/raid1/www/Hosts/bankrupt/TCR_Public/240512.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 12, 2024, Vol. 28, No. 132
Headlines
ACRES COMMERCIAL 2021-FL1: DBRS Confirms B(low) Rating on G Notes
AMMC CLO 23: S&P Assigns BB- (sf) Rating on Class E-R2 Notes
ANGEL OAK 2024-5: Fitch Assigns 'Bsf' Final Rating on Cl. B-2 Certs
AREIT LTD 2024-CRE9: Fitch Assigns 'B-sf' Rating on Class G Notes
ARES LIV: S&P Affirms BB- (sf) Rating on Class E Notes
ATLAS SENIOR IX: S&P Raises Class E Notes Rating to 'B+ (sf)'
BALLYROCK CLO 22: S&P Assigns Prelim BB-(sf) Rating on Cl. D Notes
BANK5 TRUST 2024-5YR6: Fitch Assigns 'B-sf' Rating on Two Tranches
BARCLAYS MORTGAGE 2024-NQM2: Fitch Gives Bsf Rating on B2 Certs
BBCMS 2019-BWAY: Fitch Lowers Rating on Class HRR Certs to CCC
BBCMS MORTGAGE 2024-C26: Fitch Assigns B-(EXP) on Cl. G-RR Certs
BENCHMARK 2019-B10: Fitch Lowers Rating on 2 Tranches to CCsf
BENEFIT STREET XXXIV: S&P Assigns BB- (sf) Rating on Class E Notes
BMO 2023-C6 MORTGAGE: Fitch Affirms 'B-sf' Rating on Two Tranches
BX COMMERCIAL 2024-KING: Fitch Assigns B+(EXP) Rating on HRR Certs
BX COMMERCIAL 2024-MDHS: Moody's Assigns (P)Ba1 Rating to E Certs
BX TRUST 2017-CQHP: DBRS Cuts Class F Rating to C
CHASE HOME 2024-4: DBRS Finalizes B(low) Rating on Class B-5 Certs
CIFC FUNDING 2018-IV: Moody's Cuts Rating on $16MM E Notes to Caa1
CIFC FUNDING 2024-II: Fitch Assigns 'B-sf' Rating on Class F Notes
CITIGROUP 2015-101A: Fitch Affirms 'B-sf' Rating on Class F Certs
COMM 2015-CCRE26: Fitch Lowers Rating on Class F Certs to CCC
COMM MORTGAGE 2013-300P: Fitch Affirms B-sf Rating on Class C Notes
CROWN CITY V: S&P Assigns Prelim BB- (sf) Rating on Cl. DR Notes
ELMWOOD CLO 27: S&P Assigns BB- (sf) Rating on Class E Notes
ELMWOOD CLO 29: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
FLAGSHIP CREDIT 2022-4: S&P Affirms BB- (sf) Rating on Cl. E Notes
GALAXY 33: S&P Assigns BB- (sf) Rating on $10.50MM Class E Notes
GALAXY CLO XXI: Moody's Cuts Rating on $8MM Cl. F-R Notes to Caa1
GLS AUTO 2024-2: S&P Assigns Prelim BB (sf) Rating on Cl. E Notes
GOODLEAP SUSTAINABLE 2024-1: Fitch Gives BB(EXP) Rating on C Debt
GS MORTGAGE 2024-PJ5: Moody's Assigns (P)B3 Rating to B-5 Certs
GS MORTGAGE 2024-RPL3: Fitch Gives 'Bsf' Rating on Class B-2 Certs
HARBOR PARK CLO: S&P Affirms BB- (sf) Rating on Class E Notes
HGI CRE CLO 2021-FL1: DBRS Confirms B(low) Rating on Class G Notes
HILDENE TRUPS A10BC: Moody's Assigns (P)B3 Rating to $16MM B Notes
HILDENE TRUPS A5C: Moody's Assigns B3 Rating to $2MM Cl. B Notes
HILT 2024-ORL: S&P Assigns Prelim 'BB+ (sf)' Rating on HRR Certs
HPS LOAN 2024-19: S&P Assigns BB- (sf) Rating on Class E Notes
JP MORGAN 2019-LTV2: Moody's Hikes Rating on Cl. B-5 Certs From B1
JP MORGAN 2019-LTV3: Moody's Ups Rating on Cl. B-5 Certs From Ba3
JP MORGAN 2021-12: Moody's Upgrades Rating on Cl. B-5 Certs to Ba3
JP MORGAN 2024-4: Moody's Assigns B3 Rating to Cl. B-5 Certs
KKR CLO 32: S&P Assigns 'BB- (sf)' Rating on Class E-R Notes
KKR CLO 50: Moody's Assigns B3 Rating to $200,000 Class F Notes
KKR FINANCIAL 2013-1: Moody's Assigns Ba3 Rating to Cl. D-R2 Notes
KRR CLO 50: Fitch Assigns 'BB+sf' Rating on Class E Notes
MELLO MORTGAGE 2021-INV3: Moody's Ups Cl. B-5 Certs Rating to B2
MORGAN STANLEY 2012-C6: Moody's Lowers Rating on 2 Tranches to C
MORGAN STANLEY 2015-C20: DBRS Confirms B Rating on Class X-E Certs
MORGAN STANLEY 2018-SUN: DBRS Confirms B Rating on Class G Certs
MORGAN STANLEY 2019-L2: Fitch Lowers Rating on G-RR Certs to CCCsf
MORGAN STANLEY 2024-2: Fitch Assigns 'B-sf' Rating on Cl. B-5 Certs
MORGAN STANLEY 2024-INV2: Fitch Assigns B-sf Rating on B-5 Certs
NASSAU 2019: Fitch Affirms BB-sf Rating on Cl. B Notes, Outlook Neg
NEW RESIDENTIAL 2020-2: Moody's Ups Rating on 9 Tranches from Ba1
NEW RESIDENTIAL 2024-RPL1: Fitch Gives B(EXP) Rating on B-5 Notes
NRPL TRUST 2024-RPL1: Fitch Assigns Bsf Rating on Class B2 Notes
OCTAGON 63: Fitch Assigns 'B-(EXP)sf' Rating on Class F Notes
RR 5: S&P Assigns Preliminary BB- (sf) Rating on Class D-R Notes
SEQUOIA MORTGAGE 2024-5: Fitch Assigns BB-(EXP) Rating on B4 Certs
SLM STUDENT 2013-2: Moody's Lowers Rating on Class B Certs to Ba1
TRICOLOR AUTO 2024-2: Moody's Assigns (P)B2 Rating to Cl. F Notes
UBS COMMERCIAL 2018-C10: Fitch Affirms Ratings on 13 Classes
VERTICAL BRIDGE 2024-1: Fitch Puts BB-(EXP)sf Rating on Cl. F Notes
VERUS SECURITIZATION 2024-4: S&P Assigns Prelim B-(sf) on B-2 Notes
VOYA CLO 2018-3: S&P Affirms B+ (sf) Rating on Class E Notes
VOYA CLO 2024-1: Fitch Assigns 'BBsf' Rating on Class E Notes
WELLS FARGO 2018-C44: DBRS Cuts Rating on Class G-RR Certs to CCC
WIND RIVER 2024-1: Fitch Assigns 'B-(EXP)sf' Rating on Cl. F Notes
ZAIS CLO 7: Moody's Ups Rating on $30.25MM Class D Notes From Ba1
[*] DBRS Takes Actions on NA Ofc Assets-Backed Single Asset Deals
[*] S&P Takes Various Actions on 51 Classes From Six US RMBS Deals
*********
ACRES COMMERCIAL 2021-FL1: DBRS Confirms B(low) Rating on G Notes
-----------------------------------------------------------------
DBRS, Inc. confirmed all credit ratings on the classes of notes
issued by ACRES Commercial Realty 2021-FL1 as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
Morningstar DBRS also changed the trends on Classes D, E, F, and G
to Negative from Stable. The trends on the remaining classes remain
Stable.
