/raid1/www/Hosts/bankrupt/TCR_Public/240505.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, May 5, 2024, Vol. 28, No. 125
Headlines
ALLEGRO CLO X: Moody's Lowers Rating on $3MM Class F Notes to Caa2
AMERICAN CREDIT 2024-2: S&P Assigns BB- (sf) Rating on Cl. E Notes
ARES LXXI CLO: Fitch Assigns 'B-(EXP)sf' Rating on Class F Notes
BARROW HANLEY III: S&P Assigns Prelim BB-(sf) Rating on E Notes
BRIDGE STREET IV: Fitch Assigns 'BB-sf' Rating on Class E Notes
BX TRUST 2021-VIEW: DBRS Confirms B(high) Rating on Class G Certs
CHASE HOME 2024-4: DBRS Gives Prov. B(low) Rating on B5 Certs
CHASE HOME 2024-4: Fitch Assigns Bsf Final Rating on Cl. B-5 Certs
COLT 2024-INV2: S&P Assigns 'B (sf)' Rating on Class B-2 Certs
CONNECTICUT 2024-R03: DBRS Finalizes BB(high) Rating on 4 Classes
DEWOLF PARK CLO: Moody's Cuts Rating on $30MM Class E Notes to B1
EFMT 2024-INV1: S&P Assigns B- (sf) Rating on Class B-2 Certs
FLAGSHIP CREDIT 2024-1: DBRS Finalizes BB Rating on Class E Notes
GOLDENTREE LOAN 9: S&P Assigns B- (sf) Rating on Class F-R Notes
GS MORTGAGE 2019-GC39: Fitch Affirms CCC Rating on Class G-RR Certs
HILDENE TRUPS A9C: Moody's Assigns B1 Rating to $34MM Cl. B Notes
HPS LOAN 2024-19: S&P Assigns Prelim BB- (sf) Rating on E Notes
JP MORGAN 2024-4: DBRS Gives Prov. B(low) Rating on Class B5 Certs
KAWARTHA CAD 2024-1: DBRS Finalizes BB(high) Rating on E Notes
MAD COMMERCIAL 2019-650M: Fitch Affirms CCC Rating on Class B Debt
MELLO MORTGAGE 2024-SD1: DBRS Gives Prov. BB(high) on M2 Notes
MELLO MORTGAGE 2024-SD1: Fitch Assigns BBsf Rating on Cl. M2 Notes
MORGAN STANLEY 2014-C18: DBRS Confirms B(high) Rating on E Certs
MORGAN STANLEY 2015-UBS8: DBRS Confirms B Rating on Class XD Certs
NELNET STUDENT 2023-A: DBRS Confirms BB Rating on Class E Notes
OCP CLO 2014-7: S&P Affirms 'B- (sf)' Rating on Class E-RR Notes
PRESTIGE AUTO 2022-1: S&P Affirms 'BB-(sf)' Rating on Cl. E Notes
RAD CLO 4: Moody's Assigns Ba3 Rating to $16.95MM Class E-R Notes
SCG 2024-MSP: DBRS Finalizes B Rating on Class F Certs
SDAL TRUST 2024-DAL: S&P Assigns BB-(sf) Rating on Class HRR Certs
TOWD POINT 2024-1: DBRS Finalizes B(low) Rating on Class B2 Notes
UNITED AUTO 2024-1: DBRS Gives Prov. BB(high) Rating on E Notes
UNITED AUTO 2024-1: S&P Assigns BB (sf) Rating on Class E Notes
VERUS SECURITIZATION 2022-8: S&P Affirms B- (sf) on B-2 Notes
WELLS FARGO 2014-LC16: DBRS Cuts Rating on 4 Classes to D
WELLS FARGO 2021-INV2: Moody's Ups Rating on Cl. B-5 Certs to Ba3
WFRBS 2014-LC14: DBRS Confirms B Rating on Class F Certs
[*] DBRS Hikes 4 Credit Ratings From 5 Regional Trust Transactions
[*] DBRS Reviews 207 Classes From 15 US RMBS Transactions
*********
ALLEGRO CLO X: Moody's Lowers Rating on $3MM Class F Notes to Caa2
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Moody's Ratings has upgraded the ratings on the following notes
issued by Allegro CLO X, Ltd.:
US$32,400,000 Class B-R Senior Secured Floating Rate Notes due 2032
(the "Class B-R Notes"), Upgraded to Aa1 (sf); previously on April
20, 2021 Assigned Aa2 (sf)
US$15,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2032 (the "Class C-R Notes"), Upgraded to A1 (sf);
previously on April 20, 2021 Assigned A2 (sf)
Moody's has also downgraded the rating on the following notes:
US$3,000,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2032 (the "Class F Notes"), Downgraded to Caa2 (sf); previously
on August 7, 2020 Downgraded to Caa1 (sf)
Allegro CLO X, Ltd., originally issued in June 2019 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 April 2024.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating actions reflect the benefit of the end of the
deal's reinvestment period in April 2024. In light of the
reinvestment restrictions during the amortization period which
limit the ability of the manager to effect significant changes to
the current collateral pool, Moody's analyzed the deal assuming a
higher likelihood that the collateral pool characteristics will be
maintained and continue to satisfy certain covenant requirements.
In particular, Moody's assumed that the deal will benefit from
lower weighted average rating factor (WARF) level compared to their
respective covenant levels. Moody's modeled a WARF of 2828 compared
to its current covenant level of 3008.
The downgrade rating action on the Class F notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
March 2024 trustee report [1], the OC ratio for the Class F notes
which is also the reinvestment overcollateralization test, is
reported at 104.82% versus March 2023 level [2] of 105.06%. Based
on Moody's calculation, the total collateral par balance, including
recoveries from defaulted securities, is $291.4 million, or $8.6
million less than the $300 million initial par amount targeted
during the deal's ramp-up. Furthermore, based on March 2024 trustee
report [3], the proportion of obligors in the portfolio with
Moody's Rating of Caa1 or lower is currently 8.1% of the CLO par,
versus March 2023 level [4] of 4.7%.
No action was taken on the Class A-R notes, Class D-R notes and
Class E notes because their expected loss 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: $289,991,548
Defaulted par: $3,492,716
Diversity Score: 85
Weighted Average Rating Factor (WARF): 2828
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.42%
Weighted Average Recovery Rate (WARR): 47.02%
Weighted Average Life (WAL): 4.35 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS and lower recoveries
on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
AMERICAN CREDIT 2024-2: S&P Assigns BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to American Credit
Acceptance Receivables Trust 2024-2's automobile receivables-backed
notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The ratings reflect:
-- The availability of approximately 64.27%, 57.57%, 46.80%,
37.88%, and 33.75% credit support (hard credit enhancement and
haircut to excess spread) for the class A, B, C, D, and E notes,
respectively, based on final post-pricing stressed cash flow
scenarios. These credit support levels provide at least 2.35x,
2.10x, 1.70x, 1.37x, and 1.20x coverage of S&P's expected
cumulative net loss of 27.25% for the class A, B, C, D, and E
notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.37x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB- (sf)' ratings on
the class A, B, C, D, and E notes, respectively, are within its
credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
ratings.
-- The collateral characteristics of the series' subprime
automobile loans, S&P's view of the credit risk of the collateral,
and its updated macroeconomic forecast and forward-looking view of
the auto finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the ratings.
-- S&P's operational risk assessment of American Credit Acceptance
LLC as servicer, and its view of the company's underwriting and
backup servicing arrangement with Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with its sector benchmark.
-- The transaction's payment and legal structures.
Ratings Assigned
American Credit Acceptance Receivables Trust 2024-2
Class A, $245.37 million: AAA (sf)
Class B, $55.58 million: AA (sf)
Class C, $104.97 million: A (sf)
Class D, $91.32 million: BBB (sf)
Class E, $50.05 million: BB- (sf)
ARES LXXI CLO: Fitch Assigns 'B-(EXP)sf' Rating on Class F Notes
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Ares LXXI CLO Ltd.
Entity/Debt Rating
----------- ------
Ares LXXI CLO Ltd.
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
F LT B-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Ares LXXI CLO Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Ares
CLO Management LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $500 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.14, 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
97.6% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.33% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.5%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'BBB+sf' and 'AA+sf' for class A-2, between 'BB+sf' and 'A+sf' for
class B, between 'B+sf' and 'BBB+sf' for class C, between less than
'B-sf' and 'BB+sf' for class D, between less than 'B-sf' and 'B+sf'
for class E and less than 'B-sf' for class F.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1 and class A-2
notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AA+sf' for class C, 'A+sf' for
class D, 'BBB+sf' for class E, and 'BB+sf' for class F.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
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 Ares LXXI CLO 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.
BARROW HANLEY III: S&P Assigns Prelim BB-(sf) Rating on E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Barrow
Hanley CLO III Ltd./Barrow Hanley CLO III 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 BH Credit Management LLC.
The preliminary ratings are based on information as of April 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 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
Barrow Hanley CLO III Ltd./Barrow Hanley CLO III LLC
Class A-1, $240 million: AAA(sf)
Class A-2, $16 million: AAA(sf)
Class B, $48 million: AA(sf)
Class C (deferrable), $24 million: A(sf)
Class D (deferrable), $24 million: BBB-(sf)
Class E (deferrable), $14 million: BB-(sf)
Subordinated notes, $37.2 million: Not rated
BRIDGE STREET IV: Fitch Assigns 'BB-sf' Rating on Class E Notes
---------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Bridge
Street CLO IV Ltd.
Entity/Debt Rating
----------- ------
Bridge Street
CLO IV Ltd.
A LT NRsf New Rating
A Loans LT NRsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Bridge Street CLO IV Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by FS
Structured Products Advisor, LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $350 million of primarily first lien
senior secured 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 24.29, 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
97.43% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.78% versus a
minimum covenant, in accordance with the initial expected matrix
point of 67.8%.
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 6.25% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the P&I 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, '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, 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.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Bridge Street CLO
IV 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.
BX TRUST 2021-VIEW: DBRS Confirms B(high) Rating on Class G Certs
-----------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2021-VIEW
issued by BX Trust 2021-VIEW as follows:
-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class X-NCP at AA (sf)
-- Class D at AA (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (high) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which, despite a recently reported
decline in the collateral retail property's occupancy rate and cash
flow, has remained generally in line with Morningstar DBRS'
expectations since issuance.
The underlying loan for the transaction is a first mortgage secured
by the fee-simple interest in a 509,500-square-foot (sf) portion of
The Shops at Skyview, a retail complex in downtown Flushing,
Queens. The property, constructed in 2010, consists of two retail
buildings, known as the West Retail building and the East Retail
building, and a parking garage. The West Retail building is
anchored by BJ's Wholesale Club (BJ's), and the East Retail
building is anchored by a noncollateral tenant, Target.
Approximately 23.5% of the subject's NRA is occupied by
investment-grade tenants, including Best Buy, Marshalls, Nike,
JPMorgan Chase Bank, OshKosh, and Starbucks. Prior to issuance, the
sponsor exercised the early termination option for Nordstrom Rack
in February 2020 to begin construction and plans for an upscale
food hall that was slated to be delivered in 2022, converting
approximately 33,000 sf of vacant retail space to fast casual
dining options on two levels of the mall; however, the servicer has
confirmed that the food hall project is no longer underway, and the
space is being actively marketed for lease on the property's
website.
The loan has a two-year initial term, with three 12-month extension
options, and pays interest only (IO) through the fully extended
maturity date of June 2026. The loan documents also stipulate the
borrower maintain an interest rate protection agreement with a
strike price of 2.50%, and as of the commencement date of any
extension, equal to the greater of 2.50% and the yearly rate of
interest that yields a debt service coverage ratio (DSCR) of no
less than 1.10 times (x). The borrower used whole loan proceeds to
refinance existing debt of $306.0 million and contributed
approximately $44.8 million of cash equity at closing,
demonstrating a strong commitment to the property. According to the
servicer, the borrower has not yet provided notice to extend the
loan beyond the upcoming June 2024 maturity. The loan sponsors are
two affiliates of The Blackstone Group, Inc. (Blackstone), a real
estate investment group with approximately $196.3 billion in assets
under management. Since 2018, the sponsors have invested more than
$5.9 million of capital into the property for leasing allowances
and landlord work.
The property's largest collateral tenant BJ's Wholesale Club (23.7%
of the net rentable area (NRA)) has a lease expiration date in
January 2030, several years beyond the loan's fully extended
maturity date. The property was 88.4% leased and 87.4% physically
occupied, as of YE2022, up from an occupancy rate of 79.9% at
issuance. Since issuance, major tenant, Burlington (6.4% of NRA)
has taken occupancy as a new tenant. The borrower recently executed
a short-term extension for the second-largest tenant, Best Buy
(8.8% of the NRA), to September 2024 from January 2024. A December
2023 rent roll provided to Morningstar DBRS showed the property was
81.1% occupied and 88.6% leased with three tenants accounting for
6.8% of NRA scheduled to take occupancy between March 2024 and July
2024. Five tenants, representing 5.4% of NRA, with lease expiration
dates in 2024 at issuance, recently renewed their leases for three
to five years. According to the servicer, the borrower is currently
in negotiations with prospective tenants slated to backfill
approximately 15.0% of NRA.
As of YE2022, the servicer reported net cash flow (NCF) of $20.2
million, which was an increase from the prior year but a -16.2%
variance from the Issuer's NCF of $24.2 million and a -9.6%
variance from the Morningstar DBRS NCF of $22.3 million at
issuance, primarily due to an increase in expenses. The servicer
also recently reported a YE2023 NCF of $15.6 million, with the
decline primarily the result of a significant decline in expense
reimbursements from 2022 of approximately $6.0 million. However,
based on the YE2023 financial statement provided to Morningstar
DBRS, it appears the property income is artificially depressed in
the servicer's YE2023 analysis; the servicer was contacted, and a
response provided indicated a corrected analysis to show income
stable to improving over YE2022 would be made available in the near
term.
Although the occupancy rate and overall performance remain in line
with our expectations at issuance, given the increase in expenses
of nearly 30% since issuance and the upcoming maturity, Morningstar
DBRS stress-tested the value with a NCF of $19.7 million, to
reflect the higher operating expense ratio, and cap rate of 7.0%,
resulting in a Morningstar DBRS value of $282.1 million and a
Morningstar DBRS loan-to-value ratio (LTV) of 101.0%. The
Morningstar DBRS ratings assigned to classes E through G are higher
than the results implied by the loan-to-value ratio sizing
benchmarks. These variances are warranted given property occupancy,
and revenues have continued to exhibit stable to improving
performance. Morningstar DBRS will continue to monitor expenses and
gather additional information related to the increases.
Notes: All figures are in U.S. dollars unless otherwise noted.
CHASE HOME 2024-4: DBRS Gives Prov. B(low) Rating on B5 Certs
-------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the Mortgage
Pass-Through Certificates, Series 2024-4 (the Certificates) to be
issued by Chase Home Lending Mortgage Trust 2024-4 (CHASE 2024-4)
as follows:
-- $500.4 million Class A-2 at AAA (sf)
-- $500.4 million Class A-3 at AAA (sf)
-- $500.4 million Class A-3-X at AAA (sf)
-- $375.3 million Class A-4 at AAA (sf)
-- $375.3 million Class A-4-A at AAA (sf)
-- $375.3 million Class A-4-X at AAA (sf)
-- $125.1 million Class A-5 at AAA (sf)
-- $125.1 million Class A-5-A at AAA (sf)
-- $125.1 million Class A-5-X at AAA (sf)
-- $300.3 million Class A-6 at AAA (sf)
-- $300.3 million Class A-6-A at AAA (sf)
-- $300.3 million Class A-6-X at AAA (sf)
-- $200.2 million Class A-7 at AAA (sf)
-- $200.2 million Class A-7-A at AAA (sf)
-- $200.2 million Class A-7-X at AAA (sf)
-- $75.1 million Class A-8 at AAA (sf)
-- $75.1 million Class A-8-A at AAA (sf)
-- $75.1 million Class A-8-X at AAA (sf)
-- $62.7 million Class A-9 at AAA (sf)
-- $62.7 million Class A-9-A at AAA (sf)
-- $62.7 million Class A-9-X at AAA (sf)
-- $563.1 million Class A-X-1 at AAA (sf)
-- $11.2 million Class B-1 at AA (low) (sf)
-- $11.2 million Class B-1-A at AA (low) (sf)
-- $11.2 million Class B-1-X at AA (low) (sf)
-- $5.6 million Class B-2 at A (low) (sf)
-- $5.6 million Class B-2-A at A (low) (sf)
-- $5.6 million Class B-2-X at A (low) (sf)
-- $3.8 million Class B-3 at BBB (low) (sf)
-- $2.1 million Class B-4 at BB (low)(sf)
-- $1.2 million Class B-5 at B (low) (sf)
Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-X-1,
B-1-X, and B-2-X are interest-only (IO) certificates. The class
balances represent notional amounts.
Classes A-2, A-3, A-3-X, A-4, A-4-A, A-4-X, A-5, A-6, A-7, A-7-A,
A-7-X, A-8, A-9, B-1 and B-2 are exchangeable certificates. These
classes can be exchanged for combinations of depositable
certificates as specified in the offering documents.
