years.
The downgrade on class HRR to 'CCC (sf)' reflects S&P's view that,
due to current market conditions and the class' most subordinate
position in the payment waterfall, it is more susceptible to
liquidity interruption and is at heightened risk of future default
and loss.
The affirmations on classes A, B, C, and D primarily reflect the
deleveraging of the trust balance. As part of the recent loan
modification and extension, the borrower made an equity
contribution of $125.0 million to paydown the loan balance to
$850.0 million from $975.0 million, resulting in lower debt per sq.
ft. (approximately $388 per sq. ft. through class D compared to
$467 per sq. ft. in the last published review), among other
factors.
S&P said, "We lowered our rating on the class X-E interest-only
(IO) certificates and affirmed our rating on the class X-NCP IO
certificates based on our criteria for rating IO securities, in
which the ratings on the IO securities would not be higher than
that of the lowest-rated reference class. The notional amount of
class X-NCP references the combined balance of classes A, B, C, and
D. Class X-E's notional amount references the balances of classes
E, F, and HRR.
"We withdrew our 'BBB- (sf)' rating on the class X-CP IO
certificates because they no longer receive interest payments
according to the transaction documents.
"In our last published review on Feb. 5, 2020, we noted the
property's stable-to-increasing servicer-reported net operating
income for the past three years, which we attributed primarily to
over 95.0% occupancy levels and leases signed or renewed at higher
gross rents. According to the Oct. 31, 2019, rent roll, the
property was 99.5% leased at a gross rent of $85.50 per sq. ft., as
calculated by S&P Global Ratings. At that time, we considered the
property's above-market gross rents and significant tenant
concentration and lease rollover in 2025 and 2026. As a result,
despite higher reported net cash flow (NCF) and over 95.0%
occupancy, we maintained the same expected-case value of $1.03
billion, or $651 per sq. ft., that we derived at issuance.
"Since then, unlike some of its competitors, the servicer reported
above-market occupancy (over 93.0%) at the property. According to
the Sept. 30, 2023, rent roll, it was 95.8% leased. However, the
servicer-reported NCF decreased in 2022 and 2023. We attributed the
NCF declines to various factors, including certain tenants renewing
at lower gross rents, significant rent abatements given to renewing
tenants (which we expect will burn off over time), and increases in
operating expenses that were not sufficiently offset by expense
reimbursement income.
"We also considered the property's occupancy and performance will
likely be challenged over the next several years due to
concentrated near-term tenant lease rollover in an office submarket
that continues to experience record-high vacancy and negative
absorption levels. From 2024 to 2026, 21 tenants, representing
approximately 61.8% of the property's NRA, have leases that are
scheduled to expire. This includes the property's four largest
tenants: Google, Visa, Morgan Lewis & Bockius LLP, and Autodesk,
which collectively account for 49.9% of the property's NRA and
49.8% of in-place gross rent, as calculated by S&P Global Ratings
(details below). In addition, nine tenants representing 17.5% of
NRA are currently marketing their respective spaces for sublease,
according to CoStar. This includes the second-largest tenant, Visa
(10.1% of NRA), who recently vacated the property ahead of its 2026
lease expiry and relocated staff to its new headquarters in the
Mission Bay area of San Francisco.
"As a result, in our current analysis, to account for the
concentrated near-term lease rollover and deteriorating office
submarket fundamentals, we assumed a vacancy rate of 35.0% (in line
with the current office submarket availability rate and projected
2025 vacancy rate, according to CoStar); an S&P Global Ratings'
average gross rent of $105.90 per sq. ft., which reflects our
mark-to-market adjustment on Visa's rent from in-place gross rent
per the September 2023 rent roll of $98.47 per sq. ft. to $70.73
per sq. ft. (closer to current four- and five-star office
properties' average asking rent per CoStar) since the tenant space
is currently dark; a 39.5% operating expense ratio; and higher
tenant-improvement costs to arrive at an S&P Global Ratings'
long-term sustainable NCF of $60.5 million, 14.4% lower than the
NCF (same as issuance) we utilized to derive our expected-case
value in our last published review. Using a 7.25% S&P Global
Ratings' capitalization rate--a 50 basis-point increase from our
last published review, which reflects our view of a higher risk
premium for the property due to current market conditions--and
adding to the value approximately $11.4 million for the present
value of investment-grade tenants' future rent increases, we
derived an S&P Global Ratings' expected-case value of $846.3
million, or $534 per sq. ft., which is 17.9% lower than our last
published review of $1.03 billion and 52.1% below the issuance
appraisal value of $1.77 billion. This yielded an S&P Global
Ratings' loan-to-value ratio of 100.4% on the modified lower trust
balance, up from 94.6% in our last published review."
As S&P previously discussed, the loan transferred to special
servicing on Jan. 8, 2024, due to imminent maturity default.
According to the special servicer, Wells Fargo Bank N.A., the
borrower was unable to obtain refinancing proceeds due to the
property's upcoming significant lease rollover, challenging San
Francisco office market with over 35 million sq. ft. of vacant
space, and lack of available capital for large-scale office
product, to pay off the loan by its February 2024 maturity date.
After analyzing various workout alternatives, Wells Fargo
determined that more time is needed for the property to work
through the near-term lease rollover and for capital market
conditions to improve. A modification and extension agreement was
executed on Feb. 1, 2024. The terms included, among other items:
-- Extending the loan's maturity date to Feb. 6, 2026. The
borrower is permitted to extend the loan's maturity date by an
additional year to Feb. 5, 2027. If the borrower is unable to pay
off the loan in full, it also has an additional one-year
forbearance option after the February 2027 extended maturity date
if certain conditions, including a debt yield of no less than 8.5%,
are met.
-- The borrower contributing $175.0 million, of which $125.0
million was utilized to pay down the principal loan balance, with
the remaining $50.0 million deposited with the lender to be applied
to costs and expenses required to be paid by the modification's
closing date. After paying closing costs associated with the
modification, approximately $39.6 million has been deposited into
the leasing reserve to pay future tenant improvement and leasing
commission costs. The borrower is expected to reserve all leasing
costs due and payable in the next year as well as deposit funds
equal to $150 per sq. ft. of unleased office space with the lender
through the remainder of the extended loan term.
-- The loan remaining in cash management with excess cash flow
swept into a lender-controlled account until it is paid in full.
Although the model-indicated ratings were higher than class B's and
lower than class D's current rating levels, S&P affirmed its
ratings on classes B and D because of certain qualitative
considerations.
For class B, these include:
-- The borrower's inability to refinance the loan before its
initial maturity date and the potential that the borrower may
continue to struggle to obtain refinancing proceeds in its extended
periods if property occupancy and performance declines and/or the
office market environment does not improve.
-- The potential that the property's occupancy and performance
could deteriorate beyond our expectations, and the borrower is not
able to lease up vacant space in a timely manner in consideration
of the substantial and concentrated amount of near-term lease
rollover (through 2026).
For class D, these include:
-- The potential that the sponsors, Paramount Group Operating
Partnership L.P. and Blackstone Property Partners L.P., can renew
existing leases or backfill vacant spaces in a timely manner
despite the weakened office submarket fundamentals. As of the March
2024 CREFC IRP reserve report, there is approximately $46.1 million
in various lender-controlled reserve accounts, a majority of which
is earmarked for tenant leasing. Since the loan is currently cash
managing with a reported DSC well-above 1.0x, S&P expects the
reserve balances to continue to grow.
-- The low near-term default risk, in S&P's view. The loan's
maturity date was recently extended for up to three additional
years with an additional one-year forbearance option, and it has a
servicer-reported debt service coverage (DSC) of 2.10x (based on a
below-market weighted average interest rate of 4.08%) as of
year-end 2023.
-- The low-to-moderate $388 per sq. ft. debt through class D
compared to the $467 per sq. ft. debt (through class D) in S&P's
last published review.
-- The significant market value decline based on the issuance
appraisal value that would be needed before this class experiences
principal losses.
-- The temporary liquidity support provided in the form of
servicing advancing.
-- The relative position of this class in the payment waterfall.
S&P said, "We will continue to monitor the tenancy and performance
of the property and loan as well as the borrower's ability to
refinance the loan by its extended maturity. If we receive
information that differs materially from our expectations, such as
reported negative changes in the performance beyond what we already
considered or the loan transfers to special servicing and the
workout strategy negatively affects the transaction's recovery and
liquidity, we may revisit our analysis and take further rating
actions as we deem necessary."
Property-Level Analysis
One Market Plaza consists of two class A, high-rise LEED
Platinum-certified office towers, including ground floor retail
space, totaling 1.6 million sq. ft.; a six-story, 44,200-sq.-ft.
office (floors two through six) and retail (ground floor) annex
building, and a two-story subterranean parking garage in the South
Financial District office submarket of San Francisco. The property
was built in 1976 and last renovated in 2016. The loan collateral
also includes the borrower's leasehold interest in 19,533 sq. ft.
of the ground floor and lobby of the adjacent Landmark Building.
The property is situated adjacent to the Embarcadero Plaza and
across the street from the San Francisco Ferry Building.
The servicer-reported occupancy was 97.0% in 2020, 94.0% in 2021,
93.0% in 2022, and 95.8% according to the Sept. 30, 2023, rent
roll. The reported NCF increased 10.7% in 2021 to $94.3 million
from $85.0 million in 2020. It then fell 4.1% to $90.4 million in
2022 and another 7.1% to $83.8 million in 2023. However, the
special servicer stated that the year-end 2023 NCF should be about
$92.0 million, and is in the process of adjusting the reporting.
As of the September 2023 rent roll, the property's five largest
tenants comprised 55.4% of NRA and included:
-- Google Inc. (21.3% of NRA; 20.7% of in-place gross rent, as
calculated by S&P Global Ratings; April 2025 lease expiration).
-- Visa USA Inc. (10.1%; 6.8%; September 2026). The tenant has
vacated the entirety of its space and it is currently marketed for
sublease, according to CoStar.
-- Morgan Lewis & Bockius LLP (9.4%; 10.8%; February 2026).
-- Autodesk Inc. (9.1%; 10.1%; June 2026). The tenant is currently
marketing about 2.3% of NRA for sublease, according to CoStar.
-- The Capital Group Companies Inc. (5.5%; 7.0%; September 2032).
According to CoStar, the South Financial District office submarket,
where the subject property is located, continues to experience
record high vacancy levels and negative absorption, due in large
part to changing office work preferences that have caused tenants
to exit or contract their leased space. As of year-to-date March
2024, four- and five-star office properties in the submarket have a
25.8% vacancy rate, 33.0% availability rate, and $60.86 per sq. ft.
asking rent compared to a 9.5% vacancy rate and $77.48 per sq. ft.
asking rent in our last published review in 2020. CoStar projects
vacancy to increase to 30.8% in 2024, 35.3% in 2025, and 36.7% in
2026, and asking rent to decrease to $55.54 per sq. ft., $49.60 per
sq. ft., and $48.73 per sq. ft. for the same periods. This compares
with an in place 4.2% vacancy and $105.90 per sq. ft. gross rent,
as calculated by S&P Global Ratings.
The property faces significant concentrated tenant rollover in 2025
(24.4% of NRA; 24.4% of S&P Global Ratings' in-place gross rent)
and 2026 (35.4%; 35.0%). The rollover in 2025 and 2026 are mainly
related to the property's four largest tenants: Google (April 2025
lease expiration), Morgan Lewis & Bockius LLP (February 2026),
Autodesk Inc. (June 2026), and Visa (September 2026).
As previously discussed, S&P utilized a 35.0% vacancy rate, in line
with the current submarket availability rate and projected 2025
vacancy rate, in its current analysis to account for the near-term
tenant rollover and concentrated tenancy at the property.
Table 1
Reported collateral performance by servicer
2023(I) 2022(I) 2021(I)
Occupancy rate (%) 95.8(ii) 93.0 94.0
Net cash flow (mil. $) 83.8 90.4 94.3
Debt service coverage (x) 2.10 2.27 2.37
Appraisal value (mil. $) 1,767.0 1,767.0 1,767.0
(i)Reporting period.
(ii)As of the Sept. 30, 2023, rent roll.
Table 2
S&P Global Ratings' key assumptions
CURRENT LAST REVIEW ISSUANCE
(MARCH (FEBRUARY (FEBRUARY
2024)(I) 2020) (I) 2017) (I)
Trust balance (mil. $) 850.0 975.0 975.0
Vacancy rate (%) 35.0 6.3 6.3
Net cash flow (mil. $) 60.5 70.7(ii) 70.7
Capitalization rate (%) 7.25 6.75 6.75
Value (mil. $) 846.3 1,030.5 1,030.5
Value per sq. ft. ($) 534 651 651
Loan-to-value ratio (%) 100.4 94.6 94.6
(i)Review period.
(ii)Net cash flow used to derive S&P Global Ratings' expected-case
value.
Transaction Summary
The seven-year, fixed-rate IO mortgage loan had an initial balance
of $975.0 million, paid a weighted average fixed interest rate of
4.03%, and matured on Feb. 6, 2024. Following the recent loan
modification and extension, which stipulated a $125.0 million
paydown from the sponsors, the mortgage loan has a current balance
of $850.0 million, pays a weighted average fixed interest rate of
4.09%, and matures on Feb. 6, 2026 (according to the March 12,
2024, trustee remittance report).
The loan is paid through its March 2024 debt service payment date.
To date, the trust has not incurred any principal losses. The
master servicer, also Wells Fargo, reported a DSC of 2.10x for
year-end 2023 and 2.27x for year-end 2022.
Ratings Lowered
One Market Plaza Trust 2017-1MKT
Class E to 'B+ (sf)' from 'BB- (sf)'
Class F to 'B- (sf)' from 'B (sf)'
Class HRR to 'CCC (sf)' from 'B- (sf)'
Class X-E to 'CCC (sf)' from 'B- (sf)'
Ratings Affirmed
One Market Plaza Trust 2017-1MKT
Class A: AAA (sf)
Class B: AA- (sf)
Class C: A- (sf)
Class D: BBB- (sf)
Class X-NCP: BBB- (sf)
Rating Withdrawn
One Market Plaza Trust 2017-1MKT
Class X-CP to NR from 'BBB- (sf)'
NR--Not rated.
PALMER SQUARE 2018-2: Moody's Gives B3 Rating to $6.65MM E-R Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes (the "Refinancing Notes") issued by Palmer Square
CLO 2018-2, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$6,250,000 Class X Senior Secured Floating Rate Notes due 2037,
Assigned Aaa (sf)
US$304,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2037, Assigned Aaa (sf)
US$6,650,000 Class E-R Secured Deferrable Floating Rate Notes due
2037, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans, cash, and eligible investments, and up to 10.0% of the
portfolio may consist of second lien loans, senior unsecured loans,
and permitted non-loan assets.
Palmer Square Capital 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 four other
classes of secured 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; 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: $475,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3035
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.5%
Weighted Average Recovery Rate (WARR): 47.0%
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 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.
PAWNEE EQUIPMENT 2022-1: DBRS Confirms BB(low) Rating on E Notes
----------------------------------------------------------------
DBRS, Inc. reviewed its credit ratings on 14 classes of notes
issued by three Pawnee Equipment Receivables LLC transactions. Of
the 14 classes reviewed, Morningstar DBRS upgraded its credit
ratings on nine classes and confirmed its credit ratings on five
classes.
Pawnee Equipment Receivables (Series 2022-1) LLC
-- Class A-2 Notes AAA (sf) Confirmed
-- Class A-3 Notes AAA (sf) Confirmed
-- Class B Notes AA (high)(sf) Upgraded
-- Class C Notes A (high) (sf) Upgraded
-- Class D Notes BBB (high)(sf) Upgraded
-- Class E Notes BB(low)(sf) Confirmed
The credit rating confirmations are based on the following
analytical considerations:
-- The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns: December 2023 Update," published on December 19, 2023.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
-- The currently available hard credit enhancement in the form of
overcollateralization, subordination (as applicable), and amounts
of deposit in the cash reserve account, as well as the change in
the level of protection afforded by each form of credit enhancement
since the closing of each transaction.