The trend changes reflect the increased loss expectations across
the three loans in special servicing, representing 12.9% of the
current trust balance. The primary loan of concern and the
second-largest loan in the pool, Latham Square, representing 6.1%
of the current trust balance, is secured by a 115,946-square-foot
office building in downtown Oakland, California. While the loan was
recently modified, it remains specially serviced. Modification
terms included extending the loan maturity through December 2025,
decreasing the interest rate, and allowing the borrower the option
to defer interest; however, the modification does not quell
Morningstar DBRS' credit concerns associated with the asset as the
borrower was not required to deleverage the loan or deposit fresh
equity into reserve accounts. Property performance declined
throughout 2023 as occupancy decreased to 58.3% as of the December
2023 rent roll from a prior high of 75.6% in February 2023. The
property was reappraised in September 2023 at a value of $54.0
million, reflecting a 21.6% decline from the issuance appraisal of
$69.4 million. Morningstar DBRS believes the asset's current market
value has declined further with a loan-to-value ratio (LTV) above
100.0%. While the recent modification mitigates any near-term loss,
Morningstar DBRS maintains that the loan has heightened credit risk
due to the ongoing leasing challenges facing office properties in
the downtown Oakland submarket. As such, Morningstar DBRS also
increased the loan's probability of default in its current
analysis, bringing the loan's expected loss to approximately two
times greater than the transaction's expected loss.
In addition to the loans in special servicing, the pool also
exhibits a high concentration of office loans, which have been
susceptible to value declines as the properties have been unable to
successfully execute the stated business plans. In total, seven
loans, representing 21.5% of the current trust balance, are secured
by office properties.
The credit rating confirmations reflect the overall stable
performance of the transaction, which continues to be primarily
secured by the multifamily collateral totaling 63.8% of the trust
balance. In conjunction with this press release, Morningstar DBRS
has published a Surveillance Performance Update report with
in-depth analysis and credit metrics for the transaction as well as
business plan updates on select loans. For access to this report,
please click on the link under Related Documents below or contact
us at info-DBRS@morningstar.com.
The transaction closed in May 2021 with an initial collateral pool
of 33 floating-rate mortgage loans secured by 37 mostly
transitional real estate properties, with a cut-off pool balance of
$802.6 million. Most loans were in a period of transition with
plans to stabilize and improve asset value. The transaction was
structured with a Reinvestment Period that expired with the May
2023 Payment Date. As of the April 2024 remittance, the pool
comprises 29 loans secured by 30 properties with a cumulative trust
balance of $733.4 million. Since Morningstar DBRS' previous credit
rating action in May 2023, three loans with a current trust balance
of $65.5 million were paid in full, resulting in a collateral
reduction of 8.6%.
The outstanding loans are primarily secured by properties in
suburban markets and urban markets. Twenty-two loans, representing
74.6% of the pool, are secured by properties with a Morningstar
DBRS Market Rank of 3, 4, or 5, denoting a suburban market. Five
loans, representing 18.4% of the pool, are secured by properties in
urban markets, as defined by Morningstar DBRS, with a Morningstar
DBRS Market Rank of 6 or 7. The location of the assets within urban
markets potentially serves as a mitigant to loan maturity risk, as
urban markets have historically shown greater liquidity and
investor demand.
Leverage across the pool was generally stable as of the April 2024
reporting when compared with issuance metrics. The current
weighted-average (WA) as-is appraised LTV is 70.6%, with a current
WA stabilized LTV of 65.2%. In comparison, these figures were 69.1%
and 64.6%, respectively, at issuance. Morningstar DBRS recognizes
that select property values may be inflated as the majority of the
individual property appraisals were completed in 2021 and 2022 and
may not reflect the current rising interest rate or widening
capitalization rate environment. In the analysis for this review,
Morningstar DBRS applied upward LTV adjustments across 14 loans,
representing 64.7% of the current trust balance.
Through April 2024, the lender has advanced cumulative loan future
funding of $42.9 million to 20 individual borrowers to aid in
property stabilization efforts. The largest advance has been made
to the borrower of the 2201 Renaissance loan ($5.9 million), which
is secured by an office property in King of Prussia, Pennsylvania.
Funds were advanced to complete capital improvements and finance
accretive leasing costs. An additional $27.5 million of loan future
funding allocated to 23 individual borrowers remains available. The
largest portion of available funds, $5.5 million, is allocated to
the borrower of the aforementioned Latham Square loan. Following
its recent modification, the remaining future funding is available
to finance leasing costs.
As of the April 2024 remittance, there are three loans in special
servicing totaling 12.9% of the current trust balance. The
second-largest specially serviced loan, Century Skyline, is secured
by a 225-unit, mid-rise multifamily property in Atlanta's Midtown
neighborhood. The loan transferred to special servicing in May 2023
for a nonpayment default as the borrower did not purchase a new
interest rate cap agreement as required at the April 2023 deadline.
According to the servicer, the loan is reported as 30 days
delinquent. The loan matures in April 2024, and according to an
update from the collateral manager, the loan is currently under a
forbearance agreement while the lender and borrower negotiate a
potential loan modification agreement. As of the November 2023 rent
roll, the property was 91.6% occupied; however, the loan reported a
debt service coverage ratio of 0.34 times per the financials for
the trailing 12 months ended November 30, 2023. In its analysis,
Morningstar DBRS applied an upward LTV adjustment, reflective of an
in-place LTV approaching 100.0%. Morningstar DBRS also increased
the loan's probability of default in its current analysis to bring
the loan's expected loss to approximately two times the
transaction's expected loss.