Classes A-2, A-3, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A,
A-8, and A-8-A are super senior certificates. These classes benefit
from additional protection from the senior support certificates
(Classes A-9 and A-9-A) with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 4.35% of credit
enhancement provided by subordinated certificates. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf)
ratings reflect 2.45%, 1.50%, 0.85%, 0.50%, and 0.30% 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 first-lien,
fixed-rate, prime residential mortgages funded by the issuance of
the Certificates. The Certificates are backed by 512 loans with a
total principal balance of $588,758,391 as of the Cut-Off Date
(April 1, 2024).
The pool consists of fully amortizing fixed-rate mortgages with
original terms to maturity of primarily 30 years and a
weighted-average loan age of six months. All of the loans are
traditional, nonagency, prime jumbo mortgage loans. In addition,
all of the loans in the pool were originated in accordance with the
new general Qualified Mortgage (QM) rule.
J.P. Morgan Chase Bank N.A (JPMCB) is the Originator and Servicer
of 100.0% of the pool.
For this transaction, generally, the servicing fee payable for
mortgage loans is composed of three separate components: the base
servicing fee, the delinquent servicing fee, and the additional
servicing fee. These fees vary based on the delinquency status of
the related loan and will be paid from interest collections before
distribution to the securities.
U.S. Bank Trust Company, National Association, rated AA (high) with
a Negative trend by Morningstar DBRS, will act as Securities
Administrator. U.S. Bank Trust National Association will act as
Delaware Trustee. JPMCB will act as Custodian. Pentalpha
Surveillance LLC will serve as the Representations and Warranties
Reviewer.
The transaction employs a senior-subordinate, shifting-interest,
cash-flow structure that incorporates performance triggers and
credit enhancement floors.
Morningstar DBRS' credit ratings on the Certificates address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Certificates are the
related Interest Distribution Amounts, the related Interest
Shortfalls, and the related Class Principal Amounts (for
Non-Interest-Only Certificates).
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.
CHASE HOME 2024-4: Fitch Assigns Bsf Final Rating on Cl. B-5 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Chase Home Lending
Mortgage Trust 2024-4 (Chase 2024-4).
Entity/Debt Rating Prior
----------- ------ -----
Chase 2024-4
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 BBBsf New Rating BBB(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has assigned final ratings to the residential mortgage-backed
certificates issued by Chase Home Lending Mortgage Trust 2024-4
(Chase 2024-4) as indicated above. The certificates are supported
by 512 loans with a total balance of approximately $589.20 million
as of the cutoff date. The scheduled balance as of the cutoff date
is $588.76 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 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, 99.6% qualify as safe-harbor qualified mortgage
(SHQM) average prime offer rate (APOR); the remaining 0.4% qualify
as rebuttable presumption QM (APOR). There is no exposure to Libor
in this transaction. The collateral comprises 100% fixed-rate
loans, and the certificates are fixed rate and capped at the net
weighted average coupon (WAC) or based on the net WAC.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, it views the home price values of
this pool as 10.0% above a long-term sustainable level (versus
11.1% on a national level as of 3Q23, up 1.68% since the prior
quarter). 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.
High-Quality Prime Mortgage Pool (Positive): The pool consists of
high-quality, fixed-rate, fully amortizing loans with maturities of
30 years; 99.6% of the loans qualify as SHQM APOR; the remaining
0.4% qualify as rebuttable presumption QM (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 10.0 months, according to
Fitch. The pool has a WA FICO score of 775, as determined by Fitch
and is based on the original FICO for newly originated loans and
the updated FICO for loans seasoned 12 months or more, which is
indicative of very high credit-quality borrowers. A large
percentage of the loans have a borrower with a Fitch derived FICO
score equal to or above 750.
Fitch determined that 83.0% of the loans have a borrower with a
Fitch-determined FICO score equal to or above 750. In addition, the
original WA combined loan-to-value (CLTV) ratio of 74.8%,
translating to a sustainable LTV (sLTV) ratio of 78.5%, 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 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 93.4% of the pool; condominiums
make up 5.9%; and co-ops make up 0.7%. The pool consists of loans
with the following loan purposes, as determined by Fitch: purchases
(95.8%), cashout refinances (1.6%) and rate-term refinances (2.6%).
Fitch views favorably that no loans are for investment properties
and a majority of mortgages are purchases.
Of the pool loans, 32.9% are concentrated in California, followed
by Washington and Texas. The largest MSA concentration is in the
Los Angeles-Long Beach-Santa Ana, CA MSA (10.9%), followed by the
San Francisco-Oakland-Fremont, CA MSA (8.3%) and the
Seattle-Tacoma-Bellevue, WA MSA (8.2%). The top three MSAs account
for 27.5% of the pool. As a result, no probability of default (PD)
penalty was 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, JPMCB, is obligated to advance delinquent P&I until
deemed nonrecoverable; 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 0.50% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 41.5% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Digital Risk and AMC. The third-party due diligence
described in Form 15E focused on four areas: compliance review,
credit review, valuation review and data integrity. Fitch
considered this information in its analysis and, as a result, Fitch
decreased its loss expectations by 0.14% at the 'AAAsf' stress due
to 74.2% due diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 74.2% 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 2024-4 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in Chase 2024-4, 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.
COLT 2024-INV2: S&P Assigns 'B (sf)' Rating on Class B-2 Certs
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to COLT 2024-INV2 Mortgage
Loan Trust's mortgage-backed certificates.
The certificate issuance is an RMBS transaction backed by 914
first-lien, fixed- and adjustable-rate, fully amortizing,
ability-to-repay (ATR)-exempt, business-purpose investment property
residential mortgage loans to prime and nonprime borrowers (some
with interest-only periods). The loans are secured by single-family
residential properties, planned-unit developments, condominiums,
townhomes, and two- to four-family residential properties.
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representation and warranty framework, and geographic
concentration;
-- The mortgage aggregator and reviewed originators; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. Per our latest macroeconomic update, the U.S. economy
appears on track for 2.5% average growth in 2024 (up from 1.5% in
our November 2023 forecast), spurred by a sturdy labor
market--repeating last year's outperformance versus peers. We
continue to expect the economy to transition to below-potential
growth as the year progresses. We apply 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), reflecting
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(i)
COLT 2024-INV2 Mortgage Loan Trust
Class A-1, $160,604,000: AAA (sf)
Class A-2, $15,578,000: AA (sf)
Class A-3, $27,077,000: A (sf)
Class M-1, $15,702,000: BBB (sf)
Class B-1, $11,869,000: BB (sf)
Class B-2, $9,025,000: B (sf)
Class B-3, $7,419,002: NR
Class A-IO-S, Notional(ii): NR
Class X, Notional(ii): NR
Class R, N/A: NR
(i)The ratings address the ultimate payment of interest and
principal.
(ii)Interest can be deferred on the classes, the fixed coupons are
subject to the pool's net WAC rate, and the interest rate on the
class B-1, B-2, and B-3 certificates equals the pool's net WAC.
(ii)The notional amount will equal the aggregate stated principal
balance of the mortgage loans as of the first day of the related
due period.
NR--Not rated.
CONNECTICUT 2024-R03: DBRS Finalizes BB(high) Rating on 4 Classes
-----------------------------------------------------------------
DBRS, Inc. finalized the following provisional credit ratings on
the Connecticut Avenue Securities (CAS) Series 2024-R03 Notes (the
Notes) issued by Connecticut Avenue Securities Trust 2024-R03 (CAS
2024-R03 or the Issuer):
-- $273.9 million Class 2M-1 at A (low) (sf)
-- $236.6 million Class 2M-2 at BBB (high) (sf)
-- $78.9 million Class 2M-2A at BBB (high) (sf)
-- $78.9 million Class 2M-2B at BBB (high) (sf)
-- $78.9 million Class 2M-2C at BBB (high) (sf)
-- $117.9 million Class 2B-1 at BB (high) (sf)
-- $59.0 million Class 2B-1A at BBB (low) (sf)
-- $59.0 million Class 2B-1B at BB (high) (sf)
-- $78.9 million Class 2E-A1 at BBB (high) (sf)
-- $78.9 million Class 2A-I1 at BBB (high) (sf)
-- $78.9 million Class 2E-A2 at BBB (high) (sf)
-- $78.9 million Class 2A-I2 at BBB (high) (sf)
-- $78.9 million Class 2E-A3 at BBB (high) (sf)
-- $78.9 million Class 2A-I3 at BBB (high) (sf)
-- $78.9 million Class 2E-A4 at BBB (high) (sf)
-- $78.9 million Class 2A-I4 at BBB (high) (sf)
-- $78.9 million Class 2E-B1 at BBB (high) (sf)
-- $78.9 million Class 2B-I1 at BBB (high) (sf)
-- $78.9 million Class 2E-B2 at BBB (high) (sf)
-- $78.9 million Class 2B-I2 at BBB (high) (sf)
-- $78.9 million Class 2E-B3 at BBB (high) (sf)
-- $78.9 million Class 2B-I3 at BBB (high) (sf)
-- $78.9 million Class 2E-B4 at BBB (high) (sf)
-- $78.9 million Class 2B-I4 at BBB (high) (sf)
-- $78.9 million Class 2E-C1 at BBB (high) (sf)
-- $78.9 million Class 2C-I1 at BBB (high) (sf)
-- $78.9 million Class 2E-C2 at BBB (high) (sf)
-- $78.9 million Class 2C-I2 at BBB (high) (sf)
-- $78.9 million Class 2E-C3 at BBB (high) (sf)
-- $78.9 million Class 2C-I3 at BBB (high) (sf)
-- $78.9 million Class 2E-C4 at BBB (high) (sf)
-- $78.9 million Class 2C-I4 at BBB (high) (sf)
-- $157.7 million Class 2E-D1 at BBB (high) (sf)
-- $157.7 million Class 2E-D2 at BBB (high) (sf)
-- $157.7 million Class 2E-D3 at BBB (high) (sf)
-- $157.7 million Class 2E-D4 at BBB (high) (sf)
-- $157.7 million Class 2E-D5 at BBB (high) (sf)
-- $157.7 million Class 2E-F1 at BBB (high) (sf)
-- $157.7 million Class 2E-F2 at BBB (high) (sf)
-- $157.7 million Class 2E-F3 at BBB (high) (sf)
-- $157.7 million Class 2E-F4 at BBB (high) (sf)
-- $157.7 million Class 2E-F5 at BBB (high) (sf)
-- $157.7 million Class 2-X1 at BBB (high) (sf)
-- $157.7 million Class 2-X2 at BBB (high) (sf)
-- $157.7 million Class 2-X3 at BBB (high) (sf)
-- $157.7 million Class 2-X4 at BBB (high) (sf)
-- $157.7 million Class 2-Y1 at BBB (high) (sf)
-- $157.7 million Class 2-Y2 at BBB (high) (sf)
-- $157.7 million Class 2-Y3 at BBB (high) (sf)
-- $157.7 million Class 2-Y4 at BBB (high) (sf)
-- $78.9 million Class 2-J1 at BBB (high) (sf)
-- $78.9 million Class 2-J2 at BBB (high) (sf)
-- $78.9 million Class 2-J3 at BBB (high) (sf)
-- $78.9 million Class 2-J4 at BBB (high) (sf)
-- $157.7 million Class 2-K1 at BBB (high) (sf)
-- $157.7 million Class 2-K2 at BBB (high) (sf)
-- $157.7 million Class 2-K3 at BBB (high) (sf)
-- $157.7 million Class 2-K4 at BBB (high) (sf)
-- $236.6 million Class 2M-2Y at BBB (high) (sf)
-- $236.6 million Class 2M-2X at BBB (high) (sf)
-- $117.9 million Class 2B-1Y at BB (high) (sf)
-- $117.9 million Class 2B-1X at BB (high) (sf)
Classes 2M-2, 2B-1, 2E-A1, 2E-A2, 2E-A3, 2E-A4, 2E-B1, 2E-B2,
2E-B3, 2E-B4, 2E-C1, 2E-C2, 2E-C3, 2E-C4, 2E-D1, 2E-D2, 2E-D3,
2E-D4, 2E-D5, 2E-F1, 2E-F2, 2E-F3, 2E-F4, 2E-F5, 2-J1, 2-J2, 2-J3,
2-J4, 2-K1, 2-K2, 2-K3, 2-K4, 2M-2Y, 2B-1, and 2B-1Y are Related
Combinable and Recombinable Notes (RCR Notes). Classes 2A-I1,
2A-I2, 2A-I3, 2A-I4, 2B-I1, 2B-I2, 2B-I3, 2B-I4, 2C-I1, 2C-I2,
2C-I3, 2C-I4, 2-X1, 2-X2, 2-X3, 2-X4, 2-Y1, 2-Y2, 2-Y3, 2-Y4,
2M-2X, and 2B-1X are interest-only (IO) RCR Notes.
The A (low) (sf), BBB (high) (sf), BBB (low) (sf), and BB (high)
(sf) credit ratings reflect 3.40%, 2.45%, 2.00%, and 1.55% of
credit enhancement, respectively. Other than the specified classes
above, Morningstar DBRS does not rate any other classes in this
transaction.
CAS 2024-R03 is the 62nd benchmark transaction in the CAS series.
The Notes are subject to the credit and principal payment risk of a
certain reference pool (the Reference Pool) of residential mortgage
loans held in various Fannie Mae-guaranteed mortgage-backed
securities (MBS). As of the Cut-Off Date, the Reference Pool
consists of 74,636 greater-than-20-year term, fully amortizing,
first-lien, fixed-rate mortgage loans underwritten to a full
documentation standard, with original loan-to-value ratios (LTV)
greater than 80%. The mortgage loans were estimated to be
originated on or after May 2022 and were acquired by Fannie Mae
between January 1, 2023, and June 30, 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 SOFR
(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.
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 be allocated only pro
rata between the senior and nonsenior tranches if the performance
tests are satisfied. For CAS 2024-R03, 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 delinquency test is met. Additionally, the
nonsenior tranches will also be entitled to supplemental
subordinate reduction amount if the offered reference tranche
percentage increases above 5.50%.
The interest payments for these transactions are not linked to the
performance of the reference obligations except to the extent that
modification losses have occurred.
The Notes will be scheduled to mature on the payment date in March
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. Citibank, N.A. will act as the Indenture Trustee, Exchange
Administrator, Custodian, and Investment Agent. U.S. Bank National
Association (rated AA (high) with a 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 7.3% 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.
DEWOLF PARK CLO: Moody's Cuts Rating on $30MM Class E Notes to B1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Dewolf Park CLO, Ltd.:
US$60,000,000 Class B-R Senior Secured Floating Rate Notes due
2030, Upgraded to Aa1 (sf); previously on October 15, 2021 Assigned
Aa2 (sf)
US$35,500,000 Class C-R Secured Deferrable Floating Rate Notes due
2030, Upgraded to A1 (sf); previously on October 15, 2021 Assigned
A2 (sf)
Moody's Ratings has also downgraded the rating on the following
notes:
US$30,000,000 Class E Secured Deferrable Floating Rate Notes due
2030, Downgraded to B1 (sf); previously on August 14, 2020
Confirmed at Ba3 (sf)
Dewolf Park CLO, Ltd., originally issued in August 2017 and
partially refinanced in October 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 October 2022.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating actions on the Class B-R and the Class C-R notes
are primarily a result of deleveraging of the senior notes and an
increase in the transaction's over-collateralization (OC) ratios
since May 2023. The Class A-R notes have been paid down by
approximately 16% or $61.5 million since then. Based on the
trustee's April 2024 report [1], the OC ratios for the Class A/B
and the Class C notes are reported at 132.88% and 121.96%,
respectively, versus the May 2023 [2] levels of 130.31% and
120.78%, respectively. Moody's notes that the April 2024
trustee-reported OC ratios do not reflect the April 2024 payment
distribution, when approximately $8.3 million of principal proceeds
were used to pay down the Class A-R Notes on the April 2024 payment
date.
The downgrade rating action on the Class E notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the trustee's April 2024 report [3], the OC ratio for the Class E
notes is reported at 105.69% versus May 2023 [4] level of 106.22%.
Furthermore, the trustee-reported weighted average rating factor
(WARF) has deteriorated to 3101 as of April 2024 [5] compared to
2949 in May 2023 [6].
No actions were taken on the Class A-R and the Class D-R notes
because their expected losses remain commensurate with their
current ratings, after taking into account the CLO's latest
portfolio information, its relevant structural features and its
actual over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $515,824,601
Defaulted par: $3,377,385
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3073
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.29%
Weighted Average Recovery Rate (WARR): 47.3%
Weighted Average Life (WAL): 3.7 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
EFMT 2024-INV1: S&P Assigns B- (sf) Rating on Class B-2 Certs
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to EFMT 2024-INV1's
mortgage pass-through certificates.
The certificate issuance is an RMBS transaction backed by
first-lien, fixed- and adjustable-rate fully amortizing residential
mortgage loans (some with an interest-only period), secured
primarily by single-family residential properties, including
townhomes, planned-unit developments, condominiums, two- to
four-family units, condotels, and five- to 10-unit multifamily
residential properties, to both prime and nonprime borrowers. The
pool has 1,053 loans, which are ability-to-repay-exempt mortgage
loans.