-- For Pawnee Equipment Receivables (Series 2020-1) LLC and Pawnee
Equipment Receivables (Series 2021-1) LLC, losses are tracking
below Morningstar DBRS' initial base-case cumulative net loss (CNL)
expectations. The current level of hard credit enhancement is
sufficient to support Morningstar DBRS' projected remaining CNL
assumption at a multiple of coverage commensurate with the credit
ratings.
-- For Pawnee Equipment Receivables (Series 2022-1) LLC, losses
are tracking above Morningstar DBRS' initial base-case CNL
expectation. However, because of the transaction structure, credit
enhancement has increased for all classes, mitigating the
weaker-than-expected collateral performance. The current level of
hard credit enhancement is sufficient to support Morningstar DBRS'
projected remaining CNL assumption at a multiple of coverage
commensurate with the credit ratings. Performance is expected to
stabilize as the quality of the remaining pool has less exposure to
weaker transportation credits and ongoing recovery efforts by the
servicer.
-- The relative benefit from obligor and geographic
diversification of collateral pools.
-- The transaction parties' capabilities with regard to
origination, underwriting, and servicing.
Notes: The principal methodology applicable to the credit ratings
is Morningstar DBRS Master U.S. ABS Surveillance (February 22,
2024), https://dbrs.morningstar.com/research/428506.
PIKES PEAK 7: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Pikes
Peak CLO 7 reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Pikes Peak CLO 7
A-1-R LT NRsf New Rating NR(EXP)sf
A-2-R LT AAAsf New Rating AAA(EXP)sf
B-R LT AAsf New Rating AA(EXP)sf
C-R LT Asf New Rating A(EXP)sf
D-R LT BBB-sf New Rating BBB-(EXP)sf
E-R LT BB-sf New Rating BB-(EXP)sf
TRANSACTION SUMMARY
Pikes Peak CLO 7 (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Partners Group US
Management CLO LLC that originally closed in February 2021. The
CLO's secured notes were refinanced on March 21, 2024 from proceeds
of the new secured notes. Net proceeds from the issuance of the
secured 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 25.96, versus a maximum covenant, in
accordance with the initial expected matrix point of 27.25. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
100% first-lien senior secured loans. The weighted average recovery
rate (WARR) of the indicative portfolio is 73.55% versus a minimum
covenant, in accordance with the initial expected matrix point of
71%.
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 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a rating
downgrade. Fitch evaluated the notes' sensitivity to potential
changes in such a metric. The results under these sensitivity
scenarios are as severe as between 'BBB+sf' and 'AA+sf' for class
A-2-R, between 'BB+sf' and 'A+sf' for class B-R, between '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
Rating upgrade scenarios are not applicable to the class A-2-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 a rating
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, 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Pikes Peak CLO 7.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
PPM CLO 2: S&P Assigns Prelim BB- (sf) Rating on Class E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
class A-R, B-R2, C-R2, D-R2A, D-R2B, and E-R debt and A-LR loan,
and the proposed new class X debt from PPM CLO 2 Ltd./PPM CLO 2
LLC, a CLO originally issued in March 2019 and underwent a first
refinancing in April 2021. It is managed by PPM Loan Management Co.
LLC.
The preliminary ratings are based on information as of March 27,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings. This is a
proposed second refinancing of its March 2019 transaction, which
underwent a first refinancing in April 2021. The transactions were
not rated by S&P Global Ratings.
On the March 28, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the April 2021 debt. At
that time, S&P expects to assign ratings to the replacement debt.
However, if the refinancing doesn't occur, S&P may withdraw its
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 pro rata class A-R and A-LR debt are expected to replace
the existing class A debt.
-- The sequential class D-R2A and D-R2B debt are expected to
replace the existing class D-R debt.
-- The stated maturity and the reinvestment period will be
extended by 5.0 and 3.0 years, respectively.
-- The new proposed class X debt issued in connection with this
refinancing is expected to be paid down, beginning with the April
2025 payment date.
Replacement And Original Debt Issuances
Replacement debt
-- Class X, $4.00 million: Three-month CME term SOFR + 1.15%
-- Class A-R, $221.00 million: Three-month CME term SOFR + 1.50%
-- Class A-LR loan, $29.00 million: Three-month CME term SOFR +
1.50%
-- Class B-R2, $54.00 million: Three-month CME term SOFR + 2.25%
-- Class C-R2 (deferrable), $24.00 million: Three-month CME term
SOFR + 2.80%
-- Class D-R2A (deferrable), $20.00 million: Three-month CME term
SOFR + 4.66%
-- Class D-R2B (deferrable), $8.00 million: Three-month CME term
SOFR + 5.57%
-- Class E-R (deferrable), $10.00 million: Three-month CME term
SOFR + 8.01%
April 2021 debt
-- Class A, $256.00 million: Three-month CME term SOFR + 1.50% +
CSA(i)
-- Class B-R, $47.20 million: Three-month CME term SOFR + 1.75% +
CSA(i)
-- Class C-R (deferrable), $16.40 million: Three-month CME term
SOFR + 2.20% + CSA(i)
-- Class D-R (deferrable), $22.00 million: Three-month CME term
SOFR + 3.40% + CSA(i)
-- Class E (deferrable), $20.00 million: Three-month CME term SOFR
+ 6.55% + CSA(i)
(i)The credit spread adjustment (CSA) is 0.26161%.
Preliminary Ratings Assigned
PPM CLO 2 Ltd./PPM CLO 2 LLC
Class X, $4.00 million: AAA (sf)
Class A-R, $221.00 million: AAA (sf)
Class A-LR loan, $29.00 million: AAA (sf)
Class B-R2, $54.00 million: AA (sf)
Class C-R2 (deferrable), $24.00 million: A (sf)
Class D-R2A (deferrable), $20.00 million: BBB+ (sf)
Class D-R2B (deferrable), $8.00 million: BBB- (sf)
Class E-R (deferrable), $10.00 million: BB- (sf)
Other Outstanding Debt
PPM CLO 2 Ltd./PPM CLO 2 LLC
Subordinated notes(i), $48.00 million: Not rated
(i)Includes the additional $4.00 million issued in connection
with the second refinancing.
PRESTIGE AUTO 2024-1: DBRS Gives Prov. BB Rating on Class E Notes
-----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the classes of notes to
be issued by Prestige Auto Receivables Trust 2024-1 (PART 2024-1 or
the Issuer):
-- $34,000,000 Class A-1 Notes at R-1 (high) (sf)
-- $66,640,000 Class A-2 Notes at AAA (sf)
-- $34,420,000 Class B Notes at AA (sf)
-- $32,040,000 Class C Notes at A (sf)
-- $30,860,000 Class D Notes at BBB (sf)
-- $26,350,000 at Class E Notes at BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The provisional credit ratings are based on Morningstar DBRS's
review of the following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination,
overcollateralization (OC), amounts held in the reserve account,
and excess spread. Credit enhancement levels are sufficient to
support Morningstar DBRS-projected expected cumulative net loss
(CNL) assumptions under various stress scenarios.
--The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(2) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
-- Morningstar DBRS has performed an operational review of
Prestige and considers the entity to be an acceptable originator
and servicer of subprime auto receivables. Additionally, the
transaction has an acceptable backup servicer.
-- The Company's management team has extensive experience. The
Company has been lending to the subprime auto sector since 1994 and
has considerable experience lending to Chapter 7 and 13 obligors.
(3) The credit quality of the collateral and performance of
Prestige's auto loan portfolio.
-- Prestige shared vintage CNL data with Morningstar DBRS broken
down by credit grade, payment-to-income ratio, and other buckets.
-- The Company continues to evaluate and adjust its underwriting
standards as necessary to target and maintain the credit quality of
its loan portfolio.
-- The Morningstar DBRS rating category loss multiples for each
rating assigned are within the published criteria.
(4) The Morningstar DBRS CNL assumption is 19.15% based on the
expected cutoff date pool composition.
-- The transaction assumptions consider Morningstar DBRS's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios for
Rated Sovereigns: December 2023 Update," published on December 19,
2023. These baseline macroeconomic scenarios replace Morningstar
DBRS's moderate and adverse Coronavirus Disease (COVID-19) pandemic
scenarios, which were first published in April 2020.
(5) The legal structure and expected presence of legal opinions,
which will address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Prestige, that
the trust has a valid first-priority security interest in the
assets, and consistency with the Morningstar DBRS "Legal Criteria
for U.S. Structured Finance."
The ratings on the Class A-1 and Class A-2 Notes reflect 58.60% of
initial hard credit enhancement provided by subordinated notes in
the pool (52.10%), the reserve account (1.00%), and OC (5.50%). The
ratings on the Class B, Class C, Class D, and Class E Notes reflect
44.10%, 30.60%, 17.60%, and 6.50% of initial hard credit
enhancement, respectively. Additional credit support may be
provided from excess spread available in the structure.
Notes: All figures are in U.S. dollars unless otherwise noted.
PRET 2024-RPL1: DBRS Gives Prov. B Rating on Class B-2 Notes
------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the PRET
2024-RPL1 Trust Mortgage-Backed Notes, Series 2024-RPL1 (the Notes)
to be issued by PRET 2024-RPL1 Trust (PRET 2024-RPL1 or the Trust)
as follows:
-- $257.9 million Class A-1 at AAA (sf)
-- $31.8 million Class A-2 at AA (sf)
-- $289.7 million Class A-3 at AA (sf)
-- $312.3 million Class A-4 at A (sf)
-- $331.9 million Class A-5 at BBB (sf)
-- $22.6 million Class M-1 at A (sf)
-- $19.6 million Class M-2 at BBB (sf)
-- $12.7 million Class B-1 at BB (sf)
-- $7.9 million Class B-2 at B (sf)
The Class A-3, Class A-4, and Class A-5 Notes are exchangeable.
These classes can be exchanged for combinations of initial
exchangeable notes as specified in the offering documents.
The AAA (sf) credit rating on the Notes reflects 32.75% of credit
enhancement provided by subordinated notes. The AA (sf), A (sf),
BBB (sf), BB (sf), and B (sf) credit ratings reflect 24.45%,
18.55%, 13.45%, 10.15%, and 8.10% of credit enhancement,
respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming first-lien residential mortgages funded by the
issuance of mortgage-backed notes (the Notes). The Notes are backed
by 1,851 loans with a total principal balance of $383,480,812 as of
the Cut-Off Date (January 31, 2024).
The mortgage loans are approximately 176 months seasoned. As of the
Cut-Off Date, 97.6% of the loans are current (including 1.6%
bankruptcy-performing loans), and 2.4% of the loans are 30 days
delinquent (including
PRPM 2024-NQM1: DBRS Gives Prov. BB Rating on Class B-1 Certs
-------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Mortgage-Backed Certificates, Series 2024-NQM1 (the Certificates)
to be issued by PRPM 2024-NQM1 Trust (the Issuer):
-- $216.8 million Class A-1 at AAA (sf)
-- $32.9 million Class A-2 at AA (high) (sf)
-- $26.5 million Class A-3 at A (high) (sf)
-- $15.0 million Class M-1 at BBB (high) (sf)
-- $21.2 million Class B-1 at BB (sf)
-- $9.7 million Class B-2 at B (low) (sf)
The AAA (sf) credit rating on the Class A-1 certificates reflects
34.05% of credit enhancement provided by subordinated certificates.
The AA (high) (sf), A (high) (sf), BBB (high) (sf), BB (sf), and B
(low) (sf) credit ratings reflect 24.05%, 16.00%, 11.45%, 5.00%,
and 2.05% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of fixed- and
adjustable-rate expanded prime and nonprime first-lien residential
mortgages funded by the issuance of the Mortgage Pass-Through
Certificates, Series 2024-NQM1 (the Certificates). The Certificates
are backed by 876 mortgage loans with a total principal balance of
$328,667,780 as of the Cut-Off Date (January 31, 2024).
PRPM 2024-NQM1 represents the fifth securitization issued from the
PRPM NQM shelf, which is backed by both nonqualified mortgages
(non-QM) and business-purpose investment property loans
underwritten using debt service coverage ratios (DSCR). PRP-LB VI
AIV, LLC, a fund owned by the aggregator, Balbec Capital LP & PRP
Advisors, LLC (PRP), serves as the Sponsor of this transaction.
Kiavi Funding, Inc. (Kiavi; 14.4%), FlexPoint, Inc (FlexPoint;
10.4%) and Movement Mortgage, LLC (Movement; 10.3%) are the three
largest originators of the mortgage loans. The remaining
originators each comprise less than 10.0% of the mortgage loans.
Fay Servicing, LLC (Fay; 69.4%) and Shellpoint Mortgage Servicing
(Shellpoint; 30.6%) are the Servicers of the loans in this
transaction. PRP will act as Servicing Administrator. U.S. Bank
Trust Company, National Association (rated AA (high) with a
Negative trend by Morningstar DBRS) will act as Trustee and
Securities Administrator. U.S. Bank National Association will act
as Custodian.
For 35.0% of the pool, the mortgage loans were underwritten to
program guidelines for business-purpose loans that are designed to
rely on property value, the mortgagor's credit profile, and DSCR,
where applicable. In addition, 11.2% of the pool comprises
investment-property loans underwritten using debt-to-income ratios
(DTI). Because these loans were made to borrowers for business
purposes, they are exempt from the Consumer Financial Protection
Bureau's (CFPB) Ability-to-Repay (ATR) rules and TILA/RESPA
Integrated Disclosure rule.
For 49.6% of the pool, the mortgage loans were originated to CFPB's
ATR rules, but were made to borrowers who generally do not qualify
for agency, government, or private-label nonagency prime jumbo
products for various reasons. In accordance with the QM/ATR rules,
these loans are designated as non-QM. Remaining loans subject to
the ATR rules are designated as QM Safe Harbor (3.9%), and QM
Rebuttable Presumption (1.5%) by UPB.
The Depositor, a majority-owned affiliate of the Sponsor, will
retain the Class B-2, B-3 and XS Certificates, representing an
eligible horizontal interest of at least 5% of the aggregate fair
value of the Certificates to satisfy the credit risk-retention
requirements under Section 15G of the Securities Exchange Act of
1934 and the regulations promulgated thereunder. Such retention
aligns Sponsor and investor interest in the capital structure.
On or after the earlier of (1) the distribution date in March 2027
or (2) the date when the aggregate unpaid principal balance (UPB)
of the mortgage loans is reduced to 30% of the Cut-Off Date
balance, the Depositor, at its option, may redeem all of the
outstanding Certificates at a price equal to the class balances of
the related Certificates plus accrued and unpaid interest,
including any Cap Carryover Amounts; any post-closing deferred
amounts; and other fees, expenses, indemnification, and
reimbursement amounts described in the transaction documents
(Optional Redemption). An Optional Redemption will be followed by a
qualified liquidation.
The Sponsor will have the option, but not the obligation, to
repurchase any mortgage loan that becomes 60 or more days
delinquent under the Mortgage Bankers Association (MBA) method at
the Repurchase Price (par plus interest), provided that such
repurchases in aggregate do not exceed 10% of the total principal
balance as of the Cut-Off Date.
For this transaction, the Servicers will not fund advances of
delinquent principal and interest (P&I) on any mortgage. However,
the Servicers are obligated to make advances in respect of taxes,
insurance premiums, and reasonable costs incurred in the course of
servicing and disposing of properties (servicing advances).
The transaction employs a sequential-pay cash flow structure with a
pro rata principal distribution among the senior classes (Class
A-1, A-2, and A-3), subject to certain performance triggers related
to cumulative losses or delinquencies exceeding a specified
threshold (Trigger Event). After a Trigger Event, principal
proceeds can be used to cover interest shortfalls on Class A-1 and
then A-2 before being applied sequentially to amortize the balances
of the certificates (IIPP). For all other classes, principal
proceeds can be used to cover interest shortfalls after the more
senior classes are paid in full (IPIP).
Monthly Excess Cashflow can be used to cover realized losses before
being allocated to unpaid Cap Carryover Amounts due to Class A-1,
A-2, A-3, and M-1. For this transaction, the Class A-1, A-2, and
A-3 fixed rates step up by 100 basis points on and after the
payment date in April 2028. On or after April 2028, interest and
principal otherwise payable to the Class B-3 may also be used to
pay any Class A Cap Carryover Amounts.