The third-largest loan in special servicing, 960 Penn Avenue, is
secured by a Class B office building within Pittsburgh's central
business district. The loan transferred to special servicing in
August 2022 for maturity default; however, the loan was modified to
waive extension tests and extend the loan maturity to August 2024.
According to the December 2023 rent roll, the property was only
60.0% occupied. In its analysis, Morningstar DBRS applied an upward
LTV adjustment and increased the loan's probability of default to
increase the loan's expected loss to approximately two times the
transaction's expected loss.
As of the April 2024 remittance, there are no loans on the
servicer's watchlist; however, the pool's largest loan, Paces
River, was reported as 30 days delinquent. The loan is secured by a
470-unit, Class B multifamily property in Rock Hill, South
Carolina. According to published reports, the loan's sponsor, GVA
Real Estate Group, remains delinquent on a number of loans within
its portfolio as it contends with a substantial amount of debt amid
the elevated interest rate environment. According to the December
2023 rent roll, the property was 74.5% occupied, down from 91.3% as
of June 2023. According to the servicer, the borrower attributes
the decline in occupancy to issues related to the former property
manager, which was replaced in Q4 2023. In its analysis,
Morningstar DBRS applied an upward LTV adjustment and increased the
loan's probability of default to increase the loan's expected loss
to approximately two times the transaction's expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
AMMC CLO 23: S&P Assigns BB- (sf) Rating on Class E-R2 Notes
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S&P Global Ratings assigned its ratings to the class A-1-R2,
A-2-R2, B-R2, C-R2, D-1-R2, D-2-R2, and E-R2 replacement debt from
AMMC CLO 23 Ltd./AMMC CLO 23 LLC, a CLO originally issued in
November 2020 and refinanced in November 2021 that is managed by
American Money Management Corp.
On the May 2, 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-1-R2, A-2-R2, B-R2, C-R2, D-R2, and
E-R2 debt was issued at a higher spread over three-month SOFR than
the original debt.
-- The replacement class D-1-R2 and D-2-R2 debt replaced the
existing class D-R debt.
-- The stated maturity was extended 3.5 years, the reinvestment
period was extended 2.5 years, and the non-call period was extended
by 2.5 years.
-- The target par balance increased to $320 million from $300
million.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and 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
AMMC CLO 23 Ltd./AMMC CLO 23 LLC
Class A-1-R2, $198.40 million: AAA (sf)
Class A-2-R2, $12.80 million: AAA (sf)
Class B-R2, $32.00 million: AA (sf)
Class C-R2 (deferrable), $19.20 million: A (sf)
Class D-1-R2 (deferrable), $16.00 million: BBB (sf)
Class D-2-R2 (deferrable), $6.40 million: BBB- (sf)
Class E-R2 (deferrable), $8.00 million: BB- (sf)
Ratings Withdrawn
AMMC CLO 23 Ltd./AMMC CLO 23 LLC
Class A-1-R to not rated from 'AAA (sf)'
Class A-2-R to not rated from 'AAA (sf)'
Class B-R to not rated from 'AA (sf)'
Class C-R to not rated from 'A (sf)'
Class D-R to not rated from 'BBB- (sf)'
Class E-R to not rated from 'BB- (sf)'
Other Outstanding Debt
AMMC CLO 23 Ltd./AMMC CLO 23 LLC
Subordinated notes, $31.14 million: Not rated
ANGEL OAK 2024-5: Fitch Assigns 'Bsf' Final Rating on Cl. B-2 Certs
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Fitch Ratings has assigned final ratings to Angel Oak Mortgage
Trust 2024-5 (AOMT 2024-5).
Entity/Debt Rating Prior
----------- ------ -----
AOMT 2024-5
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBB-sf New Rating BBB-(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The AOMT 2024-5 certificates are supported by 736 loans with a
balance of $295.73 million as of the cutoff date. This represents
the 38th Fitch-rated AOMT transaction, and the fifth Fitch-rated
AOMT transaction in 2024.
The certificates are secured by mortgage loans mainly originated
(93.5%) by Angel Oak Mortgage Solutions LLC (AOMS) and Angel Oak
Home Loans LLC (AOHL). The remaining 6.5% of the loans were
originated by various third-party originators (TPOs). Fitch
considers AOMS and AOHL as an average originator. The servicer of
the loans is Select Portfolio Servicing, Inc. (RPS1-/Negative).
Of the loans, 49.7% are designated as non-qualified mortgage
(non-QM) loans and 50.3% are investment properties not subject to
the Ability to Repay (ATR) Rule.
There is no Libor exposure in this transaction. There are no ARM
loans in the pool, and the certificates do not have Libor exposure.
Class A-1, A-2 and A-3 certificates are fixed rate, are capped at
the net weighted-average coupon (WAC) and have a step-up feature.
The class M-1 is based on the net WAC Rate for the related
distribution date. Class B-1, B-2 and B-3 certificates are
principal only classes that are not entitled to receive interest
payments.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 9.0% above a long-term sustainable level (vs. 11.1%
on a national level as of 4Q23, down 0% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices. Home prices have
increased 5.5% YoY nationally as of February 2024 despite modest
regional declines, but are still being supported by limited
inventory.
Non-QM Credit Quality (Mixed): The collateral consists of 736 loans
totaling $295.73 million and seasoned at about 24 months in
aggregate, according to Fitch, and 22 months, per the transaction
documents. The borrowers have a relatively strong credit profile,
with a 740 non-zero FICO and a 44.6% debt-to-income (DTI) ratio, as
determined by Fitch. They have relatively moderate leverage, with
an original combined loan-to-value (CLTV) ratio of 71.7%, as
determined by Fitch, which translates to a Fitch-calculated
sustainable LTV (sLTV) of 73.8%.
Its analysis of the pool shows that 49.6% represent loans of which
the borrower maintains a primary or secondary residence, while the
remaining 50.4% comprise investor properties. Its analysis
considered the six loans to foreign nationals to be investor
occupied, which explains the discrepancy between the
Fitch-determined figures and those in the transaction documents for
investor and owner occupancy. Fitch determined that 19.9% of the
loans were originated via a retail channel.
Additionally, 49.7% of the pool are designated as non-QM, while the
remaining 50.3% are exempt from QM status, as they are investor
loans. The pool contains 48 loans over $1.00 million, with the
largest amounting to $2.87 million. Loans on investor properties
represent 50.4% of the pool, as determined by Fitch, comprising
13.1% underwritten to the borrower's credit profile and 37.3%
investor cash flow and no ratio loans.