The ratings reflect:
-- The pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework for this
transaction;
-- The mortgage aggregator, Ellington Financial Inc., and the
originators, American Heritage Lending LLC and LendSure Mortgage
Corp.;
-- 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 appears on track for 2.5% average growth in 2024 (up from
1.5% in our November 2023 forecast), spurred by a sturdy labor
market--repeating last year's outperformance versus peers. We
continue to expect the economy to transition to below-potential
growth as the year progresses. We apply 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), reflecting
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(i)
EFMT 2024-INV1
Class A-1A, $150,225,000: AAA (sf)
Class A-1B, $24,938,000: AAA (sf)
Class A-2, $27,191,000: AA- (sf)
Class A-3, $40,561,000: A- (sf)
Class M-1, $21,182,000: BBB- (sf)
Class B-1, $16,224,000: BB- (sf)
Class B-2, $11,417,000: B- (sf)
Class B-3, $8,713,663: Not rated
Class A-IO-S, notional(ii): Not rated
Class X, notional(ii): Not rated
Class R, not applicable: Not rated
(i)The ratings address our expectation for the ultimate payment of
interest and principal.
(ii)Notional amount equals the loans' aggregate stated principal
balance as of the cutoff date.
FLAGSHIP CREDIT 2024-1: DBRS Finalizes BB Rating on Class E Notes
-----------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by Flagship Credit Auto Trust 2024-1 (FCAT
2024-1 or the Issuer):
-- $37,800,000 Class A-1 Notes at R-1 (high) (sf)
-- $145,000,000 Class A-2 Notes at AAA (sf)
-- $34,640,000 Class A-3 Notes at AAA (sf)
-- $37,620,000 Class B Notes at AA (sf)
-- $46,980,000 Class C Notes at A (sf)
-- $33,300,000 Class D Notes at BBB (sf)
-- $11,700,000 Class E Notes at BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of OC, subordination, amounts
held in the reserve account, and excess spread. Credit enhancement
levels are sufficient to support the Morningstar DBRS-projected
cumulative net loss (CNL) assumption under various stress
scenarios.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the ratings address the
timely payment of interest on a monthly basis and the payment of
principal by the legal final maturity date.
(3) The credit quality of the collateral and performance of
Flagship's auto loan portfolio.
-- The pool will include approximately 79% of indirect
originations and 21% of direct originations.
-- The loans in the pool as of the statistical cut-off date will
have a weighted-average FICO of 592 and a weighted-average annual
percentage rate (APR) of 21.12%.
(4) The Morningstar DBRS CNL assumption is 13.25% based on the
expected Cut-Off Date pool composition.
(5) The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary Baseline Macroeconomic Scenarios for Rated
Sovereigns: March 2024 Update, published on March 27, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse Coronavirus Disease (COVID-19) pandemic scenarios,
which were first published in April 2020.
(6) The capabilities of Flagship with regard to originations,
underwriting (UW), and servicing.
-- Morningstar DBRS performed an operational review of Flagship
and considers the entity to be an acceptable originator and
servicer of subprime automobile loan contracts with an acceptable
backup servicer.
(7) The consistent operational history of Flagship and the strength
of the overall Company and its management team.
-- The Flagship senior management team has considerable experience
and a successful track record within the auto finance industry.
-- The quality and consistency of historical static pool data and
performance of the auto loan portfolio.
-- Morningstar DBRS used the static pool approach to generate
static pool projected losses.
-- Morningstar DBRS was conservative in the loss forecast analysis
performed on the static pool data, and no seasoning credit was
given to this collateral.
(8) The Company indicated that it may be subject to various
consumer claims and litigation seeking damages and statutory
penalties. Some litigation against Flagship could take the form of
class-action complaints by consumers; however, the Company
indicated that there is no material pending or threatened
litigation.
(9) The legal structure and presence of legal opinions that are
expected to address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Flagship, that
the trust has a valid first-priority security interest in the
assets, and the consistency with Morningstar DBRS' Legal Criteria
for U.S. Structured Finance.
Morningstar DBRS' credit rating on the securities referenced herein
addresses the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
The associated financial obligations for each of the rated notes
are the related Accrued Note Interest and the related Note
Balance.
Morningstar DBRS' credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. For example, the associated contractual payment
obligation that is not a financial obligation is interest on unpaid
interest for each of the rated 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.
Notes: All figures are in US Dollars unless otherwise noted.
GOLDENTREE LOAN 9: S&P Assigns B- (sf) Rating on Class F-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-RL, A-RN,
A-R, A-J, B-R, C-R, D-R, D-J, E-R, and F-R replacement debt and new
class X-R debt from GoldenTree Loan Management US CLO 9 Ltd., a CLO
originally issued in March 2021 that is managed by GoldenTree Loan
Management II L.P.
On the April 22, 2024, refinancing date, the proceeds from the
replacement debt were 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-RL, A-RN, A-R, A-J, B-R, C-R, D-R, D-J,
E-R, and F-R debt was issued at a higher spread over three-month
SOFR than the original debt.
-- The replacement class A-RL, A-RN, A-R, A-J, B-R, C-R, D-R, D-J,
E-R, and F-R debt was issued at a floating spread, replacing the
current floating spread.
-- The reinvestment period was extended by five years, and the
stated maturity was extended by 4.25 years.
-- The non-call period was revised to April 20, 2026.
-- Class X-R debt was issued in connection with this refinancing.
The debt is expected to be paid down using interest proceeds during
the first eight payment dates beginning with the payment date in
period one.
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."
Ratings Assigned
GoldenTree Loan Management US CLO 9 Ltd./
GoldenTree Loan Management US CLO 9 LLC
Class X-R, $3.50 million: AAA (sf)
Class A-RL, $150.00 million: AAA (sf)
Class A-RN, $0.00 million: AAA (sf)
Class A-R, $298.00 million: AAA (sf)
Class A-J, $7.00 million: AAA (sf)
Class B-R, $77.00 million: AA (sf)
Class C-R (deferrable), $42.00 million: A (sf)
Class D-R (deferrable), $38.50 million: BBB (sf)
Class D-J (deferrable), $10.50 million: BBB- (sf)
Class E-R (deferrable), $21.00 million: BB- (sf)
Class F-R (deferrable), $7.00 million: B- (sf)
Subordinated notes, $40.89 million: Not rated
Ratings Withdrawn
GoldenTree Loan Management US CLO 9 Ltd./
GoldenTree Loan Management US CLO 9 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)'
Class F to not rated from 'B- (sf)'
GS MORTGAGE 2019-GC39: Fitch Affirms CCC Rating on Class G-RR Certs
-------------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of GS Mortgage Securities
Trust 2019-GC39 commercial mortgage pass-through certificates (GSMS
2019-GC39). The Rating Outlooks for eight of the affirmed classes
were revised to Negative from Stable. The Outlook for one class
remains Negative.
Entity/Debt Rating Prior
----------- ------ -----
GSMS 2019-GC39
A-2 36260JAB3 LT AAAsf Affirmed AAAsf
A-3 36260JAC1 LT AAAsf Affirmed AAAsf
A-4 36260JAD9 LT AAAsf Affirmed AAAsf
A-AB 36260JAE7 LT AAAsf Affirmed AAAsf
A-S 36260JAH0 LT AAAsf Affirmed AAAsf
B 36260JAJ6 LT AA-sf Affirmed AA-sf
C 36260JAK3 LT A-sf Affirmed A-sf
D 36260JAL1 LT BBBsf Affirmed BBBsf
E 36260JAQ0 LT BBB-sf Affirmed BBB-sf
F 36260JAS6 LT Bsf Affirmed Bsf
G-RR 36260JAU1 LT CCCsf Affirmed CCCsf
X-A 36260JAF4 LT AAAsf Affirmed AAAsf
X-B 36260JAG2 LT A-sf Affirmed A-sf
X-D 36260JAN7 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Fitch's current ratings
incorporate a deal-level 'Bsf' rating case loss of 4.9%. There are
seven Fitch Loans of Concern (FLOCs; 34.4% of the pool), including
two loans (4.6%) in special servicing.
The Negative Rating Outlooks on classes A-S, X-A, B, C, X-B, D,
X-D, E and F reflect increased pool loss expectations since Fitch's
prior rating action, driven primarily by further performance
declines of two FLOCs that recently transferred to special
servicing, Tulsa Office Portfolio (2.5%) and 57 East 11th Street
(2.1%). The Negative Outlooks also reflect the high overall office
concentration, which accounts for 42% of the pool, and continued
performance declines of the office collateral, including the
largest loan in the pool, 101 California Street (10.7%), given
deteriorating office market conditions in San Francisco.
Downgrades of up to one category are possible with continued
occupancy and cashflow deterioration of the FLOCs, a prolonged
workout on the specially serviced loans or updated appraisal
valuations come in significantly below Fitch's expectations.
The largest contributor to overall pool loss expectations and
largest increase in loss since the prior rating action is the Tulsa
Office Portfolio loan, secured by a 1,026,650-sf office portfolio
consisting of nine buildings in Tulsa, OK. The portfolio consists
of older vintage buildings built between 1973 to 1984. The loan
transferred to special servicing in March 2024 for imminent
monetary default.
As of December 2023, occupancy for the portfolio dropped to 53.6%
from 67% at YE 2022, 66% at YE 2021 and 77% at issuance.
Approximately 13.7% of the portfolio NRA is scheduled to roll in
2024 and 14.6% in 2025. The servicer-reported NOI DSCR has fallen
to 1.31x at YE 2023 from 1.67x at YE 2022, 1.52x at YE 2021 and
1.96x at issuance.
The portfolio has a granular rent roll with over 200 tenants, and
no individual tenant accounts for more than 3% of the portfolio
NRA. The largest tenants in the portfolio include the Federal
Bureau of Investigation (3.0% of portfolio NRA; lease expiry in
July 2025), Finance of America Reverse LLC (1.8%; February 2025)
and Blackhawk Industrial (1.7%; September 2027).
Fitch's 'Bsf' rating case loss of 27.9% (prior to concentration
add-ons) reflects an 11% cap rate, 10% stress to the YE 2023 NOI
and factors an increased probability of default due to the
declining portfolio occupancy and loan's delinquency status.
The second largest contributor to overall pool loss expectations
and second largest increase in loss since the prior rating action
is the 57th East 11th Street loan, secured by a 64,460-sf office
building located in the Greenwich Village neighborhood of New York
City. The property was formerly 100% occupied by WeWork. The
servicer noted that WeWork stopped paying rent in October 2023 and
is no longer operating at the subject after rejecting the lease
during bankruptcy proceedings.
The loan transferred to special servicing in February 2024 due to
payment delinquency. Fitch's 'Bsf' rating case loss (prior to
concentration adjustments) of 34.1% reflects a 9% cap rate, 5%
stress to the YE 2022 NOI and factors a higher probability of
default due to the fully vacated space and loan default.
The third largest contributor to overall pool loss expectations is
The Garfield Apartments loan, which is secured by a
multifamily/retail property located in Cleveland, OH.
The latest reported YE 2022 occupancy for the multifamily portion
was 80%, up from a historical low of 67% in June 2020, but remains
below 82% as of December 2019 and 94% as of February 2019.
Occupancy had improved due to the property offering lower rents and
rent concessions in 2019 and 2020. The servicer-reported NOI DSCR
was 1.28x at YE 2022, compared with 0.73x at YE 2021, 0.70x at YE
2020 and 1.00x at YE 2019. Per the servicer, updated 2023
financials have not yet been provided by the borrower.
The retail portion, which accounts for approximately 25% of the
property's revenue, is occupied by Marble Room (lease expiry
February 2032), Harness Cycle (January 2027) and Shake Shack (May
2029). As of February 2022, the multifamily leased rent averaged
$1,332 per unit, down from $1,637 per unit as of February 2019.
Fitch's 'Bsf' rating case loss of 18.7% (prior to concentration
add-ons) reflects an 8.75% cap rate and a 7.5% stress to the YE
2021 NOI.
Increased CE: As of the April 2024 distribution date, the pool's
aggregate balance has been paid down by 9.4% to $726.8 million from
$802.5 million at issuance. Two loans (3.1% of the pool) have been
defeased. Seventeen loans (67%) are full-term interest-only (IO),
and the remaining 33% of the pool is amortizing. Scheduled loan
maturities include two loans (9%) in 2024, one loan (2%) in 2028,
30 loans (80%) in 2029 and one loan (Moffett Towers II Building V,
9%) in 2035.
Investment-Grade Credit Opinion Loans: Three loans comprising 23.7%
of the transaction received an investment-grade credit opinion at
issuance. Fitch no longer considers the 101 California Street
(10.7%) loan to have the characteristics of an investment-grade
credit opinion given increased vacancy.
101 California Street is secured by a 1,251,483-sf office property
located in San Francisco's Northern Financial District. As of
December 2023, the property was 76.1% occupied, compared 76.3% at
YE 2022, 76.2% at YE 2021, 88.1% at YE 2020 and 92.1% at issuance.
Additional occupancy declines are expected as 16.0% of the NRA is
scheduled to roll in 2024 and 6.2% in 2025. According to 2Q 2024
CoStar data, the Financial District submarket has a vacancy rate of
30.9% and an average rental rate of $52.88 psf, compared to the
subject of 23.9% and $67.40, respectively.
The 365 Bond loan has since repaid in full since issuance. Fitch
maintains an investment-grade credit opinion on the Moffett Towers
II Building V (8.9%) loan.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to super senior 'AAAsf' classes are not expected due to
their 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 junior 'AAAsf' rated classes with Negative Outlooks
are possible with continued performance deterioration of the FLOCs,
increased expected losses and limited to no improvement in class
CE, or if interest shortfalls occur.
Downgrades to classes rated in the 'AA-sf' and 'A-sf' 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 classes rated 'BBBsf', 'BBB-sf' and 'Bsf' are likely
with higher than expected losses from continued underperformance of
the FLOCs, in particular Tulsa Office Portfolio, 57th East 11th
Street and 101 California, and/or with greater certainty of losses
on the specially serviced loans and/or FLOCs.
Downgrades to distressed 'CCCsf' ratings would occur should
additional loans transfer to special servicing and/or default, as
losses are realized and/or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AA-sf' and 'A-sf' category may be
possible with significantly increased CE, coupled with
stable-to-improved pool-level loss expectations and improved
performance on the FLOCs, in particular Tulsa Office Portfolio,
57th East 11th Street, 101 California and The Garfield Apartments.
Upgrades to the 'BBBsf' and 'BBB-sf' 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 the 'Bsf' rated classes would 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' category rated class is 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.
HILDENE TRUPS A9C: Moody's Assigns B1 Rating to $34MM Cl. B Notes
-----------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of notes issued
by Hildene TruPS Resecuritization A9C, LLC (the "Issuer").
Moody's rating action is as follows:
US$55,000,000 Class A Notes due 2036, Assigned Baa3 (sf)
US$34,000,000 Class B Notes due 2036, Assigned B1 (sf)
The Class A Notes and the Class B Notes are referred to herein,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the
risks associated with the portfolio of ALESCO Preferred Funding IX,
Ltd. (the "Underlying TruPS CDO") and structure as described in
Moody's methodology.
The Rated Notes are secured by the following securities that were
issued by the Underlying TruPS CDO on December 15, 2005:
US$47,589,330.67 of the $52,047,065.44 Class C-1 Deferrable Fourth
Priority Mezzanine Secured Floating Rate Notes due June 2036 (the
"Class C-1 Notes")
US$46,745,975.43 of the $46,745,975.43 Class C-2 Deferrable Fourth
Priority Mezzanine Secured Fixed/Floating Rate Notes due June 2036
(the "Class C-2 Notes")
US$9,999,783.41 of the $12,047,931.82 Class C-3 Deferrable Fourth
Priority Mezzanine Secured Fixed/Floating Rate Notes due June 2036
(the "Class C-3 Notes")
US$6,746,841.80 of the $6,746,841.80 Class C-4 Deferrable Fourth
Priority Mezzanine Secured Fixed/Floating Rate Notes due June 2036
(the "Class C-4 Notes")
The Class C-1 Notes, the Class C-2 Notes, the Class C-3 Notes and
the Class C-4 Notes are referred to herein, collectively as the
"Underlying Securities".
Hildene Structured Advisors, LLC will serve as collateral servicer
for this transaction. The transaction prohibits any asset purchases
or substitutions at any time.
In addition to the Rated Notes, the Issuer issued one class of
subordinated notes.
The transaction incorporates par coverage tests which, if
triggered, divert interest proceeds to pay down the notes in order
of seniority. The transaction also includes an interest diversion
feature from and after the June 2030 payment date, when 60% of the
interest at a junior step in the priority of interest payments will
be used to pay the principal on the Class A Notes until the Class A
Notes' principal has been paid in full, then to the payment of
principal of the Class B Notes.
The portfolio of the Underlying TruPS CDO consists of mainly TruPS
issued by US regional and community banks, the majority of which
Moody's does not publicly rate. Moody's assesses the default
probability of bank obligors that do not have public ratings
through credit scores derived using RiskCalc(TM), an econometric
model developed by Moody's Analytics. Moody's evaluation of the
credit risk of the bank obligors in the pool relies on FDIC Q4-2023
financial data. Moody's assumes a fixed recovery rate of 10% for
bank obligations.
Given the continuous challenges facing by the banking sector and
observed sudden credit deterioration of regional banks since early
2023, Moody's conducted additional analysis to evaluate the impact
of such potential risk. Moody's further conducted additional
analysis for potential OC inflation and faster prepayment. Moody's
view the sensitivity of the modeling results as acceptable.
Moody's obtained a loss distribution for this CDO's portfolio by
simulating defaults using Moody's CDOROM(TM), which used Moody's
assumptions for asset correlations and fixed recoveries in a Monte
Carlo simulation framework. Moody's then used the resulting loss
distribution, together with structural features of the CDO, as an
input in its CDOEdge(TM) cash flow model.