Notes: All figures are in U.S. dollars unless otherwise noted.
RCKT MORTGAGE 2024-CES2: Fitch Assigns Bsf Rating on Cl. B-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed notes issued by RCKT Mortgage Trust 2024-CES2 (RCKT
2024-CES2).
Entity/Debt Rating Prior
----------- ------ -----
RCKT 2024-CES2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1A LT AAAsf New Rating AAA(EXP)sf
A-1B LT AAAsf New Rating AAA(EXP)sf
A-1L LT WDsf Withdrawn AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT AAsf New Rating AA(EXP)sf
A-4 LT Asf New Rating A(EXP)sf
A-5 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-1A LT BBsf New Rating BB(EXP)sf
B-1B 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-X-1A LT BBsf New Rating BB(EXP)sf
B-X-1B LT BBsf New Rating BB(EXP)sf
M-1 LT Asf New Rating A(EXP)sf
M-2 LT BBBsf New Rating BBB(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The notes are supported by 5,542 closed-end second lien loans with
a total balance of approximately $447 million as of the cutoff
date. The pool consists of closed-end second lien mortgages
acquired by Woodward Capital Management LLC from Rocket Mortgage,
LLC. Distributions of principal and interest and loss allocations
are based on a senior-subordinate, sequential pay structure, which
also presents a 50% excess cashflow turbo feature.
Fitch has withdrawn the expected rating of 'AAA(EXP)sf' for the
previous class A-1L notes as the loan was not funded at close and
is no longer being offered.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.1% above a long-term sustainable level (versus
11.1% on a national level as of 3Q23, up 1.68% qoq). Housing
affordability is the worst it has been in decades, driven by both
high interest rates and elevated home prices. Home prices increased
5.5% yoy nationally as of December 2023, despite modest regional
declines, but are still being supported by limited inventory.
Prime Credit Quality (Positive): The collateral consists of 5,542
loans totaling $447 million and seasoned at approximately three
months in aggregate, as calculated by Fitch (one months, per the
transaction documents) — taken as the difference between the
origination date and the cutoff date. The borrowers have a strong
credit profile consisting of a weighted-average (WA) Fitch model
FICO score of 735; a 37.6% debt-to-income (DTI) ratio; and moderate
leverage, with a sustainable loan-to-value (sLTV) ratio of 79.2%.
Of the pool loans, 98.9% consist of those where the borrower
maintains a primary residence and 1.1% represent second homes,
while 91.9% of loans were originated through a retail channel.
Additionally, 49.9% of loans are designated as qualified mortgages
(QMs) and 20.0% are higher-priced QM (HPQM). Given the 100% loss
severity (LS) assumption, no additional penalties were applied for
the HPQM and non-QM loan statuses.
Second Lien Collateral (Negative): The entirety of the collateral
pool comprises closed-end second lien loans originated by Rocket
Mortgage. Fitch assumed no recovery and a 100% LS based on the
historical behavior of second lien loans in economic stress
scenarios. Fitch assumes second lien loans default at a rate
comparable to first lien loans; after controlling for credit
attributes, no additional penalty was applied to Fitch's
probability of default (PD) assumption.
Sequential Structure with Turbo Feature (Positive): The transaction
features a monthly excess cash flow priority of payments that
distributes remaining amounts from the interest and principal
priority of payments. These amounts will be applied as principal
first to repay any current and previously allocated cumulative
applied realized loss amounts and then to repay any potential net
WAC shortfalls.
A key difference from other transactions that include a material
amount of excess interest is that, instead of distributing all
remaining amounts to class XS notes, 50% of any remaining cash
thereafter will be implemented to pay principal for classes
A-1A/A-1B to B-3 sequentially. The other 50% is allocated to pay
the owner trustee, collateral trustee, Delaware trustee, paying
agent, custodian, asset manager and reviewer for extraordinary
trust expenses to the extent not paid due to application of the
annual cap and, subsequently, to class XS. This is a more
supportive structure and ensures the transaction will benefit from
excess interest, regardless of default timing.
To haircut the excess cash flow present in the transaction, Fitch
tested the structure at a 50-bp servicing fee and applied haircuts
to the WAC through a rate modification assumption. This assumption
was derived as a 2.5% haircut on 40% of the nondelinquent
projection in Fitch's stresses. Given the lower projected
delinquency (as a result of the chargeoff feature described below),
there was a higher current percentage and a higher rate
modification assumption, as a result.
180-Day Chargeoff Feature (Positive): The asset manager has the
ability, but not the obligation, to instruct the servicer to write
off the balance of a loan at 180 days delinquent (DQ) based on the
Mortgage Bankers Association (MBA) delinquency method. To the
extent the servicer expects a meaningful recovery in any
liquidation scenario, the asset manager noteholder may direct the
servicer to continue to monitor the loan and not charge it off. The
180-day chargeoff feature will result in losses incurred sooner
while there is a larger amount of excess interest to protect
against losses. This compares favorably with a delayed liquidation
scenario, where the loss occurs later in the life of the
transaction and less excess is available. If the loan is not
charged off due to a presumed recovery, this will provide added
benefit to the transaction, above Fitch's expectations.
Additionally, subsequent recoveries realized after the writedown at
180 days' DQ (excluding forbearance mortgage or loss mitigation
loans) will be passed on to bondholders as principal.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch's incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the metropolitan statistical area level. Sensitivity
analysis was conducted at the state and national level to assess
the effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 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'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC Diligence, LLC. The third-party due diligence
described in Form 15E focused on credit, regulatory compliance, and
property valuation. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment to
its analysis: a 5% PD credit to the 24.9% of the pool by loan count
in which diligence was conducted. This adjustment resulted in a
18bps reduction to the 'AAAsf' expected loss.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by clicking the link to the Appendix. Offering documents for this
market sector do not typically include RW&Es that are available to
investors and that relate to the asset pool underlying the
security. However, the offering document for this transaction
included a draft of the indenture as an appendix, which contains
RW&Es related to the underlying asset pool. For further
information, please see Fitch's Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions'.
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by clicking the link to the Appendix. The appendix also contains a
comparison of these RW&Es to those Fitch considers typical for the
asset class as detailed in the Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions'.
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by clicking the link to the Appendix. The appendix also contains a
comparison of these RW&Es to those Fitch considers typical for the
asset class as detailed in the Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions'.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SALUDA GRADE 2024-CES1: DBRS Gives Prov. B(low) Rating on B2 Notes
------------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Asset-Backed Securities, Series 2024-CES1 (the Notes) to be issued
by Saluda Grade Alternative Mortgage Trust 2024-CES1 (GRADE
2024-CES1 or the Trust):
-- $256.0 million Class A-1 at AAA (sf)
-- $14.7 million Class A-2 at AA (low) (sf)
-- $15.3 million Class A-3 at A (low) (sf)
-- $16.6 million Class M-1 at BBB (low) (sf)
-- $14.5 million Class B-1 at BB (low) (sf)
-- $9.2 million Class B-2 at B (low) (sf)
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Notes reflects 22.30% of credit
enhancement provided by subordinate Notes. The AA (low) (sf), A
(low) (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf) credit
ratings reflect 17.85%, 13.20%, 8.15%, 3.75%, and 0.95% of credit
enhancement, respectively.
This transaction is a securitization of a portfolio of fixed, prime
and near-prime, closed-end second-lien (CES) residential mortgages
funded by the issuance of the Asset-Backed Securities, Series
2024-CES1 (the Notes). The Notes are backed by 3,592 mortgage loans
with a total principal balance of $329,421,636 as of the Cut-Off
Date (February 29, 2024).
The portfolio, on average, is five months seasoned, though
seasoning ranges from zero to 23 months. Borrowers in the pool
represent prime and near-prime credit quality—weighted-average
(WA) Morningstar DBRS-calculated FICO score of 725, Issuer-provided
original combined loan-to-value ratio (CLTV) of 73.7%, vast
majority of loans originated with full documentation standards. All
the loans are current and 98.1% of the loans (by pool balance) have
never been delinquent since origination.
GRADE 2024-CES1 represents the first securitization by Saluda Grade
Opportunities Fund LLC (Saluda Grade; the Sponsor) backed by 100.0%
CES mortgage loans. The Sponsor has in the past securitized three
deals with a mix of CES and home equity lines of credit mortgage
loans. Spring EQ, LLC (Spring EQ; 83.9%) is the top originator for
the mortgage pool. The remaining originators each comprise less
than 15.0% of the mortgage loans.
Specialized Loan Servicing LLC (SLS; 100.0%), is the Servicer for
all the loans in this transaction.
U.S. Bank Trust Company, National Association (rated AA (high) with
a Negative trend by Morningstar DBRS) will act as the Indenture
Trustee, Paying Agent, Note Registrar, and Certificate Registrar.
Wilmington Trust, National Association (rated AA (low) with a
Negative trend by Morningstar DBRS) will act as the Custodian.
Although the mortgage loans were originated to satisfy the Consumer
Financial Protection Bureau's Ability-to-Repay (ATR) rules, they
were made to borrowers who generally do not qualify for agency,
government, or private-label nonagency prime jumbo products for
various reasons. In accordance with the Qualified Mortgage (QM)/ATR
rules, 74.5% of the loans are designated as non-QM (includes 32.5%
that were classified as Non-Verification Safe Harbor QM amendment
loans), 11.4% are designated as QM Rebuttable Presumption, and 6.3%
are designated as QM Safe Harbor. Approximately 7.7% of the
mortgages are loans made to investors for business purposes and are
not subject to the QM/ATR rules.
There will not be any advancing of delinquent principal or interest
on any mortgages by the Servicer or any other party to the
transaction. In addition, the Servicer is not obligated to make
advances in respect of homeowner association fees, taxes, and
insurance, installment payments on energy improvement liens, and
reasonable costs and expenses incurred in the course of servicing
and disposing of properties unless a determination is made that
there will be material recoveries.
The Sponsor, directly or indirectly through a more majority-owned
affiliate, will acquire and retain a 5% eligible vertical interest
in each class of Notes to be issued (other than any residual
certificates) to satisfy the credit risk retention requirements
under Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
On or after the date when the aggregate stated principal balance of
the mortgage loans is reduced to 20% of the Cut-Off Date balance,
the Sponsor (after written consent from the majority holder of
Class XS Notes; the Controlling Holder) has the option to terminate
the Issuer and purchase all the mortgage loans (including REO
properties) at a price equal to the outstanding class balance plus
accrued and unpaid interest, including any cap carryover amounts
(Optional Redemption).
The Controlling Holder will have the option, but not the
obligation, to repurchase any mortgage loan that becomes 90 or more
days delinquent at the repurchase price (par plus interest),
provided that such repurchases in aggregate do not exceed 10% of
the total principal balance as of the Cut-Off Date.
The Servicer, at its option, on or after the date on which the
balance of the mortgage loans falls below 10% of the loans balance
as of the Cut-Off Date, may purchase all of the mortgage loans and
REO properties at the minimum price described in the transaction
documents (Optional Clean-up Call).
For this transaction, any loan that is 180 days delinquent under
the Mortgage Bankers Association delinquency method, upon review by
the Servicer, may be considered a Charged Off Loan. With respect to
a Charged Off Loan, the total unpaid principal balance will be
considered a realized loss and will be allocated reverse
sequentially to the Noteholders. If there are any subsequent
recoveries for such Charged Off Loans, the recoveries (net of
reimbursement amounts and performance incentive fees) will be
included in the interest remittance amount and principal remittance
amount and applied in accordance with the respective distribution
waterfall; in addition, any class principal balances of Notes that
have been previously reduced by allocation of such realized losses
may be increased by such recoveries sequentially in order of
seniority. Morningstar DBRS' analysis assumes reduced recoveries
upon default on loans in this pool.
Notes: All figures are in U.S. dollars unless otherwise noted.
SBNA AUTO 2024-A: Fitch Assigns 'BB(EXP)' Rating on Cl. E Notes
---------------------------------------------------------------
Fitch Ratings expects to assign ratings and Rating Outlooks to SBNA
Auto Receivables Trust (SBAT) 2024-A.
Entity/Debt Rating
----------- ------
SBNA Auto Receivables
Trust 2024-A
Class A-1 ST F1+(EXP)sf Expected Rating
Class A-2 LT AAA(EXP)sf Expected Rating
Class A-3 LT AAA(EXP)sf Expected Rating
Class A-4 LT AAA(EXP)sf Expected Rating
Class B LT AA(EXP)sf Expected Rating
Class C LT A(EXP)sf Expected Rating
Class D LT BBB(EXP)sf Expected Rating
Class E LT BB(EXP)sf Expected Rating
KEY RATING DRIVERS
Collateral Performance — Nonstandard Prime Credit Quality: 2024-A
has a weighted-average (WA) FICO score of 684, which is low for
prime and near nonprime. FICO scores below 700 total 76.3% of the
pool; 8.70% is above 750. The concentration of extended term loans
(over 60 months) totals 94.5% of the pool. Vehicle type and model
concentrations are in line with comparable prime transactions.
However, compared with other prime platforms, the percentage of new
vehicles is lower (43.9%), the WA APR is higher (12.98%), the WA
loan-to-value is higher (113.1%), the WA debt-to-income is higher
(36.9%), and the internal score is lower than prior prime
Santander-backed transactions.
Payment Structure — Sufficient CE: Initial hard credit
enhancement (CE) totals 27.25%, 20.25%, 14.85%, 9.15% and 5.35% for
the class A, B, C, D and E notes, respectively. Excess spread is
expected to be 5.52% per year. 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 9.00%.
Forward-Looking Approach to Derive Rating Case Proxy — Low Losses
and Delinquencies: Fitch considered economic conditions and future
expectations by assessing key macroeconomic and wholesale market
conditions when deriving the series loss proxy. Fitch used the
2007-2009 and 2015-2018 vintage range to derive the loss proxy for
2024-A, representing through-the-cycle performance. Fitch's CNL
rating case proxy for 2024-A is 9.00%.
Seller/Servicer Operational Review — Consistent
Origination/Underwriting/Servicing: The current Long-Term Issuer
Default Ratings (IDR) of Santander Bank, N.A. and Santander
Holdings USA, Inc., the parent of SC, are 'BBB+'/Stable. Fitch
views SC as an adequate originator, underwriter and servicer,
evidenced by the historical performance of its managed portfolio
and prior securitizations.
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 7.00%, based on Fitch's Global Economic Outlook
- December 2023 report and historical managed performance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CNL levels that are higher than the rating case and would likely
result in reducing CE and remaining net loss coverage levels
available to the notes. Additionally, unanticipated declines in
recoveries could also result in lower net loss coverage, which may
make certain notes susceptible to potential negative rating action
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 for
all classes of issued notes. The CNL sensitivity stresses the CNL
proxy to the level necessary to reduce each rating by one full
category, to non-investment grade ('BBsf') and to 'CCCsf' based on
the break-even loss coverage provided by the CE structure.
Additionally, Fitch conducts 1.5x and 2.0x increases to the CNL
proxy, representing both moderate and severe stresses. Fitch also
evaluates the impact of stressed recovery rates on an auto loan ABS
structure and rating impact with a 50% haircut. These analyses are
intended to provide an indication of the rating sensitivity of the
notes to unexpected deterioration of a trust's performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to rising CE levels and consideration for
potential upgrades. If CNL is 20% less than the rating case proxy,
the subordinate notes 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 150 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 in the collateral pool of 14.4% of electric
vehicles, hybrid or PHEV vehicles 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.
SIERRA TIMESHARE 2024-1: Fitch Assigns 'BBsf' Rating on Cl. D Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
notes issued by Sierra Timeshare 2024-1 Receivables Funding LLC
(2024-1).
Entity/Debt Rating Prior
----------- ------ -----
Sierra Timeshare
2024-1 Receivables
Funding LLC
A LT AAAsf New Rating AAA(EXP)sf
B LT Asf New Rating A(EXP)sf
C LT BBBsf New Rating BBB(EXP)sf
D LT BBsf New Rating BB-(EXP)sf
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 8.34% per annum.