Furthermore, only 3.2% of the borrowers were viewed by Fitch as
having a prior credit event in the past seven years. None of the
loans have a junior lien in addition to the first lien mortgage.
There are no second lien loans in the pool, as 100% of the pool
consists of first lien mortgages. In Fitch's analysis, loans with
deferred balances are considered as having subordinate financing.
None of the loans in this transaction have a deferred balance;
therefore, Fitch viewed no loans in the pool as having subordinate
financing due to the borrower taking out additional financing on
the home that ranks subordinate to the mortgage in the pool. Fitch
viewed no subordinate financing as a positive aspect of the
transaction.
Fitch determined that six of the loans in the pool are to foreign
nationals. Fitch treats loans to foreign nationals as investor
occupied, coded as no documentation for employment and income
documentation, and removed the liquid reserves. If a credit score
is not available, Fitch uses a credit score of 650 for such
borrowers.
Although the borrowers' credit quality is higher than that of AOMT
transactions securitized in 2023 and 2022, the pool's
characteristics resemble those of nonprime collateral and,
therefore, the pool was analyzed using Fitch's nonprime model.
The largest concentration of loans is in Florida (29.7%), followed
by California and Texas. The largest MSA is Miami-Fort
Lauderdale-Miami Beach, FL (14.5%), followed by Los Angeles-Long
Beach-Santa Ana, CA (11.9%) and Dallas-Fort Worth-Arlington, TX
(4.0%). The top three MSAs account for 30.4% of the pool. There was
no geographical concentration risk in the pool, so Fitch did not
apply a penalty and losses were not impacted.
Loan Documentation (Negative): Fitch determined that 93.6% of the
loans in the pool were underwritten to borrowers with less than
full documentation. Fitch may consider a loan to be less than a
full documentation loan, based on its review of the loan program
and the documentation details provided in the loan tape, which may
explain any discrepancy between Fitch's percentage and figures in
the transaction documents.
Of the loans underwritten to borrowers with less than full
documentation, Fitch determined that 55.6% were underwritten to a
12- or 24-month business or personal bank statement program for
verifying income, which is not consistent with the previously
applicable Appendix Q standards and Fitch's view of a full
documentation program.
To reflect the additional risk, Fitch increases the probability of
default (PD) by 1.5x on bank statement loans. In addition to loans
underwritten to a bank statement program, 37.1% constitute a debt
service coverage ratio (DSCR) product, 0.2% are a no ratio product,
and 0.6% are an asset qualifier product.
Two loans in the pool are no-ratio DSCR loans. For no-ratio loans,
employment and income are considered to be "no documentation" in
Fitch's analysis, and Fitch assumes a DTI ratio of 100%. This is in
addition to the loans being treated as investor occupied.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent principal and interest (P&I). The
limited advancing reduces loss severities, as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside is the additional stress on the
structure, as liquidity is limited in the event of large and
extended delinquencies (DQs).
Modified Sequential-Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A
certificates, while excluding the mezzanine and subordinate
certificates from principal until all three A classes are reduced
to zero. To the extent that either a cumulative loss trigger event
or a DQ trigger event occurs in a given period, principal will be
distributed sequentially to class A-1, A-2 and A-3 certificates
until they are reduced to zero. There is limited excess spread in
the transaction available to reimburse for losses or interest
shortfalls should they occur.
However, excess spread will be reduced on and after the
distribution date in May 2028, since the class A certificates have
a step-up coupon feature, whereby the coupon rate will be the lower
of (i) the applicable fixed rate plus 1.000% and (ii) the net WAC
rate.
To offset the impact of the class A certificates' step-up coupon
feature, the B classes are principal-only classes and are not
entitled to receive interest. This feature is supportive of the
class A-1 certificate being paid timely interest at the step-up
coupon rate under Fitch's stresses and class A-2 and A-3 being paid
ultimate interest at the step-up coupon rate under Fitch's
stresses. Fitch rates to timely interest for 'AAAsf' rated classes
and to ultimate interest for all other rated classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 40.9% at 'AAAsf'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Canopy, Clarifii, Consolidated Analytics, Covius,
Infinity, Inglet Blair, Recovco, and Selene. The third-party due
diligence described in Form 15E focused on three areas: compliance
review, credit review and valuation review. Fitch considered this
information in its analysis and, as a result, did not make any
negative adjustments to its analysis due to no material due
diligence findings. Based on the results of the 100% due diligence
performed on the pool with no material findings, the overall
expected loss was reduced by 0.40%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria." The sponsor
engaged Canopy, Clarifii, Consolidated Analytics, Covius, Infinity,
Inglet Blair, Recovco, and Selene to perform the review. Loans
reviewed under these engagements were given compliance, credit and
valuation grades and assigned initial grades for each subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format.
The ASF data tape layout was established with input from various
industry participants, including rating agencies, issuers,
originators, investors and others, to produce an industry standard
for the pool-level data in support of the U.S. RMBS securitization
market. The data contained in the data tape layout were populated
by the due diligence company and no material discrepancies were
noted.
ESG CONSIDERATIONS
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.
AREIT LTD 2024-CRE9: Fitch Assigns 'B-sf' Rating on Class G Notes
-----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to AREIT
2024-CRE9 Ltd as follows:
- $396,877,000a class A 'AAAsf'; Outlook Stable;
- $61,058,000a class A-S 'AAAsf'; Outlook Stable;
- $47,490,000a class B 'AA-sf'; Outlook Stable;
- $39,857,000a class C 'A-sf'; Outlook Stable;
- $27,137,000a class D 'BBBsf'; Outlook Stable;
- $12,721,000a class E 'BBB-sf'; Outlook Stable;
- $26,289,000b class F 'BB-sf'; Outlook Stable;
- $18,656,000b class G 'B-sf'; Outlook Stable.
The following class is not rated by Fitch:
- $48,338,329b Preferred Shares.
(a) Privately placed and pursuant to Rule 144A.
(b) Horizontal risk retention interest, comprising 7.125% of the
securities.
The approximate collateral interest balance as of the cutoff date
is $678,423,330. This does not include future funding of
$41,046,670.
An affiliate of the Issuer will own the class F and G notes and the
Preferred Shares at closing.
The ratings are based on information provided by the issuer as of
May 1, 2024.
TRANSACTION SUMMARY
The notes represent the beneficial ownership interest in the trust,
primary assets of which are 15 loans secured by 22 commercial
properties having an aggregate principal balance of $678,423,330 as
of the cut-off date. The loans were contributed to the trust by
Argentic Real Estate Investment 2 LLC.