For modeling purposes, Moody's used the following base-case
assumptions for the Underlying TruPS CDO's portfolio:
Par amount: $355,599,000
Weighted Average Rating Factor (WARF): 1389
Weighted Average Spread (WAS): 1.89%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Life (WAL): 8.7 years
Methodology Underlying 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
assessments. Because these are not public ratings, they are subject
to additional estimation uncertainty.
HPS LOAN 2024-19: S&P Assigns Prelim BB- (sf) Rating on E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to HPS Loan
Management 2024-19 Ltd./HPS Loan Management 2024-19 LLC's fixed-
and floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by HPS Investment Partners CLO (UK)
LLP.
The preliminary ratings are based on information as of May 1, 2024.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
HPS Loan Management 2024-19 Ltd./HPS Loan Management 2024-19 LLC
Class A-1, $256.00 million: AAA (sf)
Class A-2, $8.00 million: AAA (sf)
Class B-1, $20.00 million: AA+ (sf)
Class B-1-B, $10.00 million: AA+ (sf)
Class B-2, $10.00 million: AA (sf)
Class C-1 (deferrable), $18.00 million: A+ (sf)
Class C-2 (deferrable), $6.00 million: A (sf)
Class D-1 (deferrable), $20.00 million: BBB (sf)
Class D-2 (deferrable), $8.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $40.00 million: Not rated
JP MORGAN 2024-4: DBRS Gives Prov. B(low) Rating on Class B5 Certs
------------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings to the
Mortgage Pass-Through Certificates, Series 2024-4 (the
Certificates) to be issued by J.P. Morgan Mortgage Trust 2024-4
(JPMMT 2024-4):
-- $517.9 million Class A-2 at AAA (sf)
-- $517.9 million Class A-3 at AAA (sf)
-- $517.9 million Class A-3-X at AAA (sf)
-- $388.4 million Class A-4 at AAA (sf)
-- $388.4 million Class A-4-A at AAA (sf)
-- $388.4 million Class A-4-X at AAA (sf)
-- $129.5 million Class A-5 at AAA (sf)
-- $129.5 million Class A-5-A at AAA (sf)
-- $129.5 million Class A-5-X at AAA (sf)
-- $310.7 million Class A-6 at AAA (sf)
-- $310.7 million Class A-6-A at AAA (sf)
-- $310.7 million Class A-6-X at AAA (sf)
-- $207.2 million Class A-7 at AAA (sf)
-- $207.2 million Class A-7-A at AAA (sf)
-- $207.2 million Class A-7-X at AAA (sf)
-- $77.7 million Class A-8 at AAA (sf)
-- $77.7 million Class A-8-A at AAA (sf)
-- $77.7 million Class A-8-X at AAA (sf)
-- $48.1 million Class A-9 at AAA (sf)
-- $48.1 million Class A-9-A at AAA (sf)
-- $48.1 million Class A-9-X at AAA (sf)
-- $566.0 million Class A-X-1 at AAA (sf)
-- $566.0 million Class A-X-2 at AAA (sf)
-- $566.0 million Class A-X-3 at AAA (sf)
-- $12.8 million Class B-1 at AA (low) (sf)
-- $12.8 million Class B-1-A at AA (low) (sf)
-- $12.8 million Class B-1-X at AA (low) (sf)
-- $14.3 million Class B-2 at A (low) (sf)
-- $14.3 million Class B-2-A at A (low) (sf)
-- $14.3 million Class B-2-X at A (low) (sf)
-- $7.9 million Class B-3 at BBB (low) (sf)
-- $3.0 million Class B-4 at BB (low) (sf)
-- $2.4 million Class B-5 at B (low) (sf)
Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-X-1,
A-X-2, A-X-3, B-1-X, and B-2-X are interest-only (IO) certificates.
The class balances represent notional amounts.
Classes A-2, A-3, A-3-X, A-4, A-4-A, A-4-X, A-5, A-6, A-7, A-7-A,
A-7-X, A-8, A-9, A-X-1, B-1, and B-2 are exchangeable certificates.
These classes can be exchanged for combinations of depositable
certificates as specified in the offering documents.
Classes A-2, A-3, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A,
A-8, and A-8-A are super-senior certificates. These classes benefit
from additional protection from the senior support certificates
(Class A-9 and Class A-9-A certificates) with respect to loss
allocation.
The AAA (sf) ratings on the Certificates reflect 7.10% of credit
enhancement provided by subordinated certificates. AA (low) (sf), A
(low) (sf), BBB (low) (sf), BB (sf), and B (low) (sf) ratings
reflect 5.00%, 2.65%, 1.35%, 0.85%, and 0.45% 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 first-lien
fixed-rate prime residential mortgages funded by the issuance of
the Certificates. The Certificates are backed by 620 loans with a
total principal balance of $609,310,301 as of the Cut-Off Date
(April 1, 2024).
The pool consists of fully amortizing fixed-rate mortgages with
original terms to maturity of 30 years and a weighted-average loan
age of two months. Approximately 80.9% of the loans are
traditional, nonagency, prime jumbo mortgage loans. The remaining
19.1% of the pool are conforming mortgage loans that were
underwritten using an automated underwriting system designated by
Fannie Mae or Freddie Mac and were eligible for purchase by such
agencies. Details on the underwriting of conforming loans can be
found in the Key Probability of Default Drivers section. In
addition, all of the loans in the pool were originated in
accordance with the new general Qualified Mortgage rule.
United Wholesale Mortgage, LLC originated 52.7% of the pool.
Various other originators, each comprising less than 15%,
originated the remainder of the loans. The mortgage loans will be
serviced or subserviced, as applicable, by Cenlar FSB (52.7%);
JPMorgan Chase Bank, National Association (33.0%); and PennyMac
Loan Services, LLC (9.0%). For the JPMCB-serviced loans, Shellpoint
Mortgage Servicing will act as interim servicer until the loans
transfer to JPMCB on the servicing transfer date (June 1, 2024).
For certain Servicers in this transaction, the servicing fee
payable for mortgage loans is composed of three separate
components: the base servicing fee, the delinquent servicing fee,
and the additional servicing fee. These fees vary based on the
delinquency status of the related loan and will be paid from
interest collections before distribution to the securities.
Nationstar Mortgage LLC will act as the Master Servicer. Citibank,
N.A. (rated AA (low) with a Stable trend by Morningstar DBRS) will
act as Securities Administrator and Delaware Trustee. Computershare
Trust Company, N.A. will act as Custodian. Pentalpha Surveillance
LLC will serve as the Representations and Warranties Reviewer.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that incorporates performance triggers and
credit enhancement floors.
Notes: All figures are in U.S. dollars unless otherwise noted.
KAWARTHA CAD 2024-1: DBRS Finalizes BB(high) Rating on E Notes
--------------------------------------------------------------
DBRS, Inc. finalized its provisional credit rating of BB (high) on
the Boreal Series 2024-1 Class E Notes (the Class E Notes) issued
by Kawartha CAD Ltd. (the Issuer) referencing the executed Junior
Loan Portfolio Financial Guarantees (the Financial Guarantee) dated
as of April 15, 2024, between the Issuer as Guarantor and Bank of
Montreal (BMO; rated AA with a Stable trend by Morningstar DBRS) as
Beneficiary with respect to a portfolio of Canadian commercial real
estate (CRE) secured loans originated or managed by BMO.
The credit rating on the Class E Notes addresses the timely payment
of interest and ultimate payment of principal on or before the
Scheduled Termination Date (as defined in the Financial Guarantee).
The payment of the interest due to the Class E Notes is subject to
the Beneficiary's ability to pay the Guarantee Fee Amount (as
defined in the Financial Guarantee).
To assess portfolio credit quality, Morningstar DBRS may provide a
credit estimate, internal assessment, or ratings mapping of BMO's
internal ratings model. Credit estimates, internal assessments, and
ratings mappings are not ratings; rather, they represent an
abbreviated analysis, including model-driven or statistical
components of default probability for each obligor that is used in
assigning a rating to a facility sufficient to assess portfolio
credit quality.
Morningstar DBRS' credit rating on the Class E Notes addresses the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations are the timely payment of interest (the
Guarantee Fee Amount) and ultimate payment of principal on or
before the Scheduled Termination Date.
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.
CREDIT RATING RATIONALE/DESCRIPTION
The credit rating is the result of Morningstar DBRS' review of the
transaction structure and the Financial Guarantees of Kawartha CAD
Ltd., a corporation established under the Canada Business
Corporations Act. Kawartha CAD Ltd., Boreal 2024-1 is a synthetic
risk transfer transaction with BMO as the Beneficiary.
In its analysis, Morningstar DBRS considered the following:
(1) The Financial Guarantee, dated as of April 15, 2024.
(2) The integrity of the transaction structure and the form and
sufficiency of available credit enhancement.
(3) The credit quality of the underlying collateral, subject to the
Replenishment Criteria.
(4) The ability of the Class E Notes to withstand projected
collateral loss rates under various stress scenarios.
(5) The legal structure as well as legal opinions addressing
certain matters of the Issuer and the consistency with the
Morningstar DBRS "Legal Criteria for U.S. Structured Finance"
methodology.
(6) Morningstar DBRS' assessment of the origination, servicing, and
management capabilities of BMO.
Morningstar DBRS analyzed the transaction using its CMBS Insight
Model and CLO Insight Model, based on certain reference portfolio
characteristics, including Eligibility Criteria and Replenishment
Criteria, as defined in the Financial Guarantee. The reference
portfolio consists of well-diversified CRE secured loans across
various obligors. The analysis produced satisfactory results, which
supported the credit rating on the Class E Notes.
Notes: The principal methodologies applicable to the credit ratings
are Global Methodology for Rating CLOs and Corporate CDOs,
including its Appendix II: Mapping Financial Institution Internal
Ratings to Morningstar DBRS Credit Ratings for Global Structured
Credit Transactions, and the CLO Insight Model version 1.0.1.0 and
North American CMBS Multi-Borrower Rating Methodology and North
American CMBS Insight Model 1.2.0.0.
MAD COMMERCIAL 2019-650M: Fitch Affirms CCC Rating on Class B Debt
------------------------------------------------------------------
Fitch Ratings has affirmed two classes of MAD Commercial Mortgage
Trust 2019-650M. The Rating Outlook for class A was revised to
Stable from Negative.
Entity/Debt Rating Prior
----------- ------ -----
MAD 2019-650M
A 55283JAA8 LT Bsf Affirmed Bsf
B 55283JAC4 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
The affirmations reflect performance remaining in line with Fitch's
expectations since the last rating action. The Rating Outlook
revision to Stable from Negative incorporates clarity on the
downsize and rental rate reduction of the largest tenant, Ralph
Lauren (RL) since the last rating action. It also reflects limited
near-term rollover, substantial leasing reserves and the
expectation of further lease-up given the strong collateral quality
and submarket positioning of the building.
Fitch's updated sustainable NCF of $42.2 million reflects the
renewal terms of RL, which includes downsizing from 41% of the NRA
to 24% with a rental rate per square footage 30% below the existing
in-place rent, and leases-in-place for the remaining tenants as of
the February 2024 rent roll, with credit given to near-term
contractual rent escalations. The renewed RL lease expires April
2036.
Fitch's NCF also assumes a lease-up of vacant spaces to a
sustainable long-term occupancy of 89.4%. This is above the
submarket occupancy, reflecting the strong collateral quality and
position in the market with unobstructed views of Central Park on
floors 15 through 27 of the property. The lease-up rate assumption
is consistent with recent leasing activity at the building,
including the executed lease of RL on the lower floors of the
building and higher rates achieved on the upper floors. As of April
2024, $19.5 million has been collected in leasing reserves.
According to Costar, and as of 1Q24, the submarket vacancy,
availability rate and average asking rent were 14.2%, 14.6% and $92
psf, respectively.
Cash Flow and Occupancy Declines: The servicer-reported YE 2023 NOI
is up 1.4% from YE 2022, but down 37% from YE 2021 and 21% below YE
2020. Collateral occupancy is expected to decline to 65% with the
downsize of RL, which compares with occupancy of 78% at YE 2022 and
97% at issuance. The departure of MSK (16.7% of NRA) in June 2022
also contributed to the overall decline in occupancy.
High-Quality Office Collateral in Prime Location: The 650 Madison
Avenue property is a 27- story, class A office building in Midtown
Manhattan, that is LEED Gold certified, which has a positive impact
on the ESG score for Waste & Hazardous Materials Management;
Ecological Impacts. Originally constructed in 1957 as an
eight-story base building, the property underwent a significant
expansion in 1987, which added 19 additional stories with views of
Central Park. Fitch assigned the property a quality grade of 'A' at
issuance.
High Fitch Leverage: The $800.0 million mortgage loan has a
Fitch-stressed DSCR and LTV of 0.64x and 137.4%, respectively,
compared with 0.82x and 106.3% at issuance, and 0.69x and 127.5% at
the last rating action. The mortgage debt is $1,332 psf. The
sponsor acquired the property in 2013 for $1.3 billion ($2,165
psf). Fitch utilized a 7.25% cap rate, up from 7% at the last
rating action and at issuance, reflecting comparable properties in
the market along with the deteriorating outlook for office
properties.
Institutional Sponsorship: Vornado (BB+/Stable) is one of the
largest owners and managers of commercial real estate in the U.S.
with a portfolio of 37.1 million sf of office, retail and other
commercial space, primarily located in New York City. Oxford
Properties Group is the global real estate investment, development
and management arm of Ontario Municipal Employees Retirement System
(OMERS) Administration Corporation (AAA/Stable). Oxford Properties
owns and operates a diversified real estate portfolio consisting of
over 100 million sf of office, retail and industrial space, in
addition to multifamily units.
Full-Term, Interest-Only Loan: The fixed-rate loan is interest-only
for the entire 10-year term. The loan matures in December 2029.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Should substantial progress toward lease-up of the vacant spaces in
the building slow significantly, new leasing occurs at rates
well-below current leasing activity and/or occupancy on the
building does not recover to Fitch's sustainable level of 89.4%,
downgrades and Negative Outlooks are possible.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are not considered likely given the current ratings
reflect Fitch's view of sustainable performance, but may be
possible with significant new leasing that contributes to
stabilized performance, including occupancy in excess of 89.4% and
new leasing on the vacant spaces at rates well-above recent leasing
activity, and the prospect for loan refinance is more certain.
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
MAD 2019-650M 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 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.
MELLO MORTGAGE 2024-SD1: DBRS Gives Prov. BB(high) on M2 Notes
--------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings to the
Mortgage-Backed Notes, Series 2024-SD1 (the Notes) to be issued by
Mello Mortgage Capital Acceptance 2024-SD1 (Mello 2024-SD1 or the
Trust) as follows:
-- $79.4 million Class A-1 at AAA (sf)
-- $10.1 million Class A-2 at AA (high) (sf)
-- $10.4 million Class A-3 at A (sf)
-- $8.8 million Class M-1 at BBB (sf)
-- $6.3 million Class M-2 at BB (high) (sf)
The AAA (sf) rating on the Class A-1 Notes reflects 47.05% of
credit enhancement provided by subordinated notes. The AA (high)
(sf), A (sf), BBB (sf), and BB (high) (sf) ratings reflect 40.35%,
33.45%, 27.60%, and 23.40% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The transaction is a securitization of a portfolio of newly
originated and seasoned, first-lien residential mortgages, to be
funded by the issuance of mortgage-backed notes (the Notes). The
Notes are backed by 436 loans with a total principal balance of
approximately $150,047,122 as of the Cut-Off Date (March 31,
2024).
loanDepot.com, LLC, is the Originator, Seller, Servicer and Asset
Manager for the transaction. This transaction represents the first
scratch & dent RMBS securitization issued from the MELLO shelf by
the Sponsor, mello Credit Strategies LLC. Since 2018, 11 prime and
investor agency were previously issued from the MELLO shelf.
Morningstar DBRS calculated the portfolio to be approximately 26
months seasoned on average, though the ages of the loans are quite
dispersed, ranging from three months to 108 months. All of the
loans had origination guideline or document deficiencies, which
prevented these loans from being sold to Fannie Mae, Freddie Mac,
or another purchaser, and the loans were subsequently put back to
the sellers for repurchase by loanDepot. In its analysis,
Morningstar DBRS assessed such defects and applied certain
penalties, consequently increasing expected losses on the mortgage
pool.
In the portfolio, 7.6% of the loans are modified. The modifications
happened less than two years ago for 64.4% of the modified loans.
Within the portfolio, 11 mortgages have non-interest-bearing
deferred amounts, equating to 0.1% of the total unpaid principal
balance (UPB). Unless specified otherwise, all statistics on the
mortgage loans in this report are based on the current UPB,
including the applicable non-interest-bearing deferred amounts.
Based on Issuer-provided information, certain loans in the pool
(7.2%) are not subject to or exempt from the Consumer Financial
Protection Bureau's (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because of seasoning or because they are
business-purpose loans. The loans subject to the ATR rules are
designated as QM Safe Harbor (83.6%), QM Rebuttable Presumption
(6.6%), and Non-QM (2.6%) by UPB.
mello Credit Strategies LLC (the Sponsor) will select the mortgage
loans prior to the up-coming Closing Date. Upon the selection of
the mortgage loans, a transfer will be initiated by the Sponsor to
the Depositor and subsequently from the Depositor to the Issuer. As
the Sponsor, or one of its majority-owned affiliates will acquire
and retain a portion of the Class B Notes and the trust certificate
representing the initial overcollateralization amount to satisfy
the credit risk retention requirements.