Loss coverage for all notes is able to support default multiples of
3.25x, 2.25x, 1.50x and 1.25x for 'AAAsf', 'Asf', 'BBBsf' and
'BBsf', respectively. As excess spread increased at pricing, loss
coverage for the D class notes now supports a default multiple of
1.25x, commensurate with the rating of 'BBsf' from 'BB-(EXP)sf'
with a default multiple of 1.17x.
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.
SIERRA TIMESHARE 2024-1: S&P Assigns BB- (sf) Rating on D Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Sierra Timeshare 2024-1
Receivables Funding LLC's fixed-rate notes.
The note issuance is an ABS transaction backed by vacation
ownership interest (timeshare) loans.
The ratings reflect:
-- The credit enhancement available in the form of subordination,
overcollateralization, a reserve account, and available excess
spread;
-- Wyndham Consumer Finance Inc.'s servicing ability and
experience in the timeshare market; and
-- The transaction's ability to pay timely interest and ultimate
principal by the notes' legal maturity under our stressed cash flow
recovery rate, and credit stability sensitivity scenarios.
Ratings Assigned
Sierra Timeshare 2024-1 Receivables Funding LLC
Class A, $143.307 million: AAA (sf)
Class B, $90.026 million: A (sf)
Class C, $84.515 million: BBB (sf)
Class D, $32.152 million: BB- (sf)
SILVER POINT 4: Fitch Assigns 'BBsf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Silver
Point CLO 4, Ltd.
Entity/Debt Rating
----------- ------
Silver Point
CLO 4, Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B-1 LT AAsf New Rating
B-2 LT AAsf New Rating
C LT A+sf New Rating
D LT BBB-sf New Rating
E LT BBsf New Rating
F LT NRsf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Silver Point CLO 4, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Silver
Point RR Manager, L.P. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $450 million of primarily first- lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
98.89% first-lien senior secured loans and has a weighted average
recovery assumption of 74.32%. 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. Fitch believes 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, 'AA+sf' 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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Silver Point CLO 4,
Ltd. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
SLM PRIVATE 2003-A: Moody's Downgrades 2 Tranches to Ba2
--------------------------------------------------------
Moody's Ratings has upgraded the ratings of three and downgraded
the ratings of eleven classes of notes issued by four SLM Private
Credit Student Loan Trusts (SLM) and two Navient Private Education
Loan Trusts (Navient) sponsored and administered by Navient
Solutions, LLC. The securitizations are backed by private student
loans, which are loans the U.S. government does not guarantee.
The complete rating actions are as follows:
Issuer: Navient Private Education Loan Trust 2016-A
Fixed Rate Class B Notes, Upgraded to Aaa (sf); previously on Feb
23, 2022 Affirmed Aa2 (sf)
Issuer: Navient Private Education Loan Trust 2021-D
Fixed Rate Class B Notes, Upgraded to Aa2 (sf); previously on May
20, 2021 Definitive Rating Assigned Aa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-A
Class A-3, Downgraded to Ba2 (sf); previously on Jun 27, 2023
Downgraded to Baa3 (sf)
Class A-4, Downgraded to Ba2 (sf); previously on Jun 27, 2023
Downgraded to Baa3 (sf)
Class C, Downgraded to Ca (sf); previously on May 5, 2014 Affirmed
Caa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-B
Class A-3, Downgraded to Ba2 (sf); previously on Jun 27, 2023
Downgraded to Baa3 (sf)
Class A-4, Downgraded to Ba2 (sf); previously on Jun 27, 2023
Downgraded to Baa3 (sf)
Class C, Downgraded to Ca (sf); previously on Feb 23, 2022 Affirmed
Caa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-C
Cl. A-3, Downgraded to Ba2 (sf); previously on Jun 27, 2023
Downgraded to Baa3 (sf)
Cl. A-4, Downgraded to Ba2 (sf); previously on Jun 27, 2023
Downgraded to Baa3 (sf)
Cl. A-5, Downgraded to Ba2 (sf); previously on Jun 27, 2023
Downgraded to Baa3 (sf)
Cl. B, Downgraded to Caa1 (sf); previously on Feb 23, 2022 Affirmed
B1 (sf)
Cl. C, Downgraded to Ca (sf); previously on Feb 23, 2022 Affirmed
Caa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-C
Cl. C, Upgraded to Aa2 (sf); previously on Feb 23, 2022 Affirmed
Aa3 (sf)
RATINGS RATIONALE
The downgrade actions are primarily driven by the continuous
deterioration in the total parity levels. Parity ratio in these
transactions has declined further to 81.0%, 75.1%, and 71.8% in
December 2023 from 84.6%, 78.8% and 75.7% in May 2023 distribution
for the 2003-A, 2003-B, and 2003-C trusts, respectively. These
transactions have high funding costs because they are funded in
part with auction rate securities which failed the auctions and
were reset to pay higher rates. The high coupon rates on the
auction-rate securities significantly reduced excess spread and
eroded overcollateralization levels, thus exposing the notes in
these transaction to default risk. The downgrade actions also take
into account legal final maturity risk and the likelihood of
classes not being paid down prior to the legal final maturity
date.
Additionally, the Class C notes in these transactions are not
amortizing and their coupon rate has increased to approximately
7.3% in the December 2023 distribution from 6.5% in the June 2023.
This has resulted in higher interest payments to these notes, thus
reducing the amount of available funds left to paydown the senior
notes, thereby increasing undercollateralization and reducing
parity levels.
The primary rationale for the upgrades in SLM 2006-C, Navient
2016-A, and Navient 2021-D is the build-up in
overcollateralization. In all those transactions, the deleveraging
in top-pay senior classes are benefiting the credit enhancement
levels of the subordinate notes.
Moody's expected lifetime defaults as a percentage of original pool
balance are approximately 16.85%, 18.65%, 19.75%, 30.75%, 18.00%,
and 21.00% for SLM 2003-A, SLM 2003-B, SLM 2003-C, SLM 2006-C,
Navient 2016-A, and Navient 2021-D trusts respectively. The default
expectations reflect updated performance trends on the underlying
pools.
For Navient 2016-A: 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.
For SLM 2003-A, SLM 2003-B, SLM 2003-C, and Navient 2021-D: 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.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating US Private Student Loan-Backed Securities"
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 up. Losses could decline below Moody's expectations.
Down
Levels of credit protection that are lower than necessary to
protect investors against current expectations of loss could drive
the ratings down. Losses could increase above Moody's expectations.
SPRUCE HILL 2020-SH1: S&P Affirms BB (sf) Rating on Cl. B-2 Notes
-----------------------------------------------------------------
S&P Global Ratings completed its review of the ratings on 12
classes from two U.S. RMBS non-qualified mortgage transactions. The
review yielded five upgrades and seven affirmations.
S&P said, "For each transaction, we performed a credit analysis
using updated loan-level information from which we determined
foreclosure frequency, loss severity, and loss coverage amounts
commensurate for each rating level. In addition, we used the same
mortgage operational assessment, representation and warranty, and
due diligence factors that were applied at issuance. Our geographic
concentration and prior credit event adjustment factors were based
on the transactions' current pool composition."
The upgrades primarily reflect deleveraging, as the rated classes
benefit from a growing percentage of credit support from regular
principal payments, historical prepayments, and the degree of
credit enhancement relative to delinquencies.
The affirmations reflect S&P's view that the projected collateral
performance relative to its projected credit support on these
classes remains relatively consistent with its prior projections.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- Historical interest shortfalls or missed interest payments;
-- Loan modifications;
-- Priority of principal payments;
-- Priority of loss allocation;
-- Available subordination and/or credit enhancement floors; and
-- Large-balance loan exposure/tail risk.
Ratings list
RATING
ISSUER
SERIES CLASS CUSIP TO FROM MAIN RATIONALE
SG Residential Mortgage Trust 2021-2
2021-2 A-1 78432YAA7 AAA (sf) AAA (sf)
SG Residential Mortgage Trust 2021-2
2021-2 A-2 78432YAB5 AA+ (sf) AA (sf)
MAIN RATIONALE: Increased credit support
SG Residential Mortgage Trust 2021-2
2021-2 A-3 78432YAC3 AA- (sf) A (sf)
MAIN RATIONALE: Increased credit support
SG Residential Mortgage Trust 2021-2
2021-2 M-1 78432YAD1 A- (sf) BBB (sf)
MAIN RATIONALE: Increased credit support
SG Residential Mortgage Trust 2021-2
2021-2 B-1 78432YAE9 BB+ (sf) BB (sf)
MAIN RATIONALE: Increased credit support
SG Residential Mortgage Trust 2021-2
2021-2 B-2 78432YAF6 B- (sf) B- (sf)
Spruce Hill Mortgage Loan Trust 2020-SH1
2020-SH1 A-1 85209FAA4 AAA (sf) AAA (sf)
Spruce Hill Mortgage Loan Trust 2020-SH1
2020-SH1 A-2 85209FAB2 AAA (sf) AAA (sf)
Spruce Hill Mortgage Loan Trust 2020-SH1
2020-SH1 A-3 85209FAC0 AAA (sf) AAA (sf)
Spruce Hill Mortgage Loan Trust 2020-SH1
2020-SH1 M-1 85209FAD8 AAA (sf) AA+ (sf)
MAIN RATIONALE: Increased credit support
Spruce Hill Mortgage Loan Trust 2020-SH1
2020-SH1 B-1 85209FAE6 A+ (sf) A+ (sf)
Spruce Hill Mortgage Loan Trust 2020-SH1
2020-SH1 B-2 85209FAF3 BB (sf) BB (sf)
STONE STREET 2015-1: DBRS Confirms BB Rating on Class C Notes
-------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on the following classes of
notes issued by Stone Street Receivables Funding 2015-1:
-- Series 2015-1, Class A Notes at AAA (sf)
-- Series 2015-1, Class B Notes at BBB (sf)
-- Series 2015-1, Class C Notes at BB (sf)
The credit rating confirmations are based on the following
analytical considerations:
-- The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns: December 2023 Update," published on December 19, 2023.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
-- The generally high credit quality of annuity providers and
their improved capitalization positions and risk-management
frameworks, which have been enhanced since the global financial
crisis of 2008–09.
-- The transaction parties' capabilities with regard to
origination, underwriting, and servicing.
-- The transaction's capital structure and form, and sufficiency
of available credit enhancement.
-- The transaction's performance to date, with zero defaults and
losses.
Notes: The principal methodology applicable to the credit ratings
is Morningstar DBRS Master U.S. ABS Surveillance (February 22,
2024), https://dbrs.morningstar.com/research/428506.
TICP CLO VII: S&P Affirms 'B+ (sf)' Rating on Class E-R Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-S-R2 and
B-R2 replacement debt from TICP CLO VII Ltd./TICP CLO VII LLC, a
CLO originally issued in May 2017 and previously reset in March
2020, which is managed by TICP CLO VII Management LLC. The class
A-S-R2 and B-R2 debt will replace the class A-S-R and B-R debt;
therefore, S&P withdrew its ratings on the original class A-S-R and
B-R debt following payment in full on the March 21, 2024,
refinancing date. At the same time, S&P also affirmed its ratings
on the class C-R, D-R, and E-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 to April 15, 2025.
-- The reinvestment period will remain unchanged.
-- The legal final maturity will remain unchanged.
-- No additional subordinated notes will be issued on the
refinancing date.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-S-R2, $307.50 million: Three-month CME term SOFR +
1.30%
-- Class B-R2, $63.50 million: Three-month CME term SOFR + 1.90%
Original debt
-- Class A-S-R, $307.50 million: Three-month CME term SOFR + 1.27%
+ CSA(i)
-- Class B-R, $63.50 million: Three-month CME term SOFR + 1.70% +
CSA(i)
(i)The CSA is 0.26161%.
CSA--Credit spread adjustment.
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
TICP CLO VII Ltd./TICP CLO VII LLC
Class A-S-R2, $307.50 million: AAA (sf)
Class B-R2, $63.50 million: AA (sf)
Ratings Affirmed
TICP CLO VII Ltd./TICP CLO VII LLC
Class C-R (deferrable) 'A (sf)'
Class D-R (deferrable)'BBB- (sf)'
Class E-R (deferrable) 'B+ (sf)'
Ratings Withdrawn
TICP CLO VII Ltd./TICP CLO VII LLC
Class A-S-R to NR from 'AAA (sf)'
Class B-R to NR from 'AA (sf)'
Other Outstanding Debt
TICP CLO VII Ltd./TICP CLO VII LLC
Class A-J-R: NR
Subordinated Notes: NR
NR--Not rated.
TRINITAS CLO XXVII: S&P Assigns BB- (sf) Rating on Class E Loans
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Trinitas CLO XXVII
Ltd./Trinitas CLO XXVII LLC's floating- and fixed-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Trinitas Capital Management LLC.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Trinitas CLO XXVII Ltd./Trinitas CLO XXVII LLC
Class A-1, $312.50 million: AAA (sf)
Class A-2, $12.50 million: AAA (sf)
Class B, $55.00 million: AA (sf)
Class C-1 (deferrable), $20.00 million: A (sf)
Class C-2 (deferrable), $10.00 million: A (sf)
Class D-1 (deferrable), $25.00 million: BBB+ (sf)
Class D-2 (deferrable), $10.00 million: BBB- (sf)
Class E (deferrable), $12.50 million: BB- (sf)
Subordinated notes, $50.40 million: Not rated
UBSCM 2018-NYCH: S&P Affirms 'BB-(sf)' Rating on Class X-NCP Certs
------------------------------------------------------------------
S&P Global Ratings affirmed its ratings on seven classes of
commercial mortgage pass-through certificates from UBSCM 2018-NYCH
Mortgage Trust, a U.S. CMBS transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a floating-rate, interest-only mortgage loan secured by the
borrower's fee interest in six limited-service hotels and one
extended-stay hotel located in the Manhattan submarkets of Times
Square, Midtown South, and Downtown.
Rating Actions
The affirmations on the class A, B, C, D, E, and F certificates
reflect the following:
-- S&P's expected-case valuation, which is unchanged from S&P's
last review in April 2022.
-- The lodging portfolio's performance has materially improved and
is returning to pre-COVID-19 pandemic levels, with the reported net
cash flow (NCF) provided by the special servicer for the
trailing-12 months (TTM) period ending Nov. 30, 2023, of $25.0
million from $24.8 million in 2019.
The paydown of the trust balance by $10.0 million as part of the
recent loan modification that was executed on Feb. 7, 2024. The
terms included, among other items, extending the loan's maturity
date by nine months from February 2024 to November 2024 and
partially paying down the loan balance.
The affirmation of S&P's 'CCC (sf)' rating on the class F
certificates also reflects its view that, due to current market
conditions and the class's position in the payment waterfall, the
class F certificates remain at a heightened risk of default and
loss, and is susceptible to liquidity interruption.
S&P said, "We affirmed our rating on the class X-NCP IO
certificates based on our criteria for rating IO securities, in
which the rating on the IO securities would not be higher than that
of the lowest-rated reference class. The notional amount of the
class X-NCP certificates references classes A, B, C, and D."
S&P said, "In our April 26, 2022, review, we noted that the lodging
portfolio's performance was negatively affected by the COVID-19
pandemic, as well as the continued supply growth in the New York
City lodging market, prolonging the recovery timeframe. At that
time, CoStar expected the New York City lodging market's revenue
per available room (RevPAR) would not return to pre-COVID-19
pandemic levels until 2025. The subject hotels' RevPAR declined
14.3% to $78.46 in 2021 from $91.50 in 2020, which was a 53.1%
decline from $195.15 in 2019. The reported NCF was negative in 2020
and under $740,000 in 2021, compared with $24.8 million in 2019. As
a result, at that time, we assumed a $162.83 RevPAR (based on an
83.5% occupancy rate and $195.00 average daily rate [ADR]) and
29.5% NCF margin to arrive at an S&P Global Ratings long-term
sustainable NCF of $19.4 million. Using an S&P Global Ratings'
capitalization rate of 10.75%, we arrived at our expected-case
valuation of $180.3 million or $165,826 per guestroom. This yielded
an S&P Global Ratings' loan-to-value (LTV) ratio of 160.9%."