The servicer is Situs Asset Management LLC, and the special
servicer is Argentic Services Company LP. The trustee is Wilmington
Trust, National Association, and the note administrator is
Computershare Trust Company, N.A. The notes follow a sequential
paydown structure.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 59.8% of the loans by
balance, and cash flow analysis and asset summary reviews on 100%
of the pool.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 15 loans
totaling 100.0% of the pool by balance. Fitch's resulting net cash
flow (NCF) of $36.0 million represents an 11.7% decline from the
issuer's underwritten NCF of $40.8 million, excluding loans for
which Fitch conducted an alternate value analysis.
Lower Fitch Leverage: The pool has lower leverage compared to
recent CRE CLO transactions rated by Fitch. The pool's Fitch
loan-to-value ratio (LTV) of 129.1% is better than the 2023 CRE CLO
average of 171.2%. The pool's Fitch NCF debt yield (DY) of 6.9% is
better than the 2023 CRE CLO average of 5.6%.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch CRE CLO transactions. The top 10 loans make up
79.8% of the pool, which is higher than the 2023 CRE CLO average of
62.5%. Fitch measures loan concentration risk with an effective
loan count, which accounts for both the number and size of loans in
the pool. The pool's effective loan count is 15.4. Fitch views
diversity as a key mitigant to idiosyncratic risk. Fitch raises the
overall loss for pools with effective loan counts below 40.
Limited Amortization: Based on the scheduled balances at the end of
the fully extended loan term, the pool will pay down by 0.1%, which
is worse than the 2023 CRE CLO average of 1.7%. The pool has 14 IO
loans (93.5% of the pool), which is worse than the 2023 CRE CLO
average of 35.3%.
SUMMARY OF FINANCIAL ADJUSTMENTS
Cash Flow Modeling - This transaction utilizes note protection
tests to provide additional credit enhancement (CE) to the
investment-grade note holders, if needed. As a result of this
structural feature, Fitch's analysis of the transaction included an
evaluation of the liabilities structure under different stress
scenarios. To undertake this evaluation, Fitch used the cash flow
modeling referenced in the Fitch criteria, "U.S. and Canadian
Multiborrower CMBS Rating Criteria."
Different scenarios were run where asset default timing
distributions and recovery timing assumptions were stressed. Key
inputs, including Rating Default Rate (RDR) and Rating Recovery
Rate (RRR), were based on the CMBS multiborrower model output in
combination with CMBS analytical insight. The cash flow modeling
results showed that the default rates in the stressed scenarios did
not exceed the available CE in any stressed scenario.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Decline: 'AAAsf' / 'AAsf' / 'Asf' / 'BBBsf' / 'BB+sf' /
'BBsf' / 'Bsf' / less than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / 'AAsf' / 'Asf' / 'BBB+sf' /
'BBBsf' / 'BBsf' / 'Bsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by KPMG LLP. The third-party due diligence described in
Form 15E focused on a comparison and re-computation of certain
characteristics with respect to each of the mortgage loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
ARES LIV: S&P Affirms BB- (sf) Rating on Class E Notes
------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
and D-R replacement debt from Ares LIV CLO Ltd./Ares LIV CLO LLC, a
CLO originally issued in 2019 that is managed by Ares CLO
Management LLC. At the same time, S&P withdrew its ratings on the
original class A, B, C, and D debt following payment in full on the
May 3, 2024, refinancing date. S&P also affirmed its rating on the
class E debt, which was not refinanced.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture, the non-call period was extended to Oct.
15, 2024.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $256.00 million: Three-month CME term SOFR +
1.00839% + CSA(i)
-- Class B-R, $48.00 million: Three-month CME term SOFR + 1.53839%
+ CSA(i)
-- Class C-R (deferrable), $24.00 million: Three-month CME term
SOFR + 2.03839% + CSA(i)
-- Class D-R (deferrable), $22.00 million: Three-month CME term
SOFR + 3.23839% + CSA(i)
Original debt
-- Class A, $256.00 million: Three-month CME term SOFR + 1.32% +
CSA(i)
-- Class B, $48.00 million: Three-month CME term SOFR + 1.85% +
CSA(i)
-- Class C (deferrable), $24.00 million: Three-month CME term SOFR
+ 2.85% + CSA(i)
-- Class D (deferrable), $22.00 million: Three-month CME term SOFR
+ 3.95% + CSA(i)
(i)The CSA is 0.26161%.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Ares LIV CLO Ltd./Ares LIV CLO LLC
Class A-R, $256.00 million: AAA (sf)
Class B-R, $48.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-R (deferrable), $22.00 million: BBB- (sf)
Ratings Withdrawn
Ares LIV CLO Ltd./Ares LIV CLO LLC
Class A to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C (deferrable) to NR from 'A (sf)'
Class D (deferrable) to NR from 'BBB- (sf)'
Ratings Affirmed
Ares LIV CLO Ltd./Ares LIV CLO LLC
Class E: BB- (sf)
Other Outstanding Debt
Ares LIV CLO Ltd./Ares LIV CLO LLC
Subordinated notes: NR
NR--Not rated.
ATLAS SENIOR IX: S&P Raises Class E Notes Rating to 'B+ (sf)'
-------------------------------------------------------------
S&P Global Ratings raised its ratings on the class D and E notes
from Atlas Senior Loan Fund IX Ltd. S&P also removed these ratings
from CreditWatch, where it placed them with positive implications
on April 17, 2024. At the same time, S&P affirmed its rating on the
class C notes from the same transaction.
The rating actions follow its review of the transaction's
performance using data from the March and April 2024 trustee
report.
The transaction has paid down $62.4 million in collective paydowns
to the class C and D notes since our September 2023 rating actions.
These paydowns resulted in improved reported overcollateralization
(O/C) ratios since the July 11, 2023 trustee report, which we used
for our previous rating actions:
-- The class C O/C ratio improved to 308.12% from 146.98%.
-- The class D O/C ratio improved to 149.15% from 118.75%.
-- The class E O/C ratio improved to 105.75% from 103.01%.
-- The higher coverage tests for the class C, D, and E notes
indicate an increase in their credit support.
Collateral obligations with ratings in the 'CCC' category have
decreased to 16.3% ($10.96 million) as of the April 2024 trustee
report from 22.0% ($31.24 million) as of the July 2023 trustee
report. Over the same period, the transaction's exposure to
defaulted collateral, which had been $2.76 million, was
eliminated.
The upgraded rating reflects the improved credit support available
to the notes at the prior rating levels. The affirmed rating
reflects passing cash flows and adequate credit support at the
current rating level.
S&P said, "Our ratings on the class E notes are constrained at 'B+
(sf)' by the application of the largest-obligor default test, a
supplemental stress test included as part of our corporate
collateralized debt obligation criteria.
"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 Positive
Atlas Senior Loan Fund IX Ltd.