The Servicer will have the option, but not the obligation, to sell
any mortgage loan that becomes 60 or more days delinquent under the
Mortgage Bankers Association (MBA) method to maximize proceeds to
the Issuer, provided that such sales to the Sponsor, Seller,
Depositor, or any of their related subsidiaries in aggregate do not
exceed 10% of the unpaid principal balance as of the Cut-Off Date
and the Servicer has obtained at least two additional independent
bids.
The Servicer will not advance any delinquent principal and interest
(P&I) on the mortgages; however, the Servicers are obligated to
make advances in respect of prior liens, insurance, real estate
taxes, and assessments as well as reasonable costs and expenses
incurred in the course of servicing and disposing of properties.
The Issuer has the option to redeem the Notes in full at a price
equal to the sum of (1) the remaining aggregate Note Amount; (2)
any accrued and unpaid interest due on the Notes through the
redemption date (including any Cap Carryover); and (3) any fees and
expenses of the transaction parties, including any unreimbursed
servicing advances (Redemption Price). Such Optional Redemption may
be exercised on or after the payment date in April 2028.
Additionally, the Issuer, at the direction of the Trust Certificate
holder, has an Optional Redemption right on the payment date on or
after April 2026.
The Issuer, at the direction of the Asset Manager, has the option
to sell the mortgage loans to unaffiliated third parties at any
price if the aggregate proceeds of all related sale(s) are
sufficient to pay the Redemption Price. Such Bulk Sale may occur on
or after the payment date in April 2026.
Additionally, a failure to pay the Notes in full by the Payment
Date in April 2029 will trigger a mandatory auction of the
underlying mortgage loans. If the auction fails to elicit
sufficient proceeds to make-whole the Rated Notes, another auction
will follow every four months for the first year and subsequently
auctions will be carried out every six months. If the Asset Manager
fails to conduct the auction, holders of more than 50% of the Class
M-2 Notes will have the right to appoint an auction agent to
conduct the auction.
The transaction employs a sequential-pay cash flow structure with a
bullet feature to Class A-2 and more subordinate notes on the
Redemption Date. P&I collections are commingled and are first used
to pay interest and any Cap Carryover amount to the Notes
sequentially and then to pay Class A-1 until its balance is reduced
to zero, which may provide for timely payment of interest on
certain rated Notes. Class A-2 and below are not entitled to any
payments of principal until the Redemption Date or upon the
occurrence of a Credit Event, except for remaining available funds
representing net sales proceeds of the mortgage loans. Prior to the
Redemption Date or an Event of Default, any available funds
remaining after Class A-1 is paid in full will be deposited into a
Redemption Account. Beginning on the Payment Date in May 2028, the
Class A-1 and the other offered Notes will be entitled to its
initial Note Rate plus the step-up note rate of 1.00% per annum. If
the Issuer does not redeem the rated Notes in full by the payment
date in April 2031 or an Event of Default occurs and is continuing,
a Credit Event will have occurred. After a Credit Event, the Notes
will be entitled to receive a Step-Up Note Rate of 3.000% from the
initial Note Rate. Upon the occurrence of a Credit Event, accrued
interest on Class A-2 and the other offered Notes will be paid as
principal to Class A-1 or the succeeding senior Notes until it has
been paid in full. The redirected amounts will accrue on the
balances of the respective Notes and will later be paid as
principal payments.
Notes: All figures are in U.S. dollars unless otherwise noted.
MELLO MORTGAGE 2024-SD1: Fitch Assigns BBsf Rating on Cl. M2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Mello Mortgage Capital
Acceptance 2024-SD1 (MMCA 2024-SD1).
Entity/Debt Rating Prior
----------- ------ -----
Mello Mortgage
Capital Acceptance
2024-SD1
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAsf New Rating AA(EXP)sf
A3 LT Asf New Rating A(EXP)sf
M1 LT BBBsf New Rating BBB(EXP)sf
M2 LT BBsf New Rating BB(EXP)sf
B LT NRsf New Rating NR(EXP)sf
CERT LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The MMCA 2024-SD1 notes are supported by 436 loans with a balance
of $150.05 million and an aggregate loan age of 26 months (based on
the transaction documents) as of the cutoff date. Each loan in the
pool is a scratch & dent (S&D) loan that was ultimately not
deliverable to Fannie Mae, Freddie Mac (GSEs), or a third-party
purchaser; or resulted in a repurchase demand or voluntary buyout
request from Ginnie Mae as further described in the PPM due to
various underwriting defects.
This is the first Mello S&D transaction to be rated by Fitch. The
loans were originated (and will be serviced) by loanDepot.com, LLC
(loanDepot). loanDepot is assessed by Fitch as an 'Acceptable'
originator and servicer.
The notes are secured by a pool of recently originated and seasoned
fixed- and adjustable-rate, fully amortizing and interest only
(IO), performing, reperforming and non-performing mortgage loans
secured by first liens primarily on one- to four-family residential
properties; planned unit developments (PUDs); condominiums;
manufactured housing; and co-operative shares.
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 (versus
11.1% on a national level as of 3Q23, up 1.68% since the prior
quarter). 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.
Nonprime Credit Quality and Less than Full Documentation
(Negative): The collateral consists of 436 loans, totaling $150
million (including $229,000 deferred principal) and seasoned
approximately 26 months in aggregate. The borrowers have a
relatively weak credit profile (711 Fitch model FICO and 46%
debt-to-income ratio [DTI], which takes into account various
adjustments for improper DTI calculations) and high leverage (83%
sustainable loan-to-value [sLTV]). Of the pool loans, 85.7% are
those where the borrower maintains a primary residence, while 11.5%
are an investor property (including 2.2% with occupancy and
citizenship misrepresentation treated as investor property); the
remaining 2.8% represent a second home.
Additionally, 78.5% of the loans were originated through a retail
channel. Approximately 78% are designated as a qualified mortgage
(QM) loan, while 6.6% are HPQM and 4.1% are non-QM. Although 92.3%
of the loans are current as of the cutoff date, the overall pool
characteristics resemble nonprime collateral.
As determined by Fitch, approximately 59.3% of the loans were
underwritten to less than full documentation (including 42.9% with
income/employment/asset verification and loan documentation defects
treated as no documentation). The tape indicated 98.3% underwritten
to full documentation and the remaining 1.7% to a streamline
refinance program. Overall, Fitch increased the probability of
default (PD) on the non-full documentation loans to reflect the
additional risk.
Guideline Exception Loans (Negative): Each loan in the pool was
flagged with certain documentation deficiencies and
misrepresentation or exceptions to guidelines at origination, which
prevented the sale of the loans to a GSE or another purchaser. The
exceptions ranged from those that are immaterial to Fitch's
analysis (MI issues, loan seasoning and other VA
eligibility-related issues) to those handled by Fitch's model due
to the tape attributes (prior delinquencies and LTVs above
thresholds) to loans with potential compliance exceptions that
received loss adjustments (loans with miscalculated DTIs and
potential ATR issues).
In addition, the loans with missing documentation may extend
foreclosure timelines or increase loss severity (LS), which Fitch
is able to account for in its loss analysis. Of these, about 98.33%
received a final overall due diligence grade of "C" or "D".
Sequential Deal Structure with Overcollateralization and No
Advancing (Mixed): The transaction utilizes a sequential-payment
structure, with a feature that re-allocates interest from the more
junior classes to pay principal on the more senior classes, to the
extent the transaction remains outstanding after the 84th payment
date (April 2031). The amount of interest paid out as principal to
the more senior class is added to the balance of the affected
junior class(es). Offsetting this positive is that the transaction
will not write down the bonds due to potential losses or
under-collateralization.
During periods of adverse performance, the subordinate bonds will
continue to be paid interest from available funds, at the expense
of principal payments that otherwise would have supported the more
senior bonds, while a more traditional structure would have seen
subordinate classes written down and accrue a smaller amount of
interest. The potential for increasing amounts of
under-collateralization is partially mitigated by the reallocation
of available funds after the 84th payment date.
Coupons on the notes are based on the lower of the available fund
cap (AFC) or the stated coupon. If the AFC is paid, it is
considered a coupon cap shortfall (interest shortfall), and the
coupon cap shortfall amount is the difference between the interest
paid (AFC) and what should have been paid based on the stated
coupon.
If the issuer fails to redeem the notes by the expected redemption
date, the coupons will step up by 100bps; after the credit event,
an additional 200bps. Given this, a larger portion of available
funds will be required to make interest payments on the notes,
which may increase the probability of an AFC on the note rates and
potentially result in under-collateralization.
Class B notes will be issued as principal only and will not be
entitled to any interest payments. The trust certificate will
represent a 100% equity interest in the issuer and will not have a
principal balance or an interest rate.
The transaction will have an overcollateralization (OC) amount of
$7.5 million on the closing date or approximately 5.0% of the
collateral UPB, which will provide subordination and protect the
classes from losses. Note amounts will not be written down by
realized losses, although, in certain situations, the proceeds may
be insufficient to cover the payment of all interest and principal
due on the notes.
Additionally, the servicer will not be advancing delinquent monthly
payments of P&I. Because P&I advances made on behalf of loans that
become delinquent and eventually liquidate reduce liquidation
proceeds to the trust, the loan-level LS are less for this
transaction than for those where the servicer is obligated to
advance P&I.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
This defined negative rating sensitivity analysis demonstrates how
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 'AAAsf'. The
analysis indicates there is some potential rating migration, with
higher MVDs for all rated classes compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated classes excluding those being
assigned ratings of 'AAAsf'.
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 environments and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. They should not be used as indicators of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Consolidated Analytics. The thirdparty due diligence
described in Form 15E focused on credit, compliance, and property
valuation review. Fitch considered this information in its analysis
together with the scratch and dent (S&D) defects noted. Given the
100% S&D collateral and the overlap in due diligence findings and
S&D exceptions, Fitch focused on the S&D defect treatments, which
were deemed more punitive. This is reflected in the 'AAAsf'
expected loss of 33.25%.
ESG CONSIDERATIONS
Mello Mortgage Capital Acceptance 2024-SD1 has an ESG Relevance
Score of '4' for Transaction Parties & Operational Risk due to
elevated overall operational risk, which resulted in an increase in
expected losses. While the reviewed originator and servicing party
did not have a material impact on the expected losses, the Tier 2
representations and warranties (R&W) framework with an unrated
counterparty has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
MORGAN STANLEY 2014-C18: DBRS Confirms B(high) Rating on E Certs
----------------------------------------------------------------
DBRS Limited downgraded its credit ratings on two classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-C18
issued by Morgan Stanley Bank of America Merrill Lynch Trust
2014-C18 as follows:
-- Class E to CCC (sf) from B (low) (sf)
-- Class F to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class D at BB (high) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at BBB (low) (sf)
-- Class PST at A (low) (sf)
-- Class 300-A at AA (high) (sf)
-- Class 300-B at A (sf)
-- Class 300-C at BBB (sf)
-- Class 300-D at BB (sf)
-- Class 300-E at B (high) (sf)
The credit rating on Class A-3 was discontinued as it was repaid
with the April 2024 remittance.
Morningstar DBRS changed the trends on Classes D and X-B to
Negative from Stable while Classes 300-C through 300-E were
assigned Negative trends with the April 15, 2024, credit rating
action. All other classes carry Stable trends with the exception of
Classes E and F, which are assigned credit ratings that do not
typically carry a trend in commercial mortgage-backed securities
(CMBS).
The credit rating downgrades reflect Morningstar DBRS' increased
loss expectations for the three loans in special servicing
(representing 7.7% of the pool), and the Negative trends reflect
increased default risk for loans not yet in special servicing as
the pool enters its maturity year. As of the April 2024 remittance,
43 of the original 65 loans remain outstanding and the initial pool
balance of $1.03 billion has been reduced to $479.0 million,
representing 53.6% of collateral reduction since issuance. Realized
trust losses total $19.6 million and have eroded the balance of the
unrated Class G certificate by nearly 65%. All of the remaining
loans are scheduled to mature by YE2024. For the three loans in
special servicing, which represent 7.7% of the pool balance,
Morningstar DBRS' analysis included liquidation scenarios based on
various stresses to the most recent appraised value, resulting in
an aggregate loss forecast of $25.5 million. While Morningstar DBRS
expects the majority of non-specially serviced loans will repay at
maturity based on the pool's weighted-average debt service coverage
ratio (DSCR) that is above 1.90 times (x), Morningstar DBRS has
identified several loans, representing about 35.0% of the pool
balance, to be at increased risk of default given performance
challenges, property type, and/or general market concerns. For
these loans, Morningstar DBRS used stressed loan-to-value ratios
(LTVs) and/or elevated probability of defaults (PODs) to increase
the expected loss as applicable.
The largest loan in special servicing is 25 Taylor (Prospectus
ID#16, 3.6% of the pool). The collateral is an office property
located in San Francisco's Theater District. The building was
previously fully occupied by WeWork on a lease through August 2027;
however, the tenant vacated in 2021. The loan transferred to
special servicing in February 2023, which the special servicing is
currently pursuing foreclosure while a receiver was recently
appointed. Since the last credit rating action, an appraisal was
conducted. The resulting value, dated October 2023, was $8.7
million, down from the issuance appraised value of $28.1 million.
Morningstar DBRS' liquidation analysis is based on a stress to the
most recent appraised value given the softening submarket
performance, lack of leasing activity and general lack of liquidity
for this property type. The resulting projected loss severity
exceeds 75%.
The largest loan in the pool is 300 North LaSalle (Prospectus ID#2,
17.2% of the pool), which is secured by a 1.3 million-square-foot
(sf) Class A office building in Chicago's River North submarket.
There is $82.5 million in senior debt held in the pooled trust, and
a $107.8 million pari passu portion is secured in Morgan Stanley
Bank of America Merrill Lynch Trust 2014-C19 (MSBAM 2014-C19),
which is also rated by Morningstar DBRS. Additionally, $244.4
million in subordinate debt backs the rake bonds offered in this
transaction. To read more on Morningstar DBRS' recent rating action
on these rake bonds, please see the press release titled
"Morningstar DBRS Takes Rating Actions on North American
Single-Asset/Single-Borrower Transactions Backed by Office
Properties," published on April 15, 2024, on the Morningstar DBRS
website.
The subject, originally built in 2009, is considered
well-positioned relative to its submarket competitors given its
riverfront location, property quality, extensive amenity package,
and experienced sponsorship in Irvine Company. The loan has
historically exhibited stable performance and reported a March 2023
occupancy of 93.5%. However, the loan is scheduled to mature in
August 2024 and leases representing 27.5% of the net rentable area
(NRA) are scheduled to expire by year-end, including the
second-largest tenant Boston Consulting Group (BCG; 12.2% of the
NRA). BCG's lease is scheduled to expire in December 2024, and the
tenant will vacate and relocate to another property in Chicago's
Fulton Market neighborhood. The sponsor has announced that
replacement tenant Winston & Strawn will backfill all of BCG's
former space, although lease terms are not known at this time.
Additionally, the largest tenant, Kirkland & Ellis (51.5% of the
NRA, lease expiry in February 2029), will reportedly execute its
termination option in February 2025 to accommodate the firm's plans
to relocate to the newly constructed Salesforce Tower Chicago. In
exchange, the tenant is required to pay a termination fee of $51.2
million, which has already been posted in the form of a letter of
credit. As another sign of the sponsor's commitment to the
property, a $30 million capital improvement project was announced
in 2023. Although the submarket performance has weakened
considerably since issuance, and the loan's upcoming maturity is a
noted concern with the possibility of a maturity extension in the
near-term, the subject is better positioned than most Chicago
office properties that have reported performance declines in the
last few years In its analysis, Morningstar DBRS updated the senior
debt LTV to reflect the Morningstar DBRS value of the property as
concluded with the April 15, 2024, credit rating action, as well as
a stressed POD considering the tenant rollover risk and near-term
maturity. This results in an expected loss that was more than
double that of the base level loan expected loss. In addition,
Morningstar DBRS had assigned Negative trends on Classes 300-C,
300-D, and 300-E with the April 15, 2024, credit rating action
given the position of the subordinate B-Note in the capital stack,
as well as rollover and maturity concerns as previously noted. The
Negative trends were maintained with this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2015-UBS8: DBRS Confirms B Rating on Class XD Certs
------------------------------------------------------------------
DBRS Limited confirmed the credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2015-UBS8
issued by Morgan Stanley Capital I Trust 2015-UBS8 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at B (sf)
-- Class E at B (low) (sf)
-- Class F at C (sf)
-- Class G at C (sf)
All trends are Stable, with the exception of Classes F and G, which
have credit ratings that do not typically carry a trend in
commercial mortgage-backed securities (CMBS) credit ratings.
The credit rating confirmations reflect minimal changes to
Morningstar DBRS' performance expectations since the last credit
rating action. As indicated by their C (sf) credit rating,
Morningstar DBRS continues to project losses to classes F and G,
driven by loans in special servicing, the largest of which is
discussed in greater detail below. The remaining pool has generally
exhibited stable performance since the prior review. Since last
credit rating action, two loans have been fully repaid and one
loan, which was previously in special servicing, was liquidated
from the pool with a realized loss of $4.9 million, relatively in
line with Morningstar DBRS' projection. As of the March 2024
remittance, realized trust losses total $24.4 million and have
eroded the entirety of the nonrated Class J and approximately 20.9%
of Class H, the credit rating for which was previously withdrawn by
Morningstar DBRS.