The loan had transferred to special servicing at the onset of the
COVID-19 pandemic on April 30, 2020, because of imminent payment
default on the $85.0 million mezzanine loan. In addition, in
February 2021, the borrower was unable to exercise one of its two
one-year extension options (the loan's initial maturity date was on
Feb. 9, 2021), because it failed to meet the debt yield
requirements. The mezzanine lender, Mack Real Estate Group,
subsequently completed a Uniform Commercial Code (UCC) foreclosure
and became the new sponsor. The loan was then modified and returned
to the master servicer on Sept. 13, 2021. As part of the
modification, the new sponsor paid down the trust loan balance by
$10.0 million and the loan's maturity was extended to Feb. 9, 2024.
While reported performance for year-end 2022 and the TTM period
ending November 2023 have rebounded and is currently on par with
pre-COVID-19 pandemic levels, the loan then transferred back to the
special servicer on Oct. 10, 2023, due to imminent maturity
default. The special servicer, Situs Holdings LLC (Situs), stated
that the borrower was unable to find refinancing options at
desirable terms.
According to Situs, a loan modification agreement was recently
finalized in February 2024.
The key modification terms include:
-- The sponsor paying $10.0 million to reduce the principal
balance of the loan;
-- The loan's maturity date extending by nine months to Nov. 9,
2024;
-- The sponsor purchasing a new interest rate protection agreement
at a strike price of 5.0% through the extended maturity date;
-- The loan continuing to cash sweep through the extended maturity
date;
-- The sponsor providing an interest guaranty and a $25.0 million
principal repayment guaranty; and
-- The sponsor completing any immediate repairs needed and a
capital expenditures plan, approved by the lender, to keep the
buildings in good standing and condition.
Situs also informed S&P that an updated appraisal and property
condition assessment reports have been ordered but are still in
progress.
S&P said, "In our current analysis, we considered the improved
performance, in particular, that the reported NCF for the TTM
period ending Nov. 30, 2023 was in line with 2019 levels. Assuming
an 83.5% occupancy rate, a $205.00 ADR (yielding a $171.18 RevPAR
versus a 2023 reported $181.54 RevPAR), and a 27.4% NCF margin, we
arrived at an S&P Global Ratings' long-term sustainable NCF of
$19.4 million, unchanged from our last review. Using the same S&P
Global Ratings capitalization rate as in our last review of 10.75%,
we derived the same S&P Global Ratings expected-case value of
$180.3 million, or $165,826 per guestroom, which is 49.6% lower
than the revised June 2021 appraisal value of $357.5 million. This
yielded an S&P Global Ratings LTV ratio of 155.3% on the trust
balance."
Although the model-indicated ratings were higher than S&P's current
ratings on classes A, B, and D, it affirmed its ratings on these
classes because of certain qualitative considerations. These
include:
-- S&P's view that the borrower may continue to face challenges
refinancing the loan in November 2024 if market conditions or the
subject portfolio's performance does not materially change, or the
sponsor does not provide additional capital outlays. Using an 8.26%
gross interest rate (based on the one-month SOFR rate noted in the
March 2024 trustee remittance report and the loan's spread), the
TTM period ending Nov. 30, 2023, and a NCF of $25.0 million, S&P
calculated a debt service coverage (DSC) of only 1.07x. The loan
had transferred to special servicing on two separate occasions and
each time, it was modified and extended.
-- The potential that the portfolio's performance may be affected
by changes in demand and supply trends in New York City. The
portfolio properties' NCF just recently rebounded back to
pre-COVID-19 pandemic levels and severely underperformed
expectations at the height of the COVID-19 pandemic.
S&P will continue to monitor the performance of the lodging
portfolio and loan, as well as the sponsor's ability to refinance
the loan by its extended maturity date in November 2024. If S&P
receives information that differs materially from its expectations,
such as property performance or appraisal values that are
materially below its expectations, or if the loan re-transfers to
special servicing and the workout strategy negatively affects the
transaction's recovery and liquidity, S&P may revisit our analysis
and take rating actions as we deem necessary.
Property Analysis
The collateral portfolio consists of six limited-service hotels and
one extended-stay hotel constructed between 2003 and 2010 totaling
1,087 guestrooms in Manhattan. The average room count is 155
guestrooms and the average age is approximately 16 years. The
hotels are in the Times Square, Midtown South, and Downtown
submarkets and operate under four different brands:
-- Hampton Inn (three hotels; 44.0% by allocated loan amount);
-- Holiday Inn Express (two hotels; 29.0%);
-- Candlewood Suites (one hotel; 17.6%); and
-- Holiday Inn (one hotel; 9.4%).
The franchise agreements expire in April 2031 (with no extension
options), and the franchise fees generally consist of a monthly
royalty fee of 5.0%-6.0% of rooms revenue, a monthly marketing
assessment of 2.5%-4.0% of rooms revenue, and a monthly reservation
fee. In addition to name recognition, the chain affiliations enable
the hotels to benefit from national brand-wide marketing campaigns
and frequent-stay programs.
Originally, the lodging portfolio was owned by a joint venture
between Hersha Hospitality Trust and Cindat Capital Management
Ltd., until the mezzanine lender, Mack Real Estate Capital,
foreclosed on the loan and took ownership of the properties in
2021. Hersha Hospitality Management (HHM), an affiliate of the
original sponsor, still manages the properties under a management
agreement that expires in April 2026, which automatically renews
for two successive five-year periods subject to certain performance
tests. The manager is entitled to receive a management fee of 3.0%
of gross revenues plus other fees, and an annual incentive
management fee in an amount equal to 10.0% of the amount by which
net operating income for the applicable year exceeds a 12.0% return
on total costs for the property for such year. Notwithstanding the
foregoing, in no event shall the manager's total compensation
exceed 4.0% of total revenues.
The seven hotels in the portfolio are:
-- Holiday Inn Express Times Square: 210-guestrooms, opened in
2009, limited-service, Times Square submarket;
-- Candlewood Suites Times Square: 188-guestrooms, opened in 2009,
extended-stay, Times Square submarket;
-- Hampton Inn Times Square: 184-guestrooms, opened in 2009,
limited-service, Times Square submarket;
-- Hampton Inn Chelsea: 144-guestrooms, opened in 2003,
limited-service, Midtown South submarket;
-- Hampton Inn Herald Square: 136-guestrooms, opened in 2005,
limited-service, Midtown South submarket;
-- Holiday Inn Wall Street: 113-guestrooms, opened in 2008,
limited-service, Downtown submarket; and
-- Holiday Inn Express Wall Street: 118-guestrooms, opened in
2010, limited-service, Downtown submarket.
The properties in the portfolio can be released subject to certain
conditions, including paying down principal by 115.0% of the
released property's allocated loan amount. As of the March 15,
2024, trustee remittance report, no properties have been released
to date.
In late 2016 and throughout 2017, the portfolio underwent an
extensive property improvement plan totaling $15.2 million ($13,983
per guestroom). Based on information received from the master
servicer, there have been various capital improvements performed at
the hotels since then, including room refurbishments such as new
carpet, furniture, and window treatments, and re-painting and
re-wallpapering of walls, among other items, though a detailed
expense itemization/timeline of the updates was not available.
Under the loan's recent modification agreement, the sponsor is
required to complete any immediate repairs and execute a
lender-approved capital expenditures plan to address brand
requirements and refresh the properties.
Demand in corporate, leisure, and especially group travel
throughout New York City declined significantly due to the COVID-19
pandemic. The portfolio's reported occupancy, ADR, and NCF fell at
the onset of the COVID-19 pandemic in 2020 to 58.1%, $157.46, and
negative $4.9 million, respectively, from 96.0%, $203.19, and $24.8
million in 2019. While occupancy, ADR, and NCF rebounded to 65.1%,
$120.60, and $734,227 in 2021, they were still significantly below
2019-levels. The depressed subject portfolio performance is also
partly attributed to the continued growth in lodging supply.
However, as travel restrictions lifted, the New York City lodging
market steadily recovered with the portfolio's occupancy, ADR, and
NCF rebounded materially to 71.3%, $214.80, and $19.0 million,
respectively, in 2022 and further increased to 80.3%, $226.01, and
$25.0 million for the TTM period ending Nov. 30, 2023. The borrower
projects an 84.4% occupancy, a $231.00 ADR, and a $26.4 million NCF
for 2024.
According to the January 2024 STR reports, the portfolio had a
weighted average occupancy, ADR, RevPAR and RevPAR penetration rate
of 80.9%, $225.03, $182.12, and 89.2%, respectively.
Per CoStar, as of the TTM period ending February 2024, upscale and
upper midscale hotels in New York City had a reported 85.3%
occupancy, $240.82 ADR, and $205.32 RevPAR. CoStar expects
performance to continue to improve, with occupancy, ADR, and RevPAR
increasing to 85.4%, $251.28, and $213.66 in 2025 and 85.3%,
$261.42, and $222.95 in 2026, respectively. The increase in
performance is mainly driven by a return of tourism to New York
City, with approximately 62.2 million visitors in 2023, which is
about 93.0% of the record of 69.1 million in 2019. CoStar noted
that there are currently 55 hotels totaling 8,245 rooms
(representing about 5.9% of the existing 140,000 rooms) under
construction in New York City but it expects new hotel construction
will likely be muted after the current pipeline is completed. This
is mainly because of new special permit requirements for hotel
construction passed by the city in December 2021 and rising
construction costs. Furthermore, New York City passed Local Law 18
in February 2022, that went into effect in September 2023, which
effectively banned short-term rentals for apartments and houses.
Table 1
Reported collateral performance by servicer
TTM NOV. 30, 2023(I) 2022(I) 2021(I)
Occupancy rate (%) 80.3 71.3 65.1
Average daily rate ($) 226.01 214.80 120.60
RevPAR ($) 181.54 153.24 78.46
Net cash flow ($ mil.) 25.0 19.0 0.7
Debt service coverage (x) (ii) 1.38 (ii)
Appraisal value ($ mil.) 357.5 357.5 357.5
(i)Reporting period.
(ii)Servicer-reported data not available. Performance information
provided by the special servicer or obtained from the borrower's
operating statements.
TTM--Trailing-12 months.
RevPAR--Revenue per available room.
Table 2
S&P Global Ratings' key assumptions
CURRENT LAST REVIEW ISSUANCE
(MARCH (APRIL (FEBRUARY
2024)(I) 2022)(I) 2018)(I)
Trust balance ($ mil.) 280.0 290.0 300.0
Occupancy (%) 83.5 83.5 90.0
Average daily rate ($) 205.00 195.00 200.00
RevPAR ($) 171.18 162.83 180.00
Net cash flow ($, mil.) 19.4 19.4 23.5
Capitalization rate (%) 10.75 10.75 9.25
Value ($ mil.) 180.3 180.3 253.7
Value per guestroom ($) 165,826 165,826 233,399
Loan-to-value ratio (%) 155.3 160.9 118.2
(i)Review period.
RevPAR-revenue per available room.
Transaction Summary
The IO mortgage loan had a current trust balance of $280.0 million
(as of the March 15, 2024, trustee remittance report) down from
$290.0 million in our last review in April 2022 and $300.0 million
at issuance. The loan pays a floating interest rate currently
indexed to one-month term SOFR plus a 2.899% spread (inclusive of a
0.047% benchmark adjustment after converting from one-month LIBOR
in August 2023). The loan originally had an initial three-year term
maturing on Feb. 9, 2021, with two one-year extension options.
However, following the first loan modification in September 2021,
the loan's maturity date was extended to Feb. 9, 2024 from Feb. 9,
2021. The loan was recently modified in February 2024, with the
maturity date extended again to Nov. 9, 2024. In addition, the
sponsor purchased a replacement interest rate cap agreement through
the extended maturity date at a strike price of 5.00%.
At issuance, there was an $85.0 million mezzanine loan. It was
extinguished in 2021 when the mezzanine lender, Mack Real Estate
Capital, became the new sponsor via a UCC foreclosure.
The master servicer, Wells Fargo Bank N.A., reported a debt service
coverage of 1.17x for the TTM period ending June 2023, down from
1.38x in 2022. To date, the trust has not incurred any principal
losses. According to the March 2024 trustee remittance report,
class HRR (not rated by S&P Global Ratings) had accumulated
interest shortfalls outstanding of $254,855 due to special
servicing fees.
Ratings Affirmed
UBSCM 2018-NYCH Mortgage Trust
Class A: 'AA+ (sf)'
Class B: 'A- (sf)'
Class C: 'BBB- (sf)'
Class D: 'BB- (sf)'
Class E: 'B- (sf)'
Class F: 'CCC (sf)'
Class X-NCP: 'BB- (sf)'
VERUS SECURITIZATION 2024-INV1: DBRS Confirms BB on B-1 Notes
-------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Mortgage-Backed Notes, Series 2024-INV1 (the Notes) to be issued by
Verus Securitization Trust 2024-INV1 (VERUS 2024-INV1):
-- $235.9 million Class A-1 at AAA(sf)
-- $26.7 million Class A-2 at AA (sf)
-- $46.7 million Class A-3 at A (high) (sf)
-- $33.3 million Class M-1 at BBB (sf)
-- $20.3 million Class B-1 at BB (sf)
-- $14.7 million Class B-2 at B (low) (sf)
The AAA (sf) credit rating on the Class A-1 Notes reflects 39.10%
of credit enhancement provided by subordinate notes. The AA (sf), A
(high) (sf), BBB (sf), BB (sf), and B (low) (sf) credit ratings
reflect 32.20%, 20.15%, 11.55%, 6.30%, and 2.50% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of fixed- and
adjustable-rate, investor debt service coverage ratio (DSCR),
first-lien residential mortgages funded by the issuance of the
Notes. The Notes are backed by 1,000 mortgage loans with a total
principal balance of $387,374,857 as of the Cut-Off Date (March 1,
2024).
VERUS 2024-INV1 represents the 12th securitization issued by the
Sponsor (VMC Asset Pooler, LLC) or a related Invictus Capital
Partners, LP entity, backed entirely by business-purpose investment
loans, predominantly underwritten using DSCR. The originators for
the mortgage pool are Hometown Equity Mortgage, LLC (27.2%) and
other originators, each comprising less than 10.0% of the mortgage
loans. Newrez LLC doing business as (dba) Shellpoint Mortgage
Servicing (100%) is the servicer of the loans in this transaction.
The mortgage loans were underwritten to program guidelines for
business-purpose loans that are designed to rely on property value,
the mortgagor's credit profile, and the DSCR, where applicable.
Because the loans were made to investors for business purposes,
they are exempt from the Consumer Financial Protection Bureau's
Ability-to-Repay rules and TILA-RESPA Integrated Disclosure rule.
The Sponsor, directly or indirectly through a majority-owned
affiliate, will retain an eligible vertical interest in each class
of Notes in the required amount of not less than 5% of each class
of Notes to satisfy the credit risk-retention requirements under
Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder. Such retention aligns Sponsor
and investor interest in the capital structure.
Nationstar Mortgage LLC dba Mr. Cooper Master Servicing will be the
Master Servicer. Wilmington Savings Fund Society, FSB will act as
the Indenture and Owner Trustee. Computershare Trust Company, N.A.
(rated BBB with a Stable trend by Morningstar DBRS) and Deutsche
Bank National Trust Company will act as the Custodians.
On or after the earlier of (1) the Payment Date occurring in March
2027 or (2) the date when the aggregate stated principal balance of
the mortgage loans is reduced to 30.00% of the Cut-Off Date
balance, the Note Owner(s) representing 50.01% or more of the Class
XS Notes (Optional Redemption Right Holder) may redeem all of the
outstanding Notes at a price equal to the greater of (A) the class
balances of the related Notes plus accrued and unpaid interest,
including any cap carryover amounts and (B) the class balances of
the related Notes less than 90 days delinquent with accrued unpaid
interest plus fair market value of the loans 90 days or more
delinquent and real estate owned properties. After such purchase,
the Depositor must complete a qualified liquidation, which requires
(1) a complete liquidation of assets within the Trust and (2)
proceeds to be distributed to the appropriate holders of regular or
residual interests.