Class D to 'AAA (sf)' from 'BBB- (sf)/Watch Pos'
Class E to 'B+ (sf)' from 'B- (sf)/Watch Pos'
Ratings Affirmed
Atlas Senior Loan Fund IX Ltd.
Class C: AAA (sf)
BALLYROCK CLO 22: S&P Assigns Prelim BB-(sf) Rating on Cl. D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Ballyrock
CLO 22 Ltd./Ballyrock CLO 22 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 Ballyrock Investment Advisors LLC,
which will engage Fidelity Management & Research Company LLC as a
sub-advisor.
The preliminary ratings are based on information as of May 8, 2024.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Ballyrock CLO 22 Ltd./Ballyrock CLO 22 LLC
Class A-1a, $299.25 million: AAA (sf)
Class A-1b, $19.00 million: AAA (sf)
Class A-2, $42.75 million: AA (sf)
Class B, $28.50 million: A (sf)
Class C (deferrable), $28.50 million: BBB- (sf)
Class D (deferrable), $19.00 million: BB- (sf)
Subordinated notes, $46.52 million: Not rated
BANK5 TRUST 2024-5YR6: Fitch Assigns 'B-sf' Rating on Two Tranches
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
BANK5 Trust 2024-5YR6 commercial mortgage pass-through certificates
series 2024-5YR6 as follows:
- $1,922,000 class A-1 'AAAsf; Outlook Stable;
- $689,022,000a class X-A 'AAAsf; Outlook Stable;
- $687,100,000 class A-3 'AAAsf; Outlook Stable;
- $199,324,000a class X-B 'AAAsf; Outlook Stable;
- $115,657,000 class A-S 'AAAsf; Outlook Stable;
- $45,525,000 class B 'AA-sf; Outlook Stable;
- $38,142,000 class C 'A-sf; Outlook Stable;
- $10,828,000abd class X-D 'BBB+sf; Outlook Stable;
- $10,828,000bd class D 'BBB+sf; Outlook Stable;
- $17,471,000abcd class XERR 'BBB-sf; Outlook Stable;
- $17,471,000bcd class E-RR 'BBB-sf; Outlook Stable;
- $17,226,000abc class XFRR 'BB-sf; Outlook Stable;
- $17,226,000bc class F-RR 'BB-sf; Outlook Stable;
- $11,074,000abc class XGRR 'B-sf; Outlook Stable;
- $11,074,000bc class G-RR 'B-sf; Outlook Stable.
The following class is not expected to be rated by Fitch:
- $39,372,833bc class J-RR
- $39,372,833abc class XJRR
(a) Exchangeable Certificates. The class A-3, class A-S, class B
and class C are exchangeable certificates. Each class of
exchangeable certificates may be exchanged for the corresponding
classes of exchangeable certificates, and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the surrendered
classes of certificates.
The class A-3 may be surrendered (or received) for the received (or
surrendered) classes A-3-1, A-3-X1, A-3-2 and A-3-X2. The class A-S
may be surrendered (or received) for the received (or surrendered)
classes A-S-1, A-S-X1, A-S-2 and A-S-X2. The class B may be
surrendered (or received) for the received (or surrendered) classes
B-1, B-X1, B-2 and B-X2. The class C may be surrendered (or
received) for the received (or surrendered) classes C-1, C-X1, C-2
and C-X2. The ratings of the exchangeable classes would reference
the ratings of the associate referenced or original classes.
(b) Notional amount and interest only.
(c) Privately placed and pursuant to Rule 144A.
(d) Horizontal Risk Retention Interest classes.
Additionally, at the time the presale was issued, class X-B (which
is tied to the classes A-S, B and C) was rated 'A-sf(EXP)',
reflecting class C, the lowest rated tranche. Since Fitch published
its expected ratings, the class B and C pass-through rates were
finalized and will be variable rate (WAC), equal to the weighted
average of the net mortgage interest rates on the mortgage loan,
and therefore the payable interest from the two classes will not
have an impact on the IO payments for class X-B. Fitch updated
class X-B to 'AAAsf' (from A-sf(EXP) at the time of the presale)
reflecting the lowest tranche (class A-S) whose payable interest
has an impact on the IO payments. This is consistent with Appendix
4 of Fitch's Global Structured Finance Rating Criteria.
The ratings are based on information provided by the issuer as of
May 6, 2024.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets, which include 46 loans secured by 54
commercial properties having an aggregate principal balance of
$984,317,834 as of the cut-off date. The loans were contributed to
the trust by JPMorgan Chase Bank, National Association, Morgan
Stanley Mortgage Capital Holdings LLC, Wells Fargo Bank, National
Association, and Bank of America, National Association. The master
servicer is Wells Fargo Bank, National Association and the special
servicer is LNR Partners, LLC.
The initial notional amount of the class X-D and Class XERR
certificates and the initial certificate balance of each of the
class D and class E-RR certificates are estimated based in part on
the estimated ranges of certificate balances and estimated fair
values described in "Credit Risk Retention". At the time the
expected ratings were published, the class D and class E-RR
certificate balances were unknown, and were expected to total
$28,299,000 in the aggregate. The classes above reflect the final
ratings and deal structure.
KEY RATING DRIVERS
Higher Leverage Compared to Recent Transactions: The pool has
higher leverage than U.S. private-label multi-borrower five-year
transactions rated by Fitch during 2023 and 2024 YTD. The pool's
Fitch loan-to-value ratio (LTV) of 93.6% is higher than the 2023
and 2024 YTD averages of 89.7% and 89.1%, respectively. The pool's
Fitch NCF debt yield (DY) of 10.8% is slightly greater than the
2023 average of 10.6% but lower than the 2024 YTD average of
11.0%.
Investment Grade Credit Opinion Loans: Three loans totaling 12.4%
of the pool received an investment grade credit opinion on a
standalone basis. Kenwood Towne Centre (7.1% of pool) received a
standalone credit opinion of 'BBBsf*'. Aliz Hotel Times Square
(5.1% of pool) received a standalone credit opinion of 'A-sf*'.
Tysons Corner Center (0.2%) received a standalone credit opinion of
'AAsf*'. The pool's total credit opinion percentage is lower than
averages for five-year transactions rated by Fitch during 2023 and
2024 YTD of 14.6% and 13.7%, respectively. Excluding these credit
opinion loans, the pool's Fitch LTV and DY are 97.6% and 10.2%,
respectively.
Lower Loan Concentration: The largest 10 loans make up 53.2% of the
pool which is less concentrated than recently rated Fitch
transactions. The average top 10 loan concentration for five-year
transactions rated by Fitch during 2023 and YTD 2024 are 63.3% and
60.9%, respectively. Fitch measures loan concentration risk with an
effective loan count, which accounts for both the number and size
of loans in the pool. The pool's effective loan count is 26.8 which
is greater than the average for five-year transactions rated by
Fitch of 19.7 and 22.1 for 2023 and YTD 2024, respectively.