The pool is considered concentrated by property type, with loans
backed by retail properties representing approximately 42.3% of the
pool balance, including three (25.9% of the pool) of the top five
loans. The pool benefits from minimal office exposure, with only
three nondefeased loans (11.9% of the pool) being secured by office
properties. Given the continued challenges faced by the office
sector, Morningstar DBRS analyzed several loans backed by office
and other properties that were showing declines from issuance or
otherwise exhibiting increased risks from issuance with stressed
scenarios and/or elevated probability of defaults (PODs) to
increase expected losses as applicable. Outside of a small
concentration of loans of concern, the overall performance of the
remaining loans in the pool is generally healthy, with the majority
reporting a debt service coverage ratio (DSCR) that remains in line
with its respective issuance figures, according to the most recent
financials.
According to the March 2024 remittance, 50 of the original 57 loans
remain in the pool, representing a collateral reduction of 16.6%
since issuance. Ten loans, representing 17.1% of the pool, are
fully defeased, while 12 loans, representing 28.7% of the pool, are
on the servicer's watchlist, and are predominantly being monitored
for low DSCR and occupancy rates. In addition, three loans,
representing 5.6% of the pool, are in special servicing. For this
review, Morningstar DBRS analyzed each specially serviced loan with
a liquidation scenario, which resulted in a weighted-average
projected loss severity of 52.4%.
The largest loan in special servicing, Mall de las Aguilas
(Prospectus ID#6; 3.3% of the pool balance), is secured by a
350,000-square-foot (sf) portion of a 450,000-sf regional mall in
Eagle Pass, Texas, which is on the United States–Mexico border.
The loan transferred to special servicing in June 2020 because of
imminent default as a result of the coronavirus pandemic-related
closure of the border, and the property became real estate owned in
July 2021. According to the most recent commentary, the special
servicer continues to work toward stabilizing the property, and is
currently assessing sale options. According to the financials for
the trailing nine months (T-9) ended September 30, 2023, the
collateral's occupancy rate remains at 73.1%, which is the same
rate reported as of September 30, 2022, while DSCR increased to
1.05 times (x) from 0.71x over the same period, as a result of a
year-over-year decrease in operating expenses. The mall is anchored
by JCPenney (collateral tenant, 18.0% of the net rentable area
(NRA)), which has a lease expiration in May 2024. However, as the
tenant had previously exercised three of its six renewal options,
Morningstar DBRS believes the tenant will likely exercise its
fourth five-year renewal option. The property is also anchored by a
noncollateral Burlington.
An updated appraisal dated June 2023 valued the property at $9.3
million. Although the most recent value represents a slight
increase from the November 2022 value of $7.4 million, this figure
remains well below the issuance appraised value of $40.0 million.
Given the sustained low performance, lack of leasing activity,
short-term renewals, and the significant value decline from
issuance, Morningstar DBRS used a liquidation scenario based on a
stress to the June 2023 value, resulting in a projected loss
severity in excess of 75%.
The largest loan on the servicer's watchlist, 525 Seventh Avenue
(Prospectus ID#1; 9.8% of the pool balance), is secured by a
23-story, 505,273-sf office building in Midtown Manhattan. The loan
was added to the watchlist in February 2022 because of a decline in
net cash flow (NCF). According to the most recent financials, the
servicer's annualized NCF for the T-9 ended September 30, 2023, was
reported at $11.7 million, reflecting a DSCR of 1.14x. Although
this figure is relatively in line with the YE2022 NCF of $11.3
million (DSCR of 1.10x), it is well below the issuer's NCF figure
of $16.6 million (DSCR of 1.75x) at issuance. Per the November 2023
rent roll, the property occupancy increased to 92.9% from the
YE2022 figure of 86.7% as a result of several new lease
commencements. However, there is concentrated scheduled rollover in
the near term. Based on the November 2023 rent roll, more than 40
tenants, representing more than 25.0% of the NRA, have lease
expirations scheduled through the loan maturity in November 2025.
Although the subject's recent leasing activity is a positive
development, Morningstar DBRS maintained a stressed loan-to-value
ratio and elevated POD adjustment given the property's age,
upcoming rollover and upcoming maturity, resulting in an expected
loss that was approximately 49.0% higher than the weighted-average
expected loss for the pool.
Notes: All figures are in U.S. dollars unless otherwise noted.
NELNET STUDENT 2023-A: DBRS Confirms BB Rating on Class E Notes
---------------------------------------------------------------
DBRS, Inc. upgraded one credit rating and confirmed 29 credit
ratings in six Nelnet Student Loan Transactions.
Nelnet Student Loan Trust 2023-A
-- Class A-FL Notes AAA (sf) Confirmed
-- Class A-FX Notes AAA (sf) Confirmed
-- Class B Notes AA (sf) Confirmed
-- Class C Notes A (sf) Confirmed
-- Class D Notes BBB (sf) Confirmed
-- Class E Notes BB (sf) Confirmed
The 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: March 2024 Update," published on March 27, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse COVID-19 pandemic scenarios, which were first published
in April 2020.
-- Upgrade on the Class B for Nelnet 2016-A, is due to significant
note amortization, increasing credit enhancement and strong
multiples commensurate with the respective rating.
-- Transactions capital structure, current ratings, and sufficient
credit enhancement levels.
-- Credit enhancement is in the form of overcollateralization,
reserve accounts, and excess spread with senior notes benefiting
from subordination of junior notes.
-- Credit enhancement levels are sufficient to support the
Morningstar DBRS-expected default and loss severity assumptions
under various stress scenarios.
-- Collateral performance is within expectations with no triggers
in effect. Forbearance, deferment, and delinquency levels remain
stable.
-- The transactions parties' capabilities with regard to
origination, underwriting, and servicing.
Morningstar DBRS' credit rating on the securities referenced herein
addresses the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
The associated financial obligations for each of the rated notes
are the related Accrued Note Interest and the related Note
Balance.
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. The associated contractual payment obligation that is
not a financial obligation is the interest on unpaid Accrued Note
Interest for each of the rated 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.
OCP CLO 2014-7: S&P Affirms 'B- (sf)' Rating on Class E-RR Notes
----------------------------------------------------------------
S&P Global Ratings raised its ratings on the class A-2-RR, B-1-RR,
B-2-RR, and C-RR notes from OCP CLO 2014-7 Ltd. S&P also removed
the ratings on the class A-2-RR, B-1-RR, and B-2-RR notes from
CreditWatch, where it placed them with positive implications on
April 17, 2024. At the same time, S&P affirmed ratings on the class
A-1-RR, D-RR notes, and E-RR notes from the same transaction.
The rating actions follow our review of the transaction's
performance using data from the March 8, 2024, trustee report.
The transaction has made approximately $163 million in collective
paydowns to the class A-1-RR notes since S&P's Nov. 12, 2021,
rating actions. These paydowns resulted in improved reported
overcollateralization (O/C) ratios for most of the capital
structure since the Sept. 10, 2021, trustee report, which S&P used
for its previous rating actions. Since that time, the following
changes have occurred:
-- The class A O/C ratio improved to 146.61% from 130.08%.
-- The class B O/C ratio improved to 128.80% from 120.56%.
-- The class C O/C ratio improved to 114.85% from 112.34%.
-- The class D O/C ratio declined to 105.69% from 106.53%.
The higher coverage tests for the class A, B, and C notes indicate
an increase in their credit support. While O/Cs improved for the
senior classes, the class D O/C declined primarily due to a
combination of par losses and an increase in defaults that the CLO
incurred since S&P's last rating action.
S&P said, "While the O/C ratios largely improved, the collateral
portfolio's credit quality has slightly deteriorated since our last
rating actions. The par amount of defaulted collateral has
increased, with $2.16 million reported as of the March 8, 2024,
trustee report, compared with $0 million reported as of the Sept.
10, 2021, trustee report. However, over the same period, collateral
obligations with ratings in the 'CCC' category have decreased, to
$18.39 million from $32.64 million. In addition, the transaction
has benefited from paydowns and a drop in the weighted average life
due to the underlying collateral's seasoning, with 3.04 years
reported as of the March 8, 2024, trustee report, compared with
4.60 years reported at the time of our Nov. 12, 2021, rating
actions."
The upgraded ratings reflect the improved credit support available
to the notes at the prior rating levels.
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 ratings
changes.
S&P said, "Although our cash flow analysis indicated higher ratings
for the class B-1-RR, B-2-RR, and C-RR notes, our rating actions
considered their existing credit support when compared with
similarly rated CLO tranches and additional sensitivity runs that
considered the exposure to lower-quality assets and distressed
prices we noticed in the portfolio.
"Although the cash flow results indicated a lower rating for the
class D-RR and E-RR notes, we view the overall credit seasoning as
an improvement to the transaction and considered the relatively
stable O/C ratios, which currently have a significant cushion over
their minimum requirements. Further, we noticed that the class E-RR
notes are current on their interest, and based on its existing
credit enhancement, we believe the class E-RR notes do not meet our
definition for 'CC' or 'CCC' risk at this time. However, any
increase in defaults or par losses could lead to negative rating
actions on the class D-RR and E-RR notes in the future.
"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 notes remain consistent with the credit enhancement
available to support them and will take rating actions as we deem
necessary."
Ratings Raised And Removed From CreditWatch
OCP CLO 2014-7 Ltd.
Class A-2-RR to 'AAA (sf)' from 'AA (sf)/Watch Pos'
Class B-1-RR to 'AA (sf)' from 'A (sf)/Watch Pos'
Class B-2-RR to 'AA (sf)' from 'A (sf)/Watch Pos'
Rating Raised
OCP CLO 2014-7 Ltd.
Class C-RR to 'BBB+ (sf)' from 'BBB- (sf)'
Ratings Affirmed
OCP CLO 2014-7 Ltd.
Class A-1-RR: 'AAA (sf)'
Class D-RR: 'B+ (sf)'
Class E-RR: 'B- (sf)'
PRESTIGE AUTO 2022-1: S&P Affirms 'BB-(sf)' Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings affirmed its 'BB- (sf)' rating on the Prestige
Auto Receivables Trust 2022-1 (PART) 2022-1 class E notes and
removed it from CreditWatch with negative implications. The
CreditWatch placement began on Oct. 27, 2023, and was extended on
Jan. 25, 2024.
S&P said, "The rating action reflects the transaction's collateral
performance to date and our expectation regarding future collateral
performance, including an increase in the series' cumulative net
loss (CNL) expectation range. This rating action also accounts for
the transaction's structure and level of credit enhancement.
Additionally, we incorporated secondary credit factors, including
credit stability, payment priorities under various scenarios, and
sector- and issuer-specific analyses, including our most recent
macroeconomic outlook, which incorporates a baseline forecast for
U.S. GDP and unemployment. Based on these factors, and the capital
contribution of $10.3 million made by Prestige Financial Services
Inc. (Prestige) to the series on April 24, 2024, we believe the
notes' creditworthiness is consistent with the affirmed rating.
"Since the CreditWatch was extended in January 2024, monthly gross
charge-offs have remained elevated, which, along with lower
recovery rates, has resulted in high monthly net losses. Excess
spread has largely been used to cover net losses, leaving very
little or no funds available to build the transaction's
overcollateralization amount, resulting in the
overcollateralization being below its target. Additionally,
delinquencies and extensions are elevated."
Table 1
PART 2022-1 Collateral Performance (%)
Pool 60+ day
Mo.(i) factor CGL CRR CNL delinq. Ext.
Oct-22 98.86 0.00 0.00 0.00 0.12 0.78
Nov-22 97.42 0.04 0.00 0.04 1.75 1.40
Dec-22 95.79 0.39 2.80 0.38 3.06 2.30
Jan-23 93.15 1.67 5.35 1.58 3.26 3.62
Feb-23 90.45 3.00 9.96 2.71 3.11 3.41
Mar-23 87.74 4.19 15.90 3.53 2.73 4.38
Apr-23 85.54 5.20 20.30 4.15 2.73 5.39
May-23 83.10 6.15 21.80 4.81 3.14 5.97
Jun-23 80.83 7.09 25.21 5.30 3.34 5.91
Jul-23 78.60 8.09 25.08 6.06 3.97 5.81
Aug-23 76.62 8.95 25.73 6.65 4.92 5.57
Sep-23 74.39 10.07 24.75 7.58 5.75 5.61
Oct-23 72.11 11.28 23.86 8.58 6.22 5.38
Nov-23 69.89 12.53 23.67 9.56 6.46 5.16
Dec-23 67.63 13.91 23.00 10.71 6.85 6.15
Jan-24 65.48 15.29 22.76 11.81 7.60 6.41
Feb-24 63.45 16.43 23.41 12.58 8.29 5.55
Mar-24 61.25 17.74 23.52 13.57 8.16 5.09
(i)As of the monthly collection period.
PART--Prestige Auto Receivables Trust.
Mo.--Month.
CGL--Cumulative gross loss.
CRR--Cumulative recovery rate.
CNL--Cumulative net loss.
Delinq.--Delinquencies.
Ext.--Extensions.
Table 2
PART 2022-1 Overcollateralization
Current Target Target Current Target
Mo.(i) (%)(ii) (%)(iii) (%)(iii) ($ mil.) ($ mil.)
(iv) (iii)
Oct-22 9.95 16.75 2.00 40.90 77.14
Nov-22 10.84 16.75 2.00 43.91 76.15
Dec-22 11.50 16.75 2.00 45.77 75.01
Jan-23 11.32 16.75 2.00 43.83 73.1
Feb-23 11.42 16.75 2.00 42.95 71.29
Mar-23 12.76 16.75 2.00 46.53 69.40
Apr-23 13.20 16.75 2.00 46.94 67.87
May-23 13.69 16.75 2.00 47.29 66.1
Jun-23 14.44 16.75 2.00 48.52 64.59
Jul-23 14.75 16.75 2.00 48.18 63.04
Aug-23 15.34 16.75 2.00 48.87 61.66
Sep-23 15.49 16.75 2.00 47.90 60.11
Oct-23 16.31 16.75 2.00 48.88 58.52
Nov-23 16.32 16.75 2.00 47.42 56.98
Dec-23 16.43 16.75 2.00 46.19 55.40
Jan-24 16.46 16.75 2.00 44.81 53.90
Feb-24 16.83 16.75 2.00 44.40 52.49
Mar-24 17.03 16.75 2.00 43.35 50.96
(i)As of the monthly collection period.
(ii)Percentage of the current collateral pool balance.
(iii)The target overcollateralization amount on any distribution
date for series 2022-1 is equal to the sum of 16.75% of the current
pool balance and 2.00% of initial collateral balance.
(iv) Amount of overcollateralization for the collection month.
PART--Prestige Auto Receivables Trust.
Mo.--Month.
In view of the series' performance to date, which is trending worse
than S&P's initial CNL expectation, along with adverse economic
headwinds and possibly continued weaker recovery rates, S&P revised
and raised its expected CNL range for the series.
Table 3
PART 2022-1 CNL Expectations (%)
Original Prior Revised
lifetime lifetime lifetime
CNL exp. CNL exp.(i) CNL exp.(ii)
16.00 24.00-25.00 29.00-30.00
(i)Revised in October 2023.
(ii)As of the April 2024 distribution date.
CNL exp.--Cumulative net loss expectation.
N/A--Not applicable.
The transaction contains a sequential principal payment structure
in which the notes are paid principal by seniority. The sequential
payment structure increases subordination as a percentage of the
amortizing pool for all classes except the lowest-rated subordinate
class. The transaction also has credit enhancement in the form of a
non-amortizing reserve account, overcollateralization, and excess
spread. The non-amortizing reserve account for the transaction
remains at its required level, which increases as a percentage of
the current pool balance as the pool amortizes.
In view of the series' weaker performance to date, Prestige, as
servicer, previously made capital contributions totaling $8.3
million and forwent servicing fees of $9.7 million. This support,
in aggregate, represents approximately 4.3% of the initial
collateral balance.
S&P said, "In our analysis, we also considered a written plan from
Prestige to contribute additional capital of $10.3 million to PART
2022-1 effective April 24, 2024. The capital contribution to the
series, which amounts to 2.5% of the initial collateral balance, is
a one-time cash infusion intended to make up the difference between
the actual and target overcollateralization amounts as of the April
2024 collection month (May 2024 payment date). The remaining
amount, after satisfying the overcollateralization target, will be
credited to the series' reserve account, where it will remain for
the remainder of the transaction. Our analysis indicated that the
contribution will increase credit enhancement for the series'
notes.
"We undertook a cash flow analysis to assess the loss coverage
levels for the series 2022-1 class E notes, giving credit to
stressed excess spread. Our various cash flow scenarios included
forward-looking assumptions on recoveries, the timing of losses,
and voluntary absolute prepayment speeds that we believe are
appropriate, given the transaction's performance to date.
Additionally, we conducted a sensitivity analysis for the series to
determine the impact a moderate ('BBB') stress scenario would have
on our rating if losses began trending higher than our revised
base-case loss expectations.
"In our view, the results demonstrated that the class E notes have
adequate credit enhancement at the affirmed rating level, which is
based on our analysis as of the collection period ended March 2024.
"We will continue to monitor the performance of PART 2022-1 to
ensure that the credit enhancement remains sufficient, in our view,
to cover the CNL expectations under our stress scenarios for each
of the rated classes."