The principal and interest (P&I) Advancing Party will fund advances
of delinquent P&I on any mortgage until such loan becomes 90 days
delinquent. The Advancing Party or Servicer has no obligation to
advance P&I on a mortgage approved for a forbearance plan during
its related forbearance period. The Servicer, however, is obligated
to make advances in respect of taxes, insurance premiums, and
reasonable costs incurred in the course of servicing and disposing
properties.
The transaction employs a sequential-pay cash flow structure with a
pro rata principal distribution among the Class A-1, A-2, and A-3
Notes (Senior Classes) subject to certain performance triggers
related to cumulative losses or delinquencies exceeding a specified
threshold (Trigger Event). However, in contrast to the prior
Morningstar DBRS-rated transaction from this shelf, in the case of
a Credit Event, principal proceeds will be allocated to cover
interest shortfalls on Class A-1 and then in reduction of the Class
A-1 note balance, before a similar allocation of funds to Class A-2
(Interest, Principal, Interest, and Principal). Prior issuance
would typically allocate principal (after a Credit Event) to cover
interest shortfalls on the Class A-1 and Class A-2 Notes (Interest,
Interest, Principal, and Principal) before being applied
sequentially to amortize the balances of the senior and
subordinated notes. In the current transaction, and the prior
transaction, for the Class A-3 Notes (only after a Credit Event)
and for the mezzanine and subordinate classes of notes (both before
and after a Credit Event), principal proceeds will be available to
cover interest shortfalls only after the more senior notes have
been paid off in full.
Excess spread can be used to cover realized losses before being
allocated to unpaid Cap Carryover Amounts due to Class A-1 down to
Class M-1 (and Class B-1 if issued with a fixed rate). The Class
A-1, A-2, and A-3 fixed-rate coupons step up by 1.00% on and after
the payment date in April 2028 (Step-Up Date). Of note, on and
after the distribution date in April 2028, interest and principal
otherwise available to pay the Class B-3 interest and interest
shortfalls may be used to pay any Class A Cap Carryover amounts.
Notes: All figures are in U.S. dollars unless otherwise noted.
VERUS SECURITIZATION 2024-INV1: S&P Assigns B-(sf) on B-2 Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Verus Securitization
Trust 2024-INV1's mortgage-backed notes series 2024-INV1.
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."
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 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.
VIBRANT CLO XR: Fitch Assigns Final 'B-sf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Vibrant CLO XR, Ltd.
Entity/Debt Rating
----------- ------
Vibrant CLO XR, Ltd.
A-1 LT NRsf New Rating
A-2 LT AAsf New Rating
A-2F LT AAsf New Rating
B LT Asf New Rating
C-1 LT BBB-sf New Rating
C-2 LT BBB-sf New Rating
D LT BB-sf New Rating
E LT B-sf New Rating
Subordinated-1 LT NRsf New Rating
Subordinated-2 LT NRsf New Rating
TRANSACTION SUMMARY
Vibrant CLO XR, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Vibrant Credit Partners, LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.2, versus a maximum covenant, in
accordance with the initial expected matrix point of 26.87. 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
99.95% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.98% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.1-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. Fitch believes 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, between 'B+sf'
and 'BBB+sf' for class B, between less than 'B-sf' and 'BB+sf' for
class C-1, between less than 'B-sf' and 'BB+sf' for class C-2,
between less than 'B-sf' and 'B+sf' for class D; and between less
than 'B-sf' and less than '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 A-2, 'AAsf' for class B, 'Asf' for
class C-1, 'A-sf' for class C-2, 'BBB+sf' for class D; and 'BB+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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Vibrant CLO XR,
Ltd. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
WELLS FARGO 2014-LC18: DBRS Cuts Class E Certs Rating to B
----------------------------------------------------------
DBRS Limited downgraded its credit ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2014-LC18 issued by
Wells Fargo Commercial Mortgage Trust 2014-LC18 as follows:
-- Class X-E to B (high) (sf) from BB (sf)
-- Class E to B (sf) from BB (low) (sf)
-- Class F to CCC (sf) from B (low) (sf)
-- Class X-F to CCC (sf) from B (sf)
Morningstar DBRS also confirmed its credit ratings on the remaining
classes as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class PEX at A (sf)
-- Class D at BBB (low) (sf)
-- Class X-B at BBB (sf)
In addition, Morningstar DBRS changed the trends on Classes D, E,
X-B, and X-E to Negative from Stable. Classes F and X-F have credit
ratings that do not generally carry a trend in commercial
mortgage-backed securities (CMBS) credit ratings. All other classes
have Stable trends.
As of the February 2024 remittance, 79 of the original 99 loans
remain in the trust, with an aggregate balance of $794.4 million,
representing a collateral reduction of 30.2% since issuance. The
credit rating downgrades and Negative trends reflect increased loss
projections for loans in special servicing, primarily driven by one
new loan in special servicing since the last credit rating action,
as well as concerns regarding a number of loans at increased risk
of maturity default. All of the remaining loans in the pool are
scheduled to mature within the next 12 months. While Morningstar
DBRS expects the majority will repay from the pool, a concentrated
number of loans exhibit increased default risk given weak credit
metrics and/or upcoming rollover. Seven loans collectively,
representing 9.0% of the pool balance, have been identified by
Morningstar DBRS to be at risk for maturity default. Should these
loans default as they near their respective maturity dates,
Morningstar DBRS' loss projections may increase to reflect
additional adverse selection. This, in addition to increased
propensity for interest shortfalls as the deal winds down, are also
drivers of the downgrades and Negative trends. There are now three
loans in special servicing, representing 5.4% of the current pool
balance. In its analysis, Morningstar DBRS used liquidation
scenarios for the three specially serviced loans, resulting in
projected losses approaching $13.0 million.
The largest loan in special servicing is the YRC Headquarters
(Prospectus ID#13, 2.2% of the current pool balance) loan, which is
secured by a 332,937-square-foot (sf) office property built in 1972
and located in the Kansas City suburb of Overland Park, Kansas. The
loan transferred to the special servicer in June 2023 for imminent
monetary default and was last paid through October 2023. The
property previously served as the headquarters of its sole tenant,
YRC Enterprise (YRC), until the tenant relocated to Nashville,
Tennessee, in 2021, leaving the building fully vacant. However, the
tenant continued to uphold its lease obligations, until its parent
company, Yellow Corp., filed for bankruptcy in August 2023. The
full building is currently listed as available in online listings
located by Morningstar DBRS. The servicer has advised that they are
pursuing rights and remedies, including a receivership sale.
Although a cash sweep was initiated with YRC's nonrenewal of its
lease, which was scheduled to expire in March 2024, the parent
company's bankruptcy filing and YRC's nonpayment of rents has
resulted in a collection of only $179,000 to date. As per the
February 2024 reserve report, there is $3.1 million across tenant
reserve, capital improvements reserve, and other reserve accounts.
According to Reis, office properties in the Overland Park/South
Johnson submarket reported a vacancy rate of 11.9% as of Q4 2023,
and an average asking rental rate of $26.70 per sf (psf), more than
double the property's asking rent of $13.00/psf as per online
listings. The rent roll dated June 2023 indicates that YRC paid
$10.14 psf on its space prior to its departure, which is half of
the Reis reported submarket effective rate of $20.8 psf. Although
there has not been an updated appraisal since issuance, value has
likely declined significantly given the fully vacant status of the
building, softening submarket conditions, below-market rental
rates, and lack of leasing activity. In its analysis, Morningstar
DBRS considered a liquidation scenario based on a dark value
analysis of the underlying property, resulting in a projected loss
severity approaching 35%.
The second largest specially serviced loan is the Hilton Garden Inn
Austin Northwest (Prospectus ID#16, 2.1% of the current pool
balance) which is secured by a 138-room hotel in Austin, Texas. The
loan transferred to the special servicer at the onset of the
pandemic in May 2020 for imminent monetary default, and a
forbearance agreement was executed in October 2021. The loan was
never returned to the master servicer following the forbearance.
According to the most recent STR report, the hotel reported a
trailing-12-month (T-12), ended month September 30, 2023, occupancy
rate of 66.7%, average daily rate of $127.66, and revenue per
available room (RevPAR) of $85.21, slightly outperforming its
competitive set with a RevPAR penetration of 108.1%. Although the
debt service coverage ratio (DSCR) has remained below breakeven
since 2020, there are some incremental improvements year over year,
driven by recovering occupancy rates. The property was appraised in
August 2023 at $18.5 million, which is unchanged from the December
2022 appraisal, but ultimately 39.4% decline from the issuance
value of $30.4 million. Given the performance fluctuations in
recent years, oversaturated submarket, and value decline since
issuance, Morningstar DBRS' analysis included a liquidation
scenario for this loan, resulting in a projected loss severity of
approximately 20%.
As mentioned above, Morningstar DBRS identified seven loans,
representing 9.0% of the pool balance, to be at increased risk for
maturity default. The largest loan in this category is the Hilton
Garden Inn Cupertino (Prospectus ID#8, 4.0% of the current pool
balance), secured by a 164-room limited-service hotel in Cupertino,
California. This loan was transferred to the special servicer in
June 2020 because of coronavirus pandemic-related performance
concerns and was returned to the master servicer in December 2022.
Although the cash flows have rebounded since the pandemic, with the
most recent DSCR reported at 1.27 times as per the T-12 ended
September 30, 2023, period, the loan's interest-only (IO) structure
provides no amortization benefit against the possible decline in
the property's value and rise in cap rates in the last few years.
As such, Morningstar DBRS expects there will be a significant
refinance gap that could exceed $20 million, thereby increasing the
risk for this loan. The remaining loans in this category have
experienced performance declines which may pose challenges given
the loans' near-term maturity.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2015-NXS2: DBRS Cuts Rating on 3 Classes to C
---------------------------------------------------------
DBRS Limited downgraded its credit ratings on seven classes of the
Commercial Mortgage Pass-Through Certificates, Series 2015-NXS2
issued by Wells Fargo Commercial Mortgage Trust 2015-NXS2 as
follows:
-- Class B to A (low) (sf) from AA (low) (sf)
-- Class C to BBB (low) (sf) from A (low) (sf)
-- Class PEX to BBB (low) (sf) from A (low) (sf)
-- Class D to CCC (sf) from BBB (low) (sf)
-- Class E to C (sf) from B (sf)
-- Class F to C (sf) from CCC (sf)
-- Class X-E to C (sf) from B (high) (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
Morningstar DBRS also changed the trends on Classes B, C, and PEX
to Negative from Stable. Classes D, E, F, and X-E have credit
ratings that do not carry a trend in commercial mortgage-backed
securities (CMBS) credit ratings. The trends on all remaining
classes are Stable.
The downgrades and Negative trends reflect Morningstar DBRS'
increased loss projections for loans in special servicing in
addition to elevated credit risk for a number of large loans on the
servicer's watchlist. The pool has a 23.9% concentration of loans
backed by office properties, including three loans in the top 15:
Campbell Technology Park (Prospectus ID#2, 8.7% of the pool
balance), Sea Harbor Office Center (Prospectus ID#6, 5.8% of the
pool balance), and Colman Building (Prospectus ID#10, 3.3% of the
pool balance), with the latter two in special servicing.
Morningstar DBRS' projected losses for all loans in special
servicing exceeds $47.0 million as of this review. In addition,
total interest shortfalls have increased to $3.7 million, up from
$2.7 million at the time of the last rating action. Outside of the
specially serviced loans, Morningstar DBRS also identified three
loans, collectively representing 11.7% of the pool balance and
including the largest loan in the pool (Campbell Technology Park),
as exhibiting increased default risk, particularly with regard to
the remaining pool's near-term maturity. In the analysis for this
review, Morningstar DBRS stressed these loans via a probability of
default (POD) and/or loan-to-value ratio (LTV) adjustment to
reflect the risk of maturity default. Morningstar DBRS' projected
liquidated losses, its expectation for additional defaults as the
pool nears maturity, and increased propensity for interest
shortfalls have contributed to the credit rating downgrades and
trends.
As of the February 2024 remittance, 54 of the original 63 loans
remain in the trust, with an aggregate balance of $686.2 million,
representing a collateral reduction of 25.0% since issuance. There
are 14 fully defeased loans, representing 22.5% of the current pool
balance. There are nine loans with the special servicer,
representing 22.5% of the current pool balance, as well as eight
loans on the servicer's watchlist representing 24.9% of the current
pool balance. Since the last rating action, one loan that was
previously in special servicing, Fairfield Inn & Suites Mt. Vernon
(Prospectus ID#48), was liquidated from the trust in June 2023 with
a $2.5 million loss to the trust, which is in line with Morningstar
DBRS' loss projection of $2.6 million at last review.
The largest loan in special servicing is the Sea Harbor Office
Center, which is secured by a 359,514-square-foot (sf) suburban
office building in Orlando, Florida. The loan originally
transferred to the special servicer in January 2019 for nonmonetary
default related to noncompliance with a cash management trigger.
The largest tenant, Wyndham Hotels & Resorts (Wyndham) occupies
72.4% of net rentable area (NRA) on a lease through October 2025,
down from 84.6% of NRA at issuance after having given back space in
2021. Media sources point to a potential relocation of the tenant,
posing further uncertainty for Wyndham's plans at the subject
property. As per the most recent rent roll dated August 2023, the
property was 94.0% occupied. Other notable large tenants at the
subject include Visit Orlando (12.4% of the NRA, lease expiring in
October 2024) and Optavise, LLC (6.2% of the NRA, lease expiring in
December 2028). The special servicer has confirmed that Visit
Orlando has extended its lease through October 2025. In total,
87.8% of the NRA is scheduled to roll over prior to loan maturity
in June 2025.
As of the February 2024 remittance, the loan is paid through
January 2024 and the workout strategy remains unclear. As per Reis,
office properties in the South Orlando submarket reported a vacancy
rate of 18.7% with an average effective rental rate of $19.52 per
sf (psf) as of YE2023, compared with the property's average rental
rate of $21.73 psf. According to the February 2024 loan-level
reserve report, the loan has $3.5 million across all reserves. Loan
performance has deteriorated, with a 0.73 times (x) debt service
coverage ratio (DSCR) for the trailing six months ended June 30,
2023, compared with 0.77x at YE2022 and 2.33x at YE2021. The
drastic decline in net cash flow (NCF) is attributable to the
increase in real estate taxes, which jumped 260% from YE2021 to
YE2022. Given the drop-off in performance, concentrated near-term
rollover risk, uncertainty surrounding the largest tenant at the
subject, and softening submarket metrics, Morningstar DBRS'
analysis includes a liquidation scenario, based on a conservative
stress to the appraised value at issuance, resulting in a projected
loss severity approaching 20%.
The largest loan on the servicer's watchlist is the Campbell
Technology Park, which is secured by a four-building, 280,000-sf
office complex in Campbell, California. The loan was added to the
watchlist in February 2022 because of a low DSCR and declining
occupancy figures. As of the October 2023 rent roll, the property
was 50.3% occupied, down from 64.7% at YE2021 and well below the
issuance occupancy rate of 93.4%. The drop in occupancy follows the
downsizing and departure of several large tenants. Additionally,
there is significant rollover risk in the near term, with nearly
all remaining leases in place scheduled to expire prior to loan
maturity in June 2025. Morningstar DBRS has requested an update
from the borrower regarding renewal activity but did not receive a
response as of the publication of this press release. Cash flow has
also declined, with the DSCR dropping to 0.55x for the trailing
nine months ended September 30, 2023, compared with 1.77x at YE2021
and the Morningstar DBRS DSCR of 1.67x at issuance. Although a cash
trap event occurred in Q2 2023 following the drop in DSCR, there is
currently no excess cash to trap. As per Reis, office properties in
the Cupertino/Campbell/Los Gatos submarket reported a vacancy rate
of 17.1% as of YE2023, with an average asking rent of $46.50 psf.