Shorter-Duration Loans: Loans with five-year terms constitute 100%
of the pool, whereas Fitch-rated multiborrower transactions have
historically included mostly loans with 10-year terms. Fitch's
historical loan performance analysis shows that five-year loans
have a modestly lower probability of default than 10-year loans,
all else equal. This is mainly attributed to the shorter window of
exposure to potential adverse economic conditions. Fitch considered
its loan performance regression in its analysis of the pool.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' /
'BBsf' / 'BB-sf' / 'B-sf';
- 10% NCF Decline: 'AA-sf' / 'A-sf' / 'BBBsf' / 'BB+sf' / 'BBsf' /
'B+sf' / 'Bsf' / less than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' /
'BBsf' / 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AA+sf' / 'Asf' / 'BBB+sf' / 'BBBsf'
/ 'BB+sf' / 'BBsf' / 'Bsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BARCLAYS MORTGAGE 2024-NQM2: Fitch Gives Bsf Rating on B2 Certs
---------------------------------------------------------------
Fitch Ratings assigns new ratings to the residential
mortgage-backed certificates issued by Barclays Mortgage Loan Trust
2024-NQM2 (BARC 2024-NQM2).
Entity/Debt Rating
----------- ------
BARC 2024-NQM2
A1 LT AAAsf New Rating
A2 LT AAsf New Rating
A3 LT Asf New Rating
M1 LT BBBsf New Rating
B1 LT BBsf New Rating
B2 LT Bsf New Rating
B3 LT NRsf New Rating
SA LT NRsf New Rating
X LT NRsf New Rating
PT LT NRsf New Rating
PT1 LT NRsf New Rating
R LT NRsf New Rating
TRANSACTION SUMMARY
The certificates are supported by 781 nonprime loans with a total
balance of approximately $282.4 million as of the cutoff date.
88.6% of the loans in the pool were originated and sold to the
seller, Sutton Funding LLC, by Carrington Mortgage Services, LLC
(CMS) 9.8% by either PennyMac Loan Services LLC or PennyMac Corp
(PennyMac), 0.8% by NQM Funding LLC and 0.7% by HomeXpress Mortgage
Corp. All loans are currently serviced by Carrington Mortgage
Services, LLC (88.6%), PennyMac Loan Services LLC (8.6%), PennyMac
Corp (1.3%) and Fay Servicing LLC (1.6%).
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.9% above a long-term sustainable level (versus
11.1% on a national level as of 3Q23, up 1.7% 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 have increased 5.5% YoY nationally as of December 2023
despite modest regional declines, but are still being supported by
limited inventory.
Non-QM Credit Quality (Negative): The collateral consists of 781
loans, totaling $282.4 million and seasoned approximately eight
months in aggregate, as determined by Fitch. The borrowers have a
moderate credit profile (724 Fitch model FICO and 45.0% model debt
to income [DTI] ratio), which takes into account Fitch's converted
debt service coverage ratio (DSCR) values. The borrowers also have
moderately high leverage — 80.9% sustainable loan-to-value (sLTV)
ratio and 72.8% original combined LTV (cLTV).
The pool consists of 55.4% of loans where the borrower maintains a
primary residence, while 35.2% comprise an investor property and
the remaining 9.4% are second home. Additionally, 8.6% are
safe-harbor qualified mortgages (SHQMs), 1.6% are higher-priced
qualified mortage (HPQM), 0.4% are ATR at risk and 54.3% are
non-qualified mortgages (non-QMs/NQMs); the QM rule does not apply
to the remainder.
Fitch's expected loss in the 'AAAsf' stress is 27.50%. This is
mostly driven by the non-QM collateral and the significant investor
cash flow product concentration.
Loan Documentation (Negative): Approximately 81.6% of the loans in
the pool were underwritten to less than full documentation, and
29.1% were underwritten to a bank statement program for verifying
income, which is not consistent with Fitch's view of a full
documentation program. A key distinction between this pool and
legacy Alt-A loans is that these loans adhere to underwriting and
documentation standards required under the Consumer Financial
Protections Bureau's (CFPB) Ability to Repay Rule (ATR Rule, or the
Rule), which reduces the risk of borrower default arising from lack
of affordability, misrepresentation or other operational quality
risks due to rigor of the Rule's mandates with respect to the
underwriting and documentation of the borrower's ability to repay.
Fitch's treatment of alternative loan documentation increased the
'AAAsf' expected loss by 675bps relative to a fully documented
loan.
High Percentage of DSCR Loans (Negative): There are 344 DSCR
products in the pool (44.0% by loan count). These business-purpose
loans are available to real estate investors that are qualified on
a cash flow basis, rather than DTI, and borrower income and
employment are not verified. Compared to standard investment
properties, for DSCR loans, Fitch converts the DSCR values to a
DTI, and treats them as low documentation.
Fitch's expected loss for these loans is 39.25% in the 'AAAsf'
stress, which is driving the higher pool expected losses due to the
31.8% WA concentration.
Modified Sequential-Payment Structure with No Advancing (Mixed):
The structure distributes principal pro rata among the senior
certificates while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event or delinquency trigger event occurs
in a given period, principal will be distributed sequentially to
class A-1, A-2 and A-3 certificates until they are reduced to
zero.
Advances of delinquent P&I will not be made on the mortgage loans.
The lack of advancing reduces loss severities, as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside to this is the additional stress
on the structure, as there is limited liquidity in the event of
large and extended delinquencies.
BARC 2024-NQM2 has a step-up coupon for the senior classes (A-1,
A-2 and A-3). After four years, the senior classes pay the lesser
of a 100-bp increase to the fixed coupon or the net weighted
average coupon (WAC) rate. The unrated class B-3 interest
allocation goes first towards the Net WAC Shortfall Reserve Account
in order to pay the senior classes any Net WAC shortfalls for as
long as the senior classes are outstanding. This increases the P&I
allocation of the senior classes.
As additional analysis to Fitch's rating stresses, Fitch took into
account a WAC deterioration that varied by rating stress. The WAC
cut was derived by assuming a 2.5% cut (based on the most common
historical modification rate) on 40% (historical Alt-A modification
percentage) of the performing loans. Although the WAC reduction
stress is based on historical modification rates, Fitch did not
include the WAC reduction stress in its testing of the delinquency
trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut,
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but will not
ultimately default due to modifications and reduced P&I.