RAD CLO 4: Moody's Assigns Ba3 Rating to $16.95MM Class E-R Notes
-----------------------------------------------------------------
Moody's Ratings has assigned ratings to five classes of refinancing
notes (the "Refinancing Notes") issued by Rad CLO 4, Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$192,000,000 Class A-R Senior Secured Floating Rate Notes due
2032 (the "Class A-R Notes"), Assigned Aaa (sf)
US$21,950,000 Class B-1-R Senior Secured Floating Rate Notes due
2032 (the "Class B-1-R Notes"), Assigned Aaa (sf)
US$13,950,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2032 (the "Class C-R Notes"), Assigned Aa3 (sf)
US$17,700,000 Class D-R Mezzanine Secured Deferrable Floating Rate
Notes due 2032 (the "Class D-R Notes"), Assigned Baa1 (sf)
US$16,950,000 Class E-R Junior Secured Deferrable Floating Rate
Notes due 2032 (the "Class E-R Notes"), Assigned Ba3 (sf)
Additionally, Moody's has taken rating action on the following
outstanding notes originally issued by the Issuer on April 2019
(the "Original Closing Date"):
US$10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2032
(the "Class B-2 Notes"), Upgraded to Aaa (sf); previously on
February 14, 2024 Upgraded to Aa1 (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.
Irradiant Partners, LP (the "Manager") will continue to direct the
acquisition and disposition of certain assets on behalf of the
Issuer.
The Issuer previously issued one other classes of secured notes and
one class of subordinated notes, which will remain outstanding.
In addition to the issuance of the Refinancing Notes, other changes
to transaction features in connection with the refinancing include
the extension of the non-call period and changes to the definition
of "Reference Rate".
Moody's rating action on the Class B-2 Notes is primarily a result
of the refinancing, which increases excess spread available as
credit enhancement to the rated notes.
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: $294,446,824
Defaulted par: $1,029,918
Diversity Score: 85
Weighted Average Rating Factor (WARF): 2850
Weighted Average Spread (WAS): (before accounting for reference
rate floors): 3.68%
Weighted Average Recovery Rate (WARR): 47.34%
Weighted Average Life (WAL): 4.22 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.
SCG 2024-MSP: DBRS Finalizes B Rating on Class F Certs
------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings to the
following classes of Commercial Mortgage Pass-Through Certificates,
Series 2024-MSP (the Certificates) issued by SCG 2024-MSP Mortgage
Trust (the Trust):
-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class HRR at B (low) (sf)
All trends are Stable.
The SCG 2024-MSP transaction is secured by the borrower's
fee-simple or leasehold interests in a four-property portfolio of
Marriott-branded full-service hotels. The portfolio is made up of
all suites and totals 1,016 keys. The properties are located in
Atlanta, Georgia (254 keys; 15.7% of allocated loan amount (ALA));
Costa Mesa, California (253 keys; 20.7% of ALA); and Scottsdale,
Arizona (two properties totaling 509 keys; 63.6% of ALA).
The Sponsor of the transaction is Starwood Capital Group, a private
investment firm founded in 1991. Starwood acquired this portfolio
in August 2019 for $250.0 million, which was securitized in the
GSMS 2019-SMP transaction. The loan proceeds of $220.2 million,
along with approximately $8.36 million in cash, will be used to
refinance existing debt of $218.85 million, pay closing costs of
approximately $5.5 million, and fund an upfront capital reserve of
approximately $4.2 million. The capital reserve exceeds 110% of the
actual costs as determined by a final detailed fully costed budget
for any such property improvement plan or similar plan required
based on the replacement management agreements entered into with
respect to the Atlanta and Old Town Properties. The loan will be
structured with a two-year initial term with three one-year
extension options.
The properties were built between 1988 and 1999 and feature large
room sizes, exhibiting a weighted average by unit count of 518 sf.
Since purchasing the portfolio, Starwood has invested approximately
$37.8 million in capital expenditures. This is in addition to the
approximately $19.4 million that was invested by the previous
owners between 2013 and 2019, for a total of over $57 million in
capital expenditures across the four properties since 2013. The
largest recipient of capex funds was Marriott Costa Mesa, which
underwent a complete renovation of guest rooms totaling $18.8
million. Other large capital improvement projects at the properties
include $4.9 million at Marriott at McDowell Mountains for
renovations of the hotel's chiller and cooling tower as well as
automation systems; $3.3 million at Marriott Old Town for roof
repairs, parking garage renovations, pool deck renovations, food
and beverage renovations, and new fitness center tile; and $3.3
million at Marriott Atlanta Midtown for renovations of the hotel's
chiller and cooling tower. Overall, the rooms and conference areas
in the Atlanta property and both Scottsdale properties appeared
dated per the Morningstar DBRS site inspections; however, their
performance shows that their large room sizes and availability of
meeting space in good locations will continue to benefit the
properties in their respective markets.
Although there are not yet any brand mandated PIPs, the loan is
structured with a $4.2 million reserve for potential required PIPs
at the Marriott Old Town and Marriott Atlanta Midtown properties as
their Marriott Management agreements expire during the loan term in
2028. This upfront reserve is in addition to the outstanding
Furniture, fixtures, and equipment (FF&E) reserves for the two
properties totaling $6.5 million as well as the $2 million per year
the sponsor will be required to fund during the loan term. The
upfront reserves and continuations of using outstanding reserves to
improve the properties are considered more prudent loan features
for loans secured by hotel properties compared with planned use of
on-going reserves to fund future capital improvements.
Prior to the COVID-19 pandemic for the year ended (YE)2019 period,
the portfolio had an occupancy rate of 78.0% and an ADR of $176.53,
resulting in RevPAR of $137.71. For YE2023, occupancy was still
below pre-COVID levels at 67.2% but ADR and RevPAR were higher, at
$216.47 and $145.53, respectively. Based on an occupancy rate of
64.3% and the T-12 ending January 2024 ADR figure of $217.15, the
concluded Morningstar DBRS RevPAR of $139.15 is 4.9% lower than the
T-12 ending January 2024 RevPAR of $146.76. Morningstar DBRS
applied RevPAR discounts of 5% to the Marriott Atlanta Midtown as
well as 7.5% discounts to the two Scottsdale properties in its
Morningstar DBRS Net Cash Flow (NCF) analysis because of new supply
in both markets, as well as slight declines in performance in the
second half of 2023. The concluded Morningstar DBRS RevPAR figure
is slightly above the YE2019 RevPAR figure of $137.71.
Noted risks include new supply in the Scottsdale and Atlanta
markets, recent performance declines, and the seasonality of the
two Scottsdale properties. There is a brand new 976-key hotel in
Atlanta and two new hotels are opening in Scottsdale in 2024 with
265 and 235 keys, respectively. The Atlanta and Scottsdale
properties also showed slight performance declines in the second
half of 2023. Morningstar DBRS accounted for these declines by
using an occupancy plug to lower the assumed RevPAR for these
properties. The two Scottsdale assets have historically shown
performance declines in the summer months with lower RevPAR figures
compared with the rest of the year. Although there are some
concerns with the properties, Morningstar DBRS has a generally
positive view of the credit characteristics of the portfolio. With
its strong sponsorship, Marriott brand affiliation, and continued
capital improvements, Morningstar DBRS has a favorable outlook on
the portfolio.
Notes: All figures are in U.S dollars unless otherwise noted.
SDAL TRUST 2024-DAL: S&P Assigns BB-(sf) Rating on Class HRR Certs
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to SDAL Trust 2024-DAL's
commercial mortgage pass-through certificates.
The certificate issuance is a U.S. CMBS transaction backed by the
borrower's fee simple and leasehold interest in the 1,841-guestroom
Sheraton Dallas, a full-service convention hotel in Dallas.
S&P said, "The ratings reflect our view of the collateral's
historical and projected performance, the sponsors' and manager's
experience, the trustee-provided liquidity, the loan's terms, and
the transaction's structure. We determined that the loan has a
beginning and ending loan-to-value ratio of 74.6%, based on our
value of the property backing the transaction."
Ratings Assigned
SDAL Trust 2024-DAL(i)
Class A, $112,200,000(ii): AAA (sf)
Class B, $40,900,000(ii): AA- (sf)
Class C, $30,400,000(ii): A- (sf)
Class D, $40,200,000(ii): BBB- (sf)
Class E, $11,300,000(ii): BB+ (sf)
Class F, $21,400,000(ii): BB (sf)
Class HRR, $13,600,000(ii): BB- (sf)
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933, to institutional accredited investors under Rule
501(a)(1)(2)(3) or Regulation D, and to non-U.S. persons under
Securities Act, Regulation S.
(ii)Approximate; subject to a variance of plus or minus 5.0%.
HRR--Horizontal risk retention.
TOWD POINT 2024-1: DBRS Finalizes B(low) Rating on Class B2 Notes
-----------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following Asset-Backed Securities, Series 2024-1 (the Notes) issued
by Towd Point Mortgage Trust 2024-1 (the Trust):
-- $495.7 million Class A1 at AAA (sf)
-- $12.9 million Class A2 at AA (high) (sf)
-- $16.7 million Class M1 at A (high) (sf)
-- $2.7 million Class M2 at BBB (high) (sf)
-- $4.3 million Class B1 at BB (high) (sf)
-- $3.5 million Class B2 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 7.90% of credit
enhancement provided by subordinated certificates. The AA (high)
(sf) A (high) (sf), BBB (high) (sf), BB (high) (sf), and B (low)
(sf) credit ratings reflect 5.50%, 2.40%, 1.90%, 1.10% and 0.45% of
credit enhancement, respectively.
This transaction is a securitization of a portfolio of seasoned
prime performing first-lien mortgages funded by the issuance of
asset-backed notes (the Notes). The Notes are backed by 832 loans
with a scheduled total principal balance of $538,271,886 as of the
Cut-Off Date (March 1, 2024).
The portfolio is approximately 85 months seasoned with all loans
seasoned for more than 24 months. The portfolio contains 1.0%
modified loans, and modifications happened more than two years ago
for all of the modified loans. Within the pool, none of the
mortgages have non-interest-bearing deferred amounts.
As of the Cut-Off Date, 97.2% of the pool is current, and 2.8% is
30 days delinquent under the Mortgage Bankers Association (MBA)
delinquency method. Additionally, none of the pool is in
bankruptcy. Approximately 94.1% of the mortgage loans have been
zero times 30 days delinquent (0 x 30) for at least the past 24
months under the MBA delinquency method or since origination.
Approximately 18.0% of the pool is exempt from the Consumer
Financial Protection Bureau (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules. Morningstar DBRS assumed 1.3% of the loans to
be designated as Temporary QM Safe Harbor or QM Safe Harbor and
80.7% to be Non-QM based upon the Third Party Due-Diligence
review.
FirstKey Mortgage, LLC (FirstKey) will acquire the loans from
various transferring trusts on the Closing Date. The transferring
trusts acquired the mortgage loans from U.S. Bank National
Association and are beneficially owned by funds managed by
affiliates of Cerberus Capital Management, L.P. (Cerberus). Upon
acquiring the loans from the transferring trusts, FirstKey, through
a wholly owned subsidiary, Towd Point Asset Funding, LLC (the
Depositor), will contribute loans to the Trust. As the Sponsor,
FirstKey, through one or more majority-owned affiliates, will
acquire and retain a 5% eligible vertical interest in each class of
securities to be issued (other than any residual certificates) to
satisfy the credit risk retention requirements.
All of the loans will be serviced by Select Portfolio Servicing,
Inc. (SPS). The SPS aggregate servicing fee rate for each payment
date is 0.09% per annum. In its analysis, Morningstar DBRS applied
a higher servicing fee rate.
For this transaction, the Servicer will fund advances of delinquent
principal and interest (P&I) until the loans become 180 days
delinquent under the MBA delinquency method or are otherwise deemed
unrecoverable. Additionally, the Servicer is obligated to make
certain 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.
FirstKey, as the Asset Manager, has the option to sell certain
nonperforming loans or real estate-owned (REO) properties to
unaffiliated third parties individually or in bulk sales. Such
sales require an asset sale price to at least equal a minimum
reserve amount of the product of (1) 83.25% and (2) the current
principal amount of the mortgage loans or REO properties as of the
sale date.
When the aggregate pool balance of the mortgage loans is reduced to
less than 20% of the Cut-Off Date balance, the Call Option Holder
(TPMT 2024-1 COH, LLC, an affiliate of the Sponsor, the Seller, the
Asset Manager, the Depositor, and the Risk Retention Holder) will
have the option to cause the Issuer to sell all of its remaining
property (other than amounts in the Breach Reserve Account) to one
or more third-party purchasers so long as the aggregate proceeds
meet a minimum price.
When the aggregate pool balance is reduced to less than 10% of the
balance as of the Cut-Off Date, the Call Option Holder may purchase
all of the mortgage loans, REO properties, and other properties
from the Issuer, as long as the aggregate proceeds meet a minimum
price.
The transaction allows for the issuance of Class A1 Loans in which
the Issuer may enter into a Credit Agreement to borrow up to the
balance of the Class A1 Loans from Class A1 Lenders on the Closing
Date. For the TPMT 2024-1 transaction, the Class A1 Loans will not
be issued at closing.
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 Class M1
and more subordinate bonds will not be paid from principal proceeds
until the Class A1 and A2 Notes are retired.
Notes: All figures are in US dollars unless otherwise noted.
UNITED AUTO 2024-1: DBRS Gives Prov. BB(high) Rating on E Notes
---------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
classes of notes to be issued by United Auto Credit Securitization
Trust 2024-1 (UACST 2024-1 or the Issuer):
-- $139,311,000 Class A Notes at AAA (sf)
-- $45,030,000 Class B Notes at AA (high) (sf)
-- $37,050,000 Class C Notes at A (high) (sf)
-- $54,910,000 Class D Notes at BBB (sf)
-- $39,520,000 Class E Notes at BB (high) (sf)
The provisional credit ratings are based on Morningstar DBRS'
review of the following analytical considerations:
(1) Transaction capital structure, credit ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve fund, and excess
spread. Credit enhancement levels are sufficient to support the
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 credit 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 21.00% based on the
expected Cut-Off Date pool composition.
-- The pool includes collateral originated by UACC as well as
Vroom collateral.
(3) The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns: March 2024 Update," published on March 27, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse coronavirus pandemic scenarios, which were first
published in April 2020.
(4) The transaction parties' capabilities with regard to
originations, underwriting, and servicing and the existence of an
experienced and capable backup servicer.
-- Morningstar DBRS has performed an operational risk review of
United Auto Credit Corporation (UACC) and considers the entity an
acceptable originator and servicer of subprime automobile loan
contracts. Additionally, the transaction has an acceptable backup
servicer.
-- UACC's senior management team has considerable experience and a
successful track record within the auto finance industry.
(5) The credit quality of the collateral and performance of UACC's
auto loan portfolio.
-- UACC originates collateral which generally has shorter terms,
higher down payments, lower book values, and higher borrower income
requirements than some other subprime auto loan originators.
However, as Vroom originations are incorporated into UACC's
portfolio, the original term has gradually increased.
(6) The legal structure and presence of legal opinions, which are
expected to address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with UACC, that the
trust has a valid first-priority security interest in the assets,
and the consistency with Morningstar DBRS' "Legal Criteria for U.S.
Structured Finance" methodology.
UACC is a specialty finance company that has been engaged in the
subprime automobile finance business since 1996. UACC purchases
motor vehicle retail installment sales contracts from franchise and
independent automobile dealerships throughout the U.S.
UACST 2024-1 will represent the 23rd asset-backed securities
transaction completed in UACC's history and will offer both senior
and subordinate rated securities. The receivables securitized in
UACST 2024-1 will be subprime automobile loan contracts secured
primarily by used automobiles, light-duty trucks, and vans.
The credit rating on the Class A Notes reflects 64.84% of initial
hard credit enhancement provided by the subordinated notes in the
pool (46.44%), the reserve fund (1.50% as a percentage of the
initial collateral balance), and OC (16.90% of the initial pool
balance). The credit ratings on the Class B, C, D, and E Notes
reflect 53.00%, 43.25%, 28.80%, and 18.40% of initial hard credit
enhancement, respectively. Additional credit support may be
provided from excess spread available in the structure.
Morningstar DBRS's credit rating on the securities referenced
herein addresses the credit risk associated with the identified
financial obligations in accordance with the relevant transaction
documents. The associated financial obligations for each of the
rated notes are the related Noteholders' Monthly Interest
Distributable Amount and the related Outstanding Balance.
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. The associated contractual payment obligation that is
not a financial obligation is the related interest on any
Noteholders' Interest Carryover Amount for each of the rated
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.
UNITED AUTO 2024-1: S&P Assigns BB (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to United Auto Credit
Securitization Trust 2024-1's automobile receivables-backed notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The ratings reflect:
-- The availability of approximately 64.4%, 56.3%, 47.0%, 35.7%,
and 29.6% credit support (hard credit enhancement and haircut to
excess spread) for the class A, B, C, D, and E notes, respectively,
based on post-pricing stressed cash flow scenarios. These credit
support levels provide at least 2.70x, 2.30x, 1.95x, 1.50x, and
1.25x of S&P's 23.50% expected cumulative net loss (ECNL) for the
class A, B, C, D, and E notes, respectively. The transactions
target overcollateralization increased to 27.50% at closing from
22.50% pre-pricing.
-- The expectation that under a moderate ('BBB') stress scenario
(1.50x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB (sf)' ratings on
the class A, B, C, D, and E notes, respectively, are within its
credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
ratings.
-- The collateral characteristics of the series' subprime
automobile loans, S&P's view of the credit risk of the collateral,
and its updated macroeconomic forecast and forward-looking view of
the auto finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the ratings.