Cushman & Wakefield lists 154,000 sf, or 55.0% of the NRA, as
available for leasing with an average asking rental rate of $29.4
psf, significantly below submarket. There is $1.7 million in
reserves as per the February 2024 loan level reserve report. Given
the year-over-year decline in performance, significant rollover
risk prior to maturity, and softening submarket metrics,
Morningstar DBRS believes the property value has declined since
issuance. To reflect this, this loan was analyzed with an elevated
POD and LTV adjustment, resulting in an expected loss that was 220%
above the pool's weighted average expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2016-C32: DBRS Confirms B Rating on Class X-F Certs
---------------------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2016-C32 issued by Wells Fargo
Commercial Mortgage Trust 2016-C32 as follows:
-- Class A-3 at AAA (sf)
-- Class A-3FL at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-3FX at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class X-F at B (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)
Morningstar DBRS changed the trends on Classes E, F, X-E, and X-F
to Negative from Stable. All other classes have Stable trends.
As of the February 2024 remittance, 100 of the original 112 loans
remain in the pool with an aggregate balance of $801.9 million,
representing 16.5% collateral reduction since issuance. The trend
changes reflect Morningstar DBRS' increased loss projections, which
are driven primarily by the loans in special servicing, two of
which received updated appraisals since the last rating action
indicating continued value decline. The same four loans
representing 5.6% of the pool balance have remained in special
servicing since last review with no new loans having been
transferred. Updated appraisals were received for two of the
properties, and Morningstar DBRS maintained its liquidation
scenario for all the loans, resulting in estimated losses of over
$19.5 million, eroding more than 50.0% of the balance of the
unrated Class G. In addition, Morningstar DBRS has identified,
several loans on the servicer's watchlist as having elevated credit
risk.
The largest loan in special servicing is 10 South LaSalle Street
(Prospectus ID#6, 3.7% of the pool), which is secured by a
781,426-square foot (sf) Class B office property in the center
business district (CBD) of Chicago. The 10-year fixed rate loan
pays interest-only (IO) and is pari passu with WFCM 2016-NXS5 which
Morningstar DBRS also rates. The loan transferred to the special
servicer in August 2022 for imminent default, though it has
technically remained current since the transfer and cash management
is active. The building is within the City of Chicago's planned
LaSalle Street redevelopment project, and as part of the
initiative, developers hope to convert existing office space to
residential units. The subject was not included on a March 2023
shortlist of properties selected for redevelopment that according
to recent reports is expected to begin moving forward in the Spring
of 2024.
No updated financials have been provided for this asset since the
prior review. Occupancy has been in decline since issuance.
According to the YE 2022 OSAR, the property was 75.5% occupied,
with leases comprising 11.4% of the net rentable area (NRA)
scheduled to expire through 2024. The largest tenant is Chicago
Title Insurance occupying 13.6% of the NRA on a lease expiring in
March 2025. The remaining tenancy is granular, with no other tenant
representing more than 8.0% of the NRA. According to LoopNet, space
is currently being marketed at an average rate of $19.0 psf, which
is below the Reis reported market average of $29.22 in Q4 2023.
There has been no updated appraisal ordered since issuance, as the
loan remains current. Given the continued concerns with historical
performance trends, lack of leasing activity, and the soft
submarket, Morningstar DBRS expects a considerable decline in value
for this property. Morningstar DBRS' analysis includes a
liquidation scenario based on a conservative stress to the issuance
appraised value, resulting in a projected loss severity exceeding
40%.
Morningstar DBRS identified three additional office loans,
representing 7.3% of the pool balance, to be at elevated credit
risk. Morningstar DBRS has a cautious outlook on this asset type as
sustained upward pressure on vacancy rates in the broader office
market may challenge landlords' efforts to backfill vacant space,
and, in certain instances, contribute to value declines,
particularly for assets in noncore markets and/or with
disadvantages in location, building quality, or amenities offered.
Morningstar DBRS also identified three other loans exhibiting
increased tenant rollover risk and declines in performance. Where
applicable, Morningstar DBRS increased the probability of default
(POD) penalties, and/or applied stressed loan-to-value ratios for
these six loans. The weighted-average expected loss for these loans
was more than double the weighted-average pool expected loss.
In addition, Morningstar DBRS made a positive adjustment to the
loan secured by the Chicago Industrial Portfolio I (Prospectus
ID#4, 5.0% of the pool) a portfolio of 18 industrial properties
totaling approximately 1.1 million sf throughout the greater
Chicago area. The adjustments were made to reflect the loan's
consistent improvements in performance year over year, reporting
increases in NCF and DSCR well above issuance expectations as well
as the improving submarket outlook.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2016-NXS5: DBRS Confirms C Rating on Class G Certs
--------------------------------------------------------------
DBRS Limited downgraded its credit ratings on three classes of
Commercial Mortgage Pass-Through Certificates, Series 2016-NXS5
issued by Wells Fargo Commercial Mortgage Trust 2016-NXS5 as
follows:
-- Class D to BB (low) (sf) from BBB (low) (sf)
-- Class E to CCC (sf) from B (sf)
-- Class F to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed its credit ratings on the
remaining classes as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-6 at AAA (sf)
-- Class A-6FL at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (low) (sf)
-- Class B at A (high) (sf)
-- Class C at BBB (high) (sf)
-- Class G at C (sf)
The trend on Class D remains Negative. In addition, Morningstar
DBRS changed the trends on Classes X-B, B, and C to Negative from
Stable. All other trends are Stable, with the exception of Classes
E, F, and G, which have credit ratings that do not typically carry
a trend in commercial mortgage-backed securities (CMBS) credit
ratings.
Morningstar DBRS downgraded Classes E, F, and G during its prior
review to reflect the projected loss expectations tied to loans in
special servicing, primarily driven by the largest loan in the
pool, 10 South LaSalle Street (Prospectus ID# 2; 11.8% of the
pool), which is secured by a Class B office property in Chicago.
The liquidation analysis assumed a haircut to the collateral's
appraised value at issuance but, considering operating performance
at the property remains depressed; coupled with soft office
submarket fundamentals, limited investor appetite for the asset
class, and the current high interest rate environment, the
property's value has likely declined further since that time.
Additional details of the loan are highlighted below. For this
review, Morningstar DBRS assumed a liquidation scenario for four of
the five loans in special servicing, resulting in a cumulative
projected loss amount of $54.1 million, approximately $32.0 million
of which is tied to the 10 South LaSalle Street loan. Those losses
would erode the entirety of the Class H (nonrated) and Class G
balance, in addition to approximately 25.0% of the Class F balance;
supporting the credit rating downgrades with this review. The trend
changes on Classes X-B, B, and C to Negative from Stable reflect
the erosion in credit support to the transaction, based on
Morningstar DBRS' loss projections. Additionally, there is a
moderate concentration of loans backed by office properties
representing 18.5% of the pool balance. As the pool begins to wind
down in 2025, Morningstar DBRS notes increased refinance risk for a
few office-backed loans that could face difficulty securing
replacement financing in the near to moderate term as performance
declines from issuance and decreased tenant demand have likely
eroded property values, which further supports the Negative trends
assigned with this review.
As of the February 2024 remittance, 55 of the original 64 loans
remain in the pool, with a trust balance of $635.7 million,
representing collateral reduction of 27.4% since issuance. To date,
the trust has incurred a total loss of $2.6 million, which has been
contained to the nonrated Class H certificate. Ten loans,
representing 18.5% of the pool balance, are on the servicer's
watchlist and five loans, representing 17.2% of the pool balance
are in special servicing. In addition, 12 loans, representing 16.9%
of the pool balance, are fully defeased.
The 10 South Lasalle Street loan is collateralized by a
781,426-square-foot (sf), Class B office property in the Central
Loop submarket of Chicago. The 10-year fixed-rate loan pays
interest only (IO) and is pari passu with Wells Fargo Commercial
Mortgage Trust 2016-C32, which Morningstar DBRS also rates. The
loan transferred to the special servicer in August 2022 for
imminent default, though it has remained current since the transfer
with active cash management provisions in place. The building is
within the City of Chicago's planned LaSalle Street redevelopment
project, and as part of the initiative, developers hope to convert
existing office space to residential units. The subject was not
included in a March 2023 shortlist of properties selected for
redevelopment that, according to recent reports, is expected to
begin moving forward in the Spring of 2024.
No updated financials have been provided for this asset since the
prior review. Occupancy has been in decline since issuance and
according to the YE2022 operating statement analysis report (OSAR),
the property was 75.5% occupied, with leases comprising11.4% of the
net rentable area (NRA) scheduled to expire through 2024. The
largest tenant is Chicago Title Insurance, occupying 13.6% of the
NRA on a lease expiring in March 2025. The remaining tenancy is
granular, which no other tenant representing more than 8.0% of the
NRA. According to LoopNet, space is currently being marketed at an
average rate of $19.0 per square foot (psf), which is below the
Reis reported market average of $29.22 psf in Q4 2023. There has
been no updated appraisal ordered since issuance, as the loan
remains current. Given the continued concerns with performance
trends, lack of leasing activity, and the soft submarket,
Morningstar DBRS expects a considerable decline in value for this
property. In the analysis for this review, Morningstar DBRS took a
conservative approach and applied a haircut to the issuance value,
resulting in a loss severity in excess of 40.0%.
The second-largest loan in special servicing, 1006 Madison Avenue
(Prospectus ID#16; 2.7% of the pool), is secured by a 3,917-sf
single-tenant retail property in Manhattan, New York. The loan
transferred to the special servicer in October 2018 for imminent
monetary default, following the departure of the property's sole
tenant in late 2018 (ahead of its lease expiration in 2025), with
the property remaining vacant since. The collateral has been real
estate owned since July 2022. A July 2023 appraisal valued the
property at $6.6 million, unchanged from the November 2022 value
but a steep decline from the issuance appraised value of $24.0
million. In its analysis, Morningstar DBRS assumed a full loss to
the loan.
The second largest loan on the servicer's watchlist, 4400 Jenifer
Street (Prospectus ID#8; 4.0% of pool balance) is secured by a
three-story, 83,777-sf Class B office property in the Friendship
Heights neighborhood of Washington, D.C. The property was built in
1972 and underwent extensive renovations between 1998 and 1999. The
loan was added to the servicer's watchlist in March 2022 for low
occupancy after the second-largest tenant, Long & Foster Real
Estate (11.7% of NRA), vacated prior to its September 2021 lease
expiration. Occupancy remains stressed, most recently reported at
68.2% (YE2023) with the debt service coverage ratio significantly
below break-even since YE2021. According to the December 2023 rent
roll, tenant leases representing 11.2% of the NRA are either
operating on a month-to-month basis or are expected to roll within
the next 12 months. In its analysis for this review, Morningstar
DBRS analyzed the loan with an elevated probability of default
penalty and stressed loan-to-value ratio, resulting in an expected
loss that was more than double the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
WHITNEY FUNDING: DBRS Confirms B(low) Rating on Class E Loan
------------------------------------------------------------
DBRS, Inc. confirmed its provisional credit ratings and removed the
Under Review with Developing Implications status on the Class A
Loan, the Class B Loan, the Class C Loan, the Class D Loan, and the
Class E Loan (collectively, the Loans) issued by Whitney Funding,
LLC, pursuant to the terms of the Second Amended and Restated Loan
Agreement (the Loan Agreement) dated December 15, 2022, among
Whitney Funding, LLC as Borrower; Delaware Life Insurance Company
as a Lender and the Managing Lender; and Alter Domus (US) LLC as
the Paying Agent and Calculation Agent:
-- Class A Loan: AA (low) (sf)
-- Class B Loan A (low) (sf)
-- Class C Loan BBB (sf)
-- Class D Loan BB (low) (sf)
-- Class E Loan B (low) (sf)
The provisional credit rating on the Class A Loan addresses the
timely payment of interest and the ultimate payment of principal on
or before the Legal Final Maturity Date of December 18, 2034. The
provisional credit ratings on the Class B Loan, Class C Loan, Class
D Loan, and Class E Loan address the ultimate payment of interest
and the ultimate payment of principal on or before the Legal Final
Maturity Date of December 18, 2034.
A provisional credit rating is not a final rating with respect to
the Loans and may change or be different than the final rating
assigned or may be discontinued. The assignment of final ratings on
the Loans is subject to receipt by Morningstar DBRS of all data
and/or information and final documentation that Morningstar DBRS
deems necessary to finalize the ratings, including, for these
Loans: completion of the funding period, up to the Maximum
Commitment Amount (as defined in the Loan Agreement) and
satisfaction of the Portfolio Criteria (as defined in the Loan
Agreement). Failure by the Borrower to complete the above
conditions, as described in the Loan Agreement, may result in the
provisional ratings not being finalized or being finalized at
different ratings than the assigned provisional ratings.
Should a Distribution Event (as defined in the Loan Agreement)
occur, the Designated Lender (as defined in the Loan Agreement)
shall have the right at any time, upon written notice to the
Borrower, the Paying Agent, and the Rating Agency, to instruct the
Paying Agent to distribute the Borrower's assets to the Designated
Lenders. In consideration therefor, the Aggregate Loan Balance of
the Loans will be reduced to zero and all obligations of the
Borrower (except those that expressly survive the termination of
the Loan Agreement) shall be deemed satisfied.
The Borrower is a bankruptcy-remote special-purpose vehicle set up
by Delaware Life Insurance Company as the Managing Lender and
Servicer. At the time of closing, Morningstar DBRS understands that
Delaware Life Insurance Company is the sole Lender to the Borrower
(though Delaware Life Insurance Company may sell or assign the
Loans following the closing). As such, as of this date, certain key
parties to this transaction are related parties. In addition,
Delaware Life Insurance Company engaged Morningstar DBRS for the
determination of the credit ratings on the Loans.
The Loans issued by the Borrower are collateralized primarily by a
portfolio of U.S. middle-market corporate loans. Whitney Funding,
LLC is managed by Delaware Life Insurance Company. Morningstar DBRS
considers Delaware Life Insurance Company an acceptable
collateralized loan obligation (CLO) manager.
CREDIT RATING RATIONALE/DESCRIPTION
The provisional credit rating confirmations are the result of
Morningstar DBRS' review of the transaction performance by applying
the "Global Methodology for Rating CLOs and Corporate CDOs" (the
CLO Methodology), initially released on October 22, 2023. On
November 9, 2023, the provisional credit ratings were placed Under
Review with Developing Implications to allow for Morningstar DBRS
to review the provisional credit ratings using the CLO
Methodology.
The Scheduled Reinvestment Period Termination Date is three years
following the DBRS Final Ratings Effective Date (as defined in the
Loan Agreement). The Legal Final Maturity Date is December 18,
2034.
Morningstar DBRS monitors transaction performance metrics based on
the periodicity of the transaction's reporting. The performance
metrics include Collateral Quality Tests, Coverage Tests,
Concentration Limitations, and Performing Collateral Par. As of
January 5, 2024, the Borrower is in compliance with all performance
metrics except Senior Secured Loans and Permitted Investments
Concentration Limit. However, this failure is calculated using the
transaction's maximum pool par. When calculated based on the
current Par Amount, the transaction is compliance with this
Concentration Limit. Therefore, Morningstar DBRS considers the test
failure to not be material and therefore confirmed its credit
ratings on the Loans, as the current transaction performance is
within Morningstar DBRS' expectation.
Some of the performance metrics that Morningstar DBRS reviewed are
listed below:
Collateral Quality Tests
Minimum Weighted-Average Spread: Threshold 5.50%; Current 6.22%
Maximum Morningstar DBRS Risk Score: Threshold 32.00%; Current
27.32%
Coverage Tests
Class A Overcollateralization Ratio: Threshold 137.06%; Current
148.23%
Class B Overcollateralization Ratio: Threshold 125.33%; Current
134.39%
Class C Overcollateralization Ratio: Threshold 119.00%; Current
125.99%
Class D Overcollateralization Ratio: Threshold 110.28%; Current
117.20%
Class E Overcollateralization Ratio: Threshold 106.73%; Current
112.62%
In its analysis, Morningstar DBRS considered the following aspects
of the transaction:
(1) The execution of the Second Amended and Restated Loan
Agreement, dated as of December 15, 2022.
(2) The transaction's capital structure and the form and
sufficiency of available credit enhancement.
(3) Relevant credit enhancement in the form of subordination and
excess spread.