-- S&P's operational risk assessment of United Auto Credit Corp.
(UACC) as servicer, and its view of the company's underwriting and
backup servicing arrangement with Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with its sector benchmarks.
-- The transaction's payment and legal structures.
Ratings Assigned
United Auto Credit Securitization Trust 2024-1
Class A, $139.311 million: AAA (sf)
Class B, $45.030 million: AA (sf)
Class C, $37.050 million: A (sf)
Class D, $54.910 million: BBB (sf)
Class E, $39.520 million: BB (sf)
VERUS SECURITIZATION 2022-8: S&P Affirms B- (sf) on B-2 Notes
-------------------------------------------------------------
S&P Global Ratings completed its review of the ratings on 36
classes from six U.S. RMBS non-qualified mortgage transactions. The
review yielded 14 upgrades and 22 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 our 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 NAME
SERIES CLASS CUSIP TO FROM
Verus Securitization Trust 2021-7
2021-7 A1 92538QAA8 AAA (sf) AAA (sf)
Verus Securitization Trust 2021-7
2021-7 A2 92538QAB6 AA+ (sf) AA (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-7
2021-7 A3 92538QAC4 AA- (sf) A (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-7
2021-7 M1 92538QAD2 A- (sf) BBB (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-7
2021-7 B1 92538QAE0 BB+ (sf) BB (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-7
2021-7 B2 92538QAF7 B- (sf) B- (sf)
Verus Securitization Trust 2021-8
2021-8 A1 92538GAA0 AAA (sf) AAA (sf)
Verus Securitization Trust 2021-8
2021-8 A2 92538GAB8 AA+ (sf) AA (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-8
2021-8 A3 92538GAC6 AA- (sf) A (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-8
2021-8 M1 92538GAD4 A- (sf) BBB (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-8
2021-8 B1 92538GAE2 BB+ (sf) BB (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2021-8
2021-8 B2 92538GAF9 B- (sf) B- (sf)
Verus Securitization Trust 2022-3
2022-3 A1 92538UAA9 AAA (sf) AAA (sf)
Verus Securitization Trust 2022-3
2022-3 A2 92538UAB7 AA+ (sf) AA (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2022-3
2022-3 A3 92538UAC5 A (sf) A (sf)
Verus Securitization Trust 2022-3
2022-3 M1 92538UAD3 BBB (sf) BBB- (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2022-3
2022-3 B1 92538UAE1 BB+ (sf) BB (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2022-3
2022-3 B2 92538UAF8 B- (sf) B- (sf)
Verus Securitization Trust 2022-6
2022-6 A1 92539AAA2 AAA (sf) AAA (sf)
Verus Securitization Trust 2022-6
2022-6 A2 92539AAB0 AA+ (sf) AA (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2022-6
2022-6 A3 92539AAC8 A (sf) A (sf)
Verus Securitization Trust 2022-6
2022-6 M1 92539AAD6 BBB- (sf) BBB- (sf)
Verus Securitization Trust 2022-6
2022-6 B1 92539AAE4 BB- (sf) BB- (sf)
Verus Securitization Trust 2022-6
2022-6 B2 92539AAF1 B- (sf) B- (sf)
Verus Securitization Trust 2022-7
2022-7 A1 92539NAA4 AAA (sf) AAA (sf)
Verus Securitization Trust 2022-7
2022-7 A2 92539NAB2 AA+ (sf) AA (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2022-7
2022-7 A3 92539NAC0 A (sf) A (sf)
Verus Securitization Trust 2022-7
2022-7 M1 92539NAD8 BBB- (sf) BBB- (sf)
Verus Securitization Trust 2022-7
2022-7 B1 92539NAE6 BB- (sf) BB- (sf)
Verus Securitization Trust 2022-7
2022-7 B2 92539NAF3 B- (sf) B- (sf)
Verus Securitization Trust 2022-8
2022-8 A1 924922AA5 AAA (sf) AAA (sf)
Verus Securitization Trust 2022-8
2022-8 A2 924922AB3 AA+ (sf) AA (sf)
PRIMARY RATING DRIVER: Increased credit support.
Verus Securitization Trust 2022-8
2022-8 A3 924922AC1 A (sf) A (sf)
Verus Securitization Trust 2022-8
2022-8 M1 924922AD9 BBB- (sf) BBB- (sf)
Verus Securitization Trust 2022-8
2022-8 B1 924922AE7 BB- (sf) BB- (sf)
Verus Securitization Trust 2022-8
2022-8 B2 924922AF4 B- (sf) B- (sf)
WELLS FARGO 2014-LC16: DBRS Cuts Rating on 4 Classes to D
---------------------------------------------------------
DBRS Limited downgraded the credit ratings on eight classes across
four transactions as follows:
Wells Fargo Commercial Mortgage Trust 2014-LC16 (WFCM 2014-LC16)
-- Class D to D (sf) from C (sf)
-- Class E to D (sf) from C (sf)
-- Class F to D (sf) from C (sf)
WFRBS Commercial Mortgage Trust 2014-C20 (WFRBS 2014-C20)
-- Class D to D (sf) from C (sf)
-- Class E to D (sf) from C (sf)
-- Class F to D (sf) from C (sf)
JPMCC Commercial Mortgage Securities Trust 2015-JP1 (JPMCC
2015-JP1)
-- Class G to D (sf) from CCC (sf)
COMM 2014-UBS2 Mortgage Trust (COMM 2014-UBS2)
-- Class F to D (sf) from C (sf)
In addition, Morningstar DBRS simultaneously discontinued and
withdrew the credit ratings on the above-mentioned classes.
The credit ratings downgrade and discontinuation were due to a loss
to the respective trusts that was reflected with the March 2023
remittances. The WFCM 2014-LC16 transaction incurred a loss of
$74.7 million, wiping out Classes E, F, and G (the latter is
nonrated) and eroding $38.5 million of Class D. The WFRBS 2014-C20
transaction incurred a loss of $80.9 million, wiping out Classes E,
F, and G (the latter is nonrated) and eroding $19.1 million of
Class D. These losses were tied to the liquidation of Woodbridge
Center (Prospectus ID#1), a pari passu loan with pieces secured in
both transactions. The total loss amount of $155.7 million was
lower than Morningstar DBRS' expectation of $205.7 million at the
last review.
The JPMCC 2015-JP1 transaction incurred a loss of $8.5 million,
wiping out the nonrated Class HR and approximately $333,000 of
Class G. This loss was tied to the liquidation of two loans,
Franklin Ridge - 9910 Building (Prospectus ID#13) and Franklin
Ridge - 9920 Building (Prospectus ID#14). The aggregate loss was
above Morningstar DBRS' expectation of $5.0 million at last
review.
The COMM 2014-UBS2 transaction incurred a loss of $15.5 million,
wiping out the nonrated Class G and eroding $4.5 million of Class
F. No loans were liquidated, but it appears that the loss may be
tied to "other interest loss" as noted in the March 2023
remittance. Morningstar DBRS has requested clarification from the
servicer, and a response is currently pending. Morningstar DBRS
will continue to monitor for developments.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2021-INV2: Moody's Ups Rating on Cl. B-5 Certs to Ba3
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 20 bonds from six US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo, agency eligible and investment mortgage loans.
A List of Affected Credit Ratings is available at
https://urlcurt.com/u?l=hhnWyT
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: TIAA Bank Mortgage Loan Trust 2018-2
Cl. B-3, Upgraded to Aaa (sf); previously on Jun 27, 2023 Upgraded
to Aa3 (sf)
Cl. B-4, Upgraded to Aa2 (sf); previously on Jun 27, 2023 Upgraded
to Baa2 (sf)
Issuer: TIAA Bank Mortgage Loan Trust 2018-3
Cl. B-4, Upgraded to Aaa (sf); previously on Jun 27, 2023 Upgraded
to Baa1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2020-1 Trust
Cl. B-4, Upgraded to A2 (sf); previously on Jun 30, 2023 Upgraded
to Baa2 (sf)
Cl. B-5, Upgraded to Baa3 (sf); previously on Nov 12, 2021 Upgraded
to B1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2020-RR1 Trust
Cl. B-3, Upgraded to Aa1 (sf); previously on Jun 30, 2023 Upgraded
to A3 (sf)
Cl. B-4, Upgraded to Aa3 (sf); previously on Jun 30, 2023 Upgraded
to Baa2 (sf)
Cl. B-5, Upgraded to A2 (sf); previously on Jul 26, 2021 Upgraded
to Ba3 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2021-INV2 Trust
Cl. A-17, Upgraded to Aaa (sf); previously on Nov 23, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-18, Upgraded to Aaa (sf); previously on Nov 23, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Jun 30, 2023 Upgraded
to Aa2 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Jun 30, 2023 Upgraded
to A1 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Jun 30, 2023 Upgraded
to Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Jun 30, 2023 Upgraded
to Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Jun 30, 2023 Upgraded
to B2 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2021-RR1 Trust
Cl. B-1, Upgraded to Aa1 (sf); previously on Jun 28, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jun 28, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Jun 28, 2021 Definitive
Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Baa2 (sf); previously on Jun 28, 2021
Definitive Rating Assigned Ba1 (sf)
Cl. B-5, Upgraded to Ba1 (sf); previously on Jun 28, 2021
Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's Ratings' updated loss expectations on the underlying pool.
The rating upgrades are a result of the improving performance of
the related pool, and an increase in credit enhancement for all
bonds since Moody's last review. The loans underlying the pool have
fewer delinquencies, resulting in an improvement in Moody's loss
projections for most of the bonds reviewed since Moody's last
review.
Moody's analysis also considered the existence of historical
interest shortfalls for some of the bonds. While all shortfalls
have since been recouped, the size and length of the past
shortfalls, as well as the potential for recurrence, were analyzed
as part of the upgrades. In addition, while Moody's analysis
applied a greater probability of default stress on loans that have
experienced modifications, Moody's decreased that stress to the
extent the modifications were in the form of temporary payment
relief.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Over the past few years,
Moody's have worked closely with loan servicers to understand and
analyze their strategies regarding borrower relief programs and the
impact those programs may have on collateral performance and
transaction liquidity, through servicer advancing. Moody's recent
analysis has found that many of these borrower relief programs, in
addition to robust home price appreciation, have contributed to
collateral performance being stronger than Moody's past
expectations, thus supporting the upgrades.
No actions were taken on certain rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. This includes interest risk from past
or potential missed interest. No actions were taken on the
remaining rated classes in these deals as those classes are already
at the highest achievable levels within Moody's rating scale.
Principal Methodologies
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's Ratings' 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 Ratings' 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.
WFRBS 2014-LC14: DBRS Confirms B Rating on Class F Certs
--------------------------------------------------------
DBRS, Inc. confirmed its ratings on all classes of Commercial
Mortgage Pass-Through Certificates, Series 2014-LC14 issued by
WFRBS Commercial Mortgage Trust 2014-LC14 as follows:
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
-- Class X-B at BBB (sf)
-- Class X-C at B (high) (sf)
As part of the credit rating action, all trends were changed to
Negative from Stable.
The Negative trends reflect the pool's increasing concentration and
high exposure to defaulted assets. Since Morningstar DBRS' last
credit rating action, 46 loans have repaid or liquidated from the
trust, leaving eight outstanding as of the March 2024 remittance.
Six of the eight remaining loans are in special servicing,
representing 68.5% of the pool, including three loans that have
transferred to the special servicer since the April 2023
surveillance review of this transaction. To test the durability of
the ratings, Morningstar DBRS' analysis for this review considered
a liquidation scenario for all of the specially serviced loans
based on various stresses to the most recent appraised values.
Morningstar DBRS concluded that although losses are expected to be
contained to the unrated Class G certificate, and projected
proceeds from loans in special servicing will likely be sufficient
to recover the Class D certificate balance, the concentration of
defaulted assets, increased default risk for loans that are not in
special servicing, and increased propensity for interest shortfalls
limit the potential for future upgrades.
The largest loan is Williams Center Towers (Prospectus ID#6, 30.9%
of the pool), which is secured by an office complex totaling
approximately 765,809 square feet (sf) of space, located in the in
the central business district (CBD) of Tulsa, Oklahoma. The loan
was transferred to special servicing in April 2018 after a large
tenant, Samson Investment Company, filed for bankruptcy and vacated
the property, causing occupancy to decline to 78.0%. Occupancy
declined again following the departure of Bank of Oklahoma (11.1%
of the net rentable area (NRA)) in December 2019, with the
September 2022 rent roll reporting an occupancy rate of 70.3%. As
of the June 2023 servicer reporting, occupancy declined further to
61%. Per Reis, Inc., office vacancy in the Tulsa CBD submarket
increased to 22.1% as of YE2023 from 18.3% as of YE2022 and 14.7%
as of YE2021. The reported debt service coverage ratio (DSCR) as of
the June 2023 financial statement was 0.91 times (x), compared with
the YE2022 DSCR of 0.90x and the Morningstar DBRS DSCR of 1.19x.
The loan was scheduled to mature in February 2024 and the borrower
has not remitted debt service payments for February or March 2024,
as of the most recent reporting. The servicer commentary indicates
the borrower has requested a maturity extension. Given the
sustained low performance and the lack of meaningful leasing
traction following the loss of two large tenants, the value has
likely declined significantly from issuance, a factor that will
significantly impede refinance efforts even in the event of an
extension. Morningstar DBRS' liquidation analysis for this loan is
based on a conservative stress to the issuance appraised value, as
an updated appraisal has not yet been made available, resulting in
a projected loss severity approaching 50%.
The second-largest loan is Canadian Pacific Plaza (Prospectus ID#6,
26.6% of the pool). The collateral is a 26-story, 394,000-sf Class
B office property in the Minneapolis CBD. The loan has been on the
servicer's watchlist since July 2020 because of a significant drop
in occupancy. A previous major tenant, Nilan Johnson Lewis PA
(formerly 19.6% of NRA) vacated in February 2020, driving occupancy
down to 63.0% by YE2020. As of the September 2023 reporting,
occupancy has declined further to 57.0%. The DSCR has declined to
0.04x from 0.54x at YE2022 and 0.69x at YE2021. According to Reis,
office vacancy in the Minneapolis CBD was 24.1% as of YE2023, up
from 22.8% at YE2022 and 18.8% at YE2021.
The loan had an anticipated repayment date of November 2023 and is
now scheduled to hyper amortize through November 2028. According to
the servicer's commentary, the loan is in cash management but
remains current on payments despite the lack of excess cash flow
implied by the reported DSCR, suggesting the borrower continues to
fund out of pocket. The loan's continued deleveraging helps
mitigate some of the above-noted concerns, as the current
loan-to-value ratio (LTV) is 65.1% based on the issuance appraised
value, down from the issuance LTV of 74.3%. However, given the
significantly depressed performance and soft submarket, Morningstar
DBRS expects the value for this office building has declined since
issuance. The increased default risk for this loan contributed to
the Negative trends placed on all classes.
Notes: All figures are in U.S. dollars unless otherwise noted.
[*] DBRS Hikes 4 Credit Ratings From 5 Regional Trust Transactions
------------------------------------------------------------------
DBRS, Inc. upgraded four credit ratings and confirmed 15 credit
ratings from five Regional Management Issuance Trust transactions.
The Affected Ratings are available at https://tinyurl.com/464z5szp
The Issuers are:
Regional Management Issuance Trust 2021-2
Regional Management Issuance Trust 2022-2B
Regional Management Issuance Trust 2021-1
Regional Management Issuance Trust 2020-1
Regional Management Issuance Trust 2022-1
The credit rating actions 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 March 2024 Update," published on March 27, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse coronavirus pandemic scenarios, which were first
published in April 2020.
-- The level of hard credit enhancement in the form of
overcollateralization, subordination, and amounts held in reserve
fund available in the transactions. Hard credit enhancement and
estimated excess spread are sufficient to support Morningstar DBRS'
current credit rating levels.
-- The collateral performance to date and Morningstar DBRS'
assessment of future performance.
-- 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.
[*] DBRS Reviews 207 Classes From 15 US RMBS Transactions
---------------------------------------------------------
DBRS, Inc. reviewed 207 classes from 15 U.S. residential
mortgage-backed securities (RMBS) transactions Of the 15
transactions, five are generally classified as prime jumbo
transactions and 10 are classified as mortgage insurance
linked-note transactions. Of the 207 classes reviewed, Morningstar
DBRS upgraded 47 credit ratings and confirmed 160 credit ratings.
The Affected Ratings are available at https://tinyurl.com/rhd4y32
The Issuers are:
Eagle Re 2021-2 Ltd.
Bellemeade Re 2021-3 Ltd.
Bellemeade Re 2022-2 Ltd.
Home Re 2022-1 Ltd.
Oaktown Re VII Ltd.
Radnor Re 2022-1 Ltd.
Bellemeade Re 2022-1 Ltd.
Radnor Re 2021-2 Ltd.
J.P. Morgan Mortgage Trust 2017-4
J.P. Morgan Mortgage Trust 2019-5
Oaktown Re V Ltd.
Triangle Re 2021-1 Ltd.
J.P. Morgan Mortgage Trust 2023-3
J.P. Morgan Mortgage Trust 2019-LTV3
J.P. Morgan Mortgage Trust 2019-LTV2
The credit rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new credit rating levels. The credit rating confirmations
reflect asset performance and credit-support levels that are
consistent with the current credit ratings.
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 credit 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 US Dollars unless otherwise noted.
*********
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