(4) The ability of the Loans to withstand projected collateral loss
rates under various cash flow stress scenarios.
(5) The credit quality of the underlying collateral and the ability
of the transaction to reinvest Principal Proceeds into new
Collateral Obligations, subject to the Eligibility Criteria, which
include testing the Concentration Limitations, Collateral Quality
Tests, and Coverage Tests.
(6) Morningstar DBRS' assessment of the origination, servicing, and
CLO management capabilities of Delaware Life Insurance Company.
(7) The legal structure as well as legal opinions addressing
certain matters of the Borrower and the consistency with the
Morningstar DBRS "Legal Criteria for U.S. Structured Finance"
methodology.
Some particular strengths of the transaction are (1) the collateral
quality, which consists mostly of senior-secured middle-market
loans; and (2) the expected adequate diversification of the
portfolio of collateral obligations.
Some challenges were identified: (1) the expected weighted-average
credit quality of the underlying obligors may fall below investment
grade (per the Collateral Quality Matrix), and the majority may not
have public ratings once purchased; and (2) the underlying
collateral portfolio may be insufficient to redeem the Loans in an
Event of Default.
The transaction is performing according to the contractual
requirements of the Loan Agreement. There were no defaults
registered in the underlying portfolio to date. Considering the
transaction performance, its legal aspects and structure,
Morningstar DBRS confirmed its provisional credit ratings on the
Loans.
To assess portfolio credit quality, Morningstar DBRS provides a
credit estimate or internal assessment for each nonfinancial
corporate obligor in the portfolio not rated by Morningstar DBRS.
Credit estimates are not credit ratings; rather, they represent a
model-driven default probability for each obligor that Morningstar
DBRS uses when rating the Loans.
Notes: All figures are in U.S. dollars unless otherwise noted.
[*] DBRS Reviews 78 Classes From 14 US RMBS Transactions
--------------------------------------------------------
DBRS, Inc. reviewed its credit ratings on 78 classes from 14 U.S.
residential mortgage-backed securities (RMBS) transactions. Out of
the 14 transactions reviewed, seven are classified as synthetic
RMBS, one is legacy subprime RMBS, and six are ReREMICs of legacy
RMBS backed by prime, Alt-A, or option adjustable-rate mortgage
collateral. Of the 78 classes reviewed, Morningstar DBRS upgraded
its credit rating on one class and confirmed its credit ratings on
77 classes.
The Affected Ratings are available at https://bit.ly/4cszpoB
The Issuers are:
RESI Finance Limited Partnership 2003-B & RESI Finance DE
Corporation 2003-B
RESI Finance Limited Partnership 2003-C & RESI Finance DE
Corporation 2003-C
RESI Finance Limited Partnership 2003-D & RESI Finance DE
Corporation 2003-D
RESI Finance Limited Partnership 2004-A & RESI Finance DE
Corporation 2004-A
RESI Finance Limited Partnership 2004-B & RESI Finance DE
Corporation 2004-B
RESI Finance Limited Partnership 2004-C & RESI Finance DE
Corporation 2004-C
RESI Finance Limited Partnership 2005-B & RESI Finance DE
Corporation 2005-B
C-BASS 2004-CB4 Trust
Deutsche Mortgage Securities, Inc. REMIC Trust, Series 2008-RS2
BCAP LLC 2008-RR2 Trust
Morgan Stanley Resecuritization Trust 2015-R2
J.P. Morgan Resecuritization Trust, Series 2010-1
Deutsche Mortgage Securities, Inc. REMIC Trust, Series 2008-RS1
Deutsche Mortgage Securities, Inc. REMIC Trust, Series 2008-RS3
The credit rating upgrade reflects a positive performance trend and
an increase in credit support sufficient to withstand stresses at
the new credit rating level. The credit rating confirmations
reflect asset performance and credit-support levels that are
consistent with the current credit ratings.
Notes: The principal methodology applicable to the credit ratings
is the U.S. RMBS Surveillance Methodology (March 3, 2023),
https://dbrs.morningstar.com/research/410498.
[*] DBRS Takes Rating Actions on Eight Real Estate Transactions
---------------------------------------------------------------
DBRS Limited conducted its surveillance review of eight
small-balance commercial real estate (CRE) transactions, which
included 107 classes. Morningstar DBRS confirmed the credit ratings
on 105 classes across all of the transactions and upgraded the
credit ratings on two classes of Bayview Financing SBC Trust
2021-5F (BVRT 2021-5F), which is a re-securitization of Silver Hill
Trust 2019-SBC1 (SHT 2019-SBC1). The trends are all Stable, except
for those on Classes B and C of the Sutherland 2021-SBC10 (SCMT
2021-SBC10) transaction, which were changed to Positive from
Stable.
The Affected Ratings are available at https://bit.ly/49fU50t
The Issuers are:
Angel Oak SB Commercial Mortgage Trust 2020-SBC1
Sutherland Commercial Mortgage Trust 2021-SBC10
Cherrywood SB Commercial Mortgage Loan Trust 2016-1
Oceanview Mortgage Loan Trust 2020-SBC1
Sutherland Commercial Mortgage Trust 2019-SBC8
Silver Hill Trust 2019-SBC1
Oceanview Mortgage Trust 2022-SBC1
Bayview Financing SBC Trust 2021-5F
The credit rating confirmations reflect the overall stable
performance of the transactions, which have generally remained in
line with Morningstar DBRS' expectations. Overall, these
transactions experienced collateral reductions ranging between
12.0% and 90.0%, with a weighted average (WA) of approximately
41.0% since issuance, compared with the prior review when the WA
was approximately 34.0%. The concentration of delinquent loans
increased slightly while the net WA coupon increased by just over
50 basis points on average. The majority of the loans are fully
amortizing, with the exception of SCMT 2021-SBC10 in which less
than half of the loans are fully amortizing. However, SCMT
2021-SBC10 exhibited the most collateral reduction change since
last review, increasing by 13.6% since last review, therefore
supporting the positive trends on Classes B and C.
The assets backing the BVRT 2021-5F transaction consist of
interest-only (IO) notes, principal and interest (P&I) notes, Class
P notes, and Class X subordinated notes issued by SHT 2019-SBC1. As
of the February 2024 reporting, the subject transaction was
overcollateralized by approximately $35.0 million as a result of
payments from the underlying SHT 2019-SBC1 transaction; including
P&I payments on principal and interest notes, interest payment on
IO notes, and prepayment premiums. This overcollateralization is
subordinate to the rated notes of the transaction, resulting in the
increased credit enhancement since issuance. Since Morningstar
DBRS' prior review, credit-enhancement levels for the rated notes
have increased considerably, ranging from approximately 20.0% on
the most senior A-1 note to almost 50% on the most junior A-3 note,
further supporting the credit rating upgrades.
According to the February 2024 reporting, 2219 loans are secured
across the transactions (excluding BVRT 2021-5F), with an aggregate
outstanding balance of $935.8 million. Of the 123 delinquent loans
(5.8% of the aggregate outstanding balance), 44 loans (2.6% of
aggregate outstanding balance) were 120+ days delinquent, in
foreclosure, real estate owned, or with borrowers in bankruptcy.
The delinquent loans were analyzed with elevated probability of
default (POD) penalties, with incrementally more punitive treatment
applied based on the length of delinquency or workout strategy to
appropriately reflect the credit risk profile. Certain POD
adjustments were also considered for loans secured by
non-traditional property types, as well as amortization and loan
prepayment, in addition to certain loss given default (LGD)
penalties considered for the lack of environmental reporting.
Most of the loans that have repaid since issuance across all
transactions were paid in advance of the respective maturity dates,
with the most recent repayments including applicable prepayment
penalties. Based on the most recent reporting available, these
pools had WA life, trailing 12-month, and trailing three-month
constant prepayment rates (CPRs) of 11.1%, 11.1%, and 4.3%,
respectively. These rates have generally decreased since the last
review, which was expected considering the rising interest rate
environment and related property trade disruption in the CRE
market.
The "North American CMBS Insight Model" (CMBS Model) does not
contemplate the ability to prepay loans, which is generally
considered credit positive because prepaid loans cannot default. As
a result, Morningstar DBRS applied the fully adjusted default
assumptions and model-generated severity figures from the CMBS
Model to the "RMBS Insight 1.3: U.S. Residential Mortgage-Backed
Securities Model" (RMBS Model), which considers sequential and pro
rata structures, for all transactions with the exception of Angel
Oak SB Commercial Mortgage Trust 2020-SBC1 and Cherrywood SB
Commercial Mortgage Loan Trust 2016-1 (Cherrywood 2016-1)).
As part of the RMBS Model analysis, Morningstar DBRS incorporated
four CPR stresses: 5.0%, 10.0%, 15.0%, and 20.0%. In addition, a
22-month recovery lag period (excluding SCMT 2021-SBC10, which
assumed a recovery lag of six months given the seasoning of the
deal), 100% servicer advancing, and three default curves (uniform,
front, and back). The shape and duration of the default curves were
based on the RMBS loss curves. Lastly, rates were stressed upward
and downward, based on the respective loan indices.
Generally, these pools are well-diversified, a factor that combines
with the increased credit support to the rated classes from
issuance (excluding Sutherland Mortgage Trust 2019-SBC8 (SCMT
2019-SBC8) and SCMT 2021-SBC10 deals, which have pro rata
structures) to generally reduce the loan-level event risk of the
transaction. There are noteworthy risks for the transactions,
however, in that property quality is generally considered to be
Average-/Below Average based on those properties samples and that
the loan sponsors are generally less sophisticated operators of CRE
with limited real estate portfolios and experience. These risks are
partially mitigated by borrower or guarantor recourse, regardless
of credit history. Morningstar DBRS notes that ongoing property
financials are not provided as part of the surveillance reviews.
Notes: All figures are in U.S. dollars unless otherwise noted.
[*] Moody's Takes Actions on $129.8MM of US RMBS Issued 2004-2006
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 15 bonds and downgraded
the rating of one bond from 10 US residential mortgage-backed
transactions (RMBS), backed by subprime mortgages issued by RAMP
between 2004 and 2006.
The complete rating actions are as follows:
Issuer: RAMP Series 2004-RS10 Trust
Cl. M-I-1, Upgraded to Aa2 (sf); previously on Jun 9, 2023 Upgraded
to Baa2 (sf)
Cl. M-II-2, Downgraded to Caa3 (sf); previously on Jun 14, 2018
Upgraded to Caa1 (sf)
Issuer: RAMP Series 2005-EFC2 Trust
Cl. M-6, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to A1 (sf)
Issuer: RAMP Series 2005-EFC3 Trust
Cl. M-6, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to A1 (sf)
Issuer: RAMP Series 2005-EFC4 Trust
Cl. M-5, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to Baa2 (sf)
Issuer: RAMP Series 2005-EFC5 Trust
Cl. M-3, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to Aa3 (sf)
Cl. M-4, Upgraded to A1 (sf); previously on Jun 9, 2023 Upgraded to
Ba1 (sf)
Issuer: RAMP Series 2005-RS5 Trust
Cl. M-5, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to Baa2 (sf)
Issuer: RAMP Series 2005-RS7 Trust
Cl. M-2, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to Aa2 (sf)
Cl. M-3, Upgraded to Aa2 (sf); previously on Jun 9, 2023 Upgraded
to Baa3 (sf)
Cl. M-4, Upgraded to B1 (sf); previously on Dec 20, 2018 Upgraded
to Caa2 (sf)
Issuer: RAMP Series 2005-RS8 Trust
Cl. M-2, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to Baa2 (sf)
Cl. M-3, Upgraded to Ba2 (sf); previously on Jun 9, 2023 Upgraded
to Caa2 (sf)
Issuer: RAMP Series 2005-RZ3 Trust
Cl. M-5, Upgraded to A1 (sf); previously on Jun 9, 2023 Upgraded to
Ba3 (sf)
Issuer: RAMP Series 2006-EFC1 Trust
Cl. M-2, Upgraded to Aaa (sf); previously on Jun 9, 2023 Upgraded
to Aa3 (sf)
Cl. M-3, Upgraded to Ba1 (sf); previously on Apr 12, 2017 Upgraded
to Caa3 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds. The rating downgrade is primarily due to a
deterioration in collateral performance, and a decline in credit
enhancement available to the bond.
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 sensitivity to
excess spread.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Takes Various Actions on 51 Classes From 25 U.S. RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 51 classes from six U.S.
RMBS transactions and 19 U.S. RMBS re-securitized real estate
mortgage investment conduits, issued between 2003 and 2010. The
review yielded four downgrades, six discontinuances, 16
withdrawals, and 25 affirmations.
A list of Affected Ratings can be viewed at:
https://rb.gy/k4mtfu
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- Underlying collateral performance or delinquency trends;
-- Available subordination and/or overcollateralization;
-- Erosion of or increases in credit support;
-- A small loan count;
-- Historical and/or outstanding missed interest payments; and
-- Reduced interest payments due to loan modifications.
Rating Actions
S&P said, "The rating changes reflect our opinion regarding the
associated transaction-specific collateral performance and/or
structural characteristics, as well as the application of specific
criteria applicable to these classes. See the ratings list for the
specific rationales associated with each of the classes with rating
transitions.
"The rating affirmations reflect our opinion that our projected
credit support, collateral performance, and credit-related
reductions in interest on these classes has remained relatively
consistent with our prior projections.
"The downgrades due to interest shortfalls are consistent with our
"S&P Global Ratings Definitions," published June 9, 2023, which
imposes a maximum rating threshold on classes that have incurred
missed interest payments resulting from credit or liquidity
erosion. In applying our ratings definitions, we looked to see if
the applicable class received additional compensation beyond the
imputed interest due as direct economic compensation for the delay
in interest payments (e.g., interest on interest) and if the missed
interest payments will be repaid by the maturity date.
"In instances where the class does receive additional compensation
for outstanding interest shortfalls, our analysis considers the
likelihood that the missed interest payments, including the
capitalized interest, would be reimbursed under our various rating
scenarios. Three classes from three transactions were affected in
this review.
"In instances where the class does not receive additional
compensation for outstanding interest shortfalls, our analysis
focuses on our expectations regarding the length of the interest
payment interruptions to assign the rating on the class. One class
from one transaction was affected in this review.
"We withdrew our ratings on 15 classes from 13 transactions due to
the small number of loans remaining in the related/underlying group
or structure. Once a pool has declined to a de minimis amount, its
future performance becomes more difficult to project. As such, we
believe there is a high degree of credit instability that is
incompatible with any rating level. Additionally, as a result, we
applied our interest-only criteria, "Global Methodology For Rating
Interest-Only Securities," published April 15, 2010, on one class,
which resulted in a rating withdrawal."
[*] S&P Takes Various Actions On 64 Classes From 7 US RMBS Deals
----------------------------------------------------------------
S&P Global Ratings completed its review of 64 ratings from seven
U.S. RMBS transactions issued between 2003 and 2007. The review
yielded 45 affirmations and 19 withdrawals.
A list of Affected Ratings can be viewed at:
https://rb.gy/iz0psa
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- Erosion in credit support;
-- A small loan count; and
-- Payment priority.
Rating Actions
S&P said, "The rating changes reflect our view regarding the
associated transaction-specific collateral performance, structural
characteristics, and/or the application of specific criteria
applicable to these classes. See the ratings list for the specific
rationales associated with each of the classes with rating
transitions.
"The rating affirmations reflect our view that our projected credit
support, collateral performance, and credit-related reductions in
interest on these classes have remained relatively consistent with
our prior projections.
"We withdrew our ratings on 16 classes from three transactions due
to the small number of loans remaining in the related group. Once a
pool has declined to a de minimis amount, its future performance
becomes more difficult to project. As such, we believe there is a
high degree of credit instability that is incompatible with any
rating level.
"Additionally, we withdrew our ratings on three classes from
Sequoia Mortgage Trust 2004-8 due to our view that because the
payment allocation triggers are passing, which allows principal
payments to be made to more subordinate classes, projected credit
support for the affected classes continues to erode. In addition
there is an increasing delinquency trend that may result in
insufficient principal to pay down the securities."
*********
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