Furthermore, this approach had the largest impact on the
back-loaded scenario.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 10.9% at base case. The analysis indicates that
there is some potential rating migration with higher MVDs for all
rated classes, compared with the model projection. A 10% additional
decline in home prices would lower all rated classes by one full
category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes. A 10% gain
in home prices would result in a full category upgrade for the
rated class excluding those assigned 'AAAsf' ratings.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC, Clayton Services and Recovco Mortgage
Management. The third-party due diligence described in Form 15E
focused on credit, compliance, and property valuation review. Fitch
considered this information in its analysis and, as a result, Fitch
made the following adjustment(s) to its analysis: a 5% credit at
the loan level for each loan where satisfactory due diligence was
completed. This adjustment resulted in 55bps reduction in losses at
the 'AAAsf' stress.
ESG CONSIDERATIONS
BARC 2024-NQM2 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to elevated Operational Risk, which
has a negative impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BBCMS 2019-BWAY: Fitch Lowers Rating on Class HRR Certs to CCC
--------------------------------------------------------------
Fitch Ratings has downgraded seven classes of BBCMS 2019-BWAY
Mortgage Trust (BBCMS 2019-BWAY) commercial mortgage pass-through
certificates. Additionally, all seven classes have been placed on
Rating Watch Negative following their downgrades.
Entity/Debt Rating Prior
----------- ------ -----
BBCMS 2019-BWAY
A 05492NAA1 LT AA-sf Downgrade AAAsf
B 05492NAC7 LT A-sf Downgrade AA-sf
C 05492NAE3 LT BBB-sf Downgrade A-sf
D 05492NAG8 LT BB-sf Downgrade BBB-sf
E 05492NAJ2 LT B-sf Downgrade BB-sf
HRR 05492NAL7 LT CCCsf Downgrade B+sf
X-NCP 05492NAQ6 LT AA-sf Downgrade AAAsf
KEY RATING DRIVERS
Performance Deterioration; Delinquent Loan: The downgrades reflect
continued property performance declines and deteriorating submarket
conditions beyond Fitch's view of sustainable performance since the
last rating action, in addition to the delinquent status of the
1407 Broadway loan. Fitch does not expect the property will
materially outperform the submarket, which has seen an increase in
vacancy and availability and placed downward pressure on effective
rents at comparable buildings.
The Rating Watch Negative placement on all classes reflects the
likelihood of further downgrades of one to two categories should
deteriorating market fundamentals limit the borrower's ability to
improve occupancy and execute new leases at market-level rents, a
prolonged workout by the special servicer and/or a significantly
lower updated appraisal valuation below Fitch's expectations.
Fitch will resolve the Rating Watch status within six months as
further updates on property performance, the progress of the loan
workout and an appraisal are provided by the special servicer.
Recent commentary indicated the special servicer is dual tracking
foreclosure and a potential loan modification, but no additional
details have been provided to Fitch. The floating rate loan is
uncapped as the prior interest rate cap expired at the second
extended maturity date in November 2023.
The loan transferred to the special servicer in August 2023 ahead
of its second extended maturity date in November 2023. The special
servicer was subsequently transferred from KeyBank to Mount Street
in November 2023.
Fitch placed Mount Street's commercial special servicer rating on
Rating Watch Negative, reflecting concerns regarding transparency
of information during the workout process for the 1407 Broadway
loan, including the timely receipt and reporting of valuations to
all market participants relative to other Fitch-rated special
servicers. See Fitch's press release published on April 30, 2024
titled Fitch Places Mount Street U.S. Commercial Special Servicer
Rating on Negative Watch.
As of the April 2024 payment date, the loan was reported as a
non-performing matured balloon and was over 90 days past due, with
the last paid through date as of January 2024. The automatic
appraisal reduction of 25% has been applied to the loan balance as
of the April 2024 remittance reporting in accordance with the trust
and servicing agreement, which has limited master servicer
advancing on the loan. Interest shortfalls are currently affecting
classes D, E and H-RR.
Based on the limited information provided, including interim 2023
financials, Fitch's updated net cash flow (NCF) of $27.6 million,
which is 9.1% below Fitch's NCF of $30.4 million at the last rating
action and 15.3% below Fitch's issuance NCF of $32.6 million,
considers leases-in-place as of the February 2024 rent roll, with
credit given to near-term contractual rent escalations and minimal
lease-up, offset by tenants that have vacated or tenants with lease
expirations through 2024. Additionally, Fitch applied higher
leasing costs and capital expenditure assumptions in its updated
analysis. Fitch has not received full year financials since YE
2022. Fitch will continue to monitor its cash flow and valuation
assumptions as additional information is received.
The property's occupancy as of the servicer-provided February 2024
rent roll was 81.3%, down from 83.9% at YE 2022 and 93.8% at
issuance. The tenant roster is fairly granular, with the property
comprising of a concentration of apparel and garment-related
tenants which typically have smaller footprints. The
servicer-provided rent roll indicates that the sponsor continues
efforts to maintain occupancy and sign or renew both office and
retail tenants at the property. Recent leasing at the property show
office rental rates have generally ranged from around $40 psf to
$55 psf (excluding rent steps) depending on the space and lease
terms. As of the April 2024 servicer reporting, the leasing reserve
has a balance of approximately $3.3 million.
Fitch Leverage: The $350 million mortgage loan, which represents a
total debt of $313 psf, has a Fitch stressed debt service coverage
ratio and loan-to-value of 0.79x and 114%, respectively, compared
with 0.91x and 98%, respectively, at the last rating action and
1.03x and 85.9% at issuance. Fitch incorporated a higher stressed
capitalization rate of 9.0%, up from 8.5% at the last rating action
and 8.0% at issuance to reflect increased office sector concerns
and the leasehold interest.
The collateral consists of a leasehold interest in 1407 Broadway, a
49-story, 1.1. million-sf office building located in the Garment
District in Midtown Manhattan. The property is well situated in
proximity to Manhattan's public transportation hubs including Times
Square, Grand Central Terminal, New York Penn Station and the Port
Authority Bus Terminal. The sponsor, an affiliate of Shorenstein
Company, LLC, acquired the property in 2015 and subsequently
renovated the property, including upgrading the common areas,
retail storefronts and HVAC.
The largest tenant is Comcast (Fitch rated A-/Outlook Stable; 9.3%
of NRA), which has a lease through December 2028. Other office
tenants include S. Rothschild & Co. (4.2% of NRA through June
2025), VCS Group (3.8% of NRA through September 2028) and ES Sutton
(2.8 % of NRA through December 2028).
Short-Term Leasehold Interest: The property is subject to a 76-year
ground lease through December 2030, with one 18-year renewal option
remaining, which would extend the ground lease through December
2048. The current ground lease payments are a fixed $414,000 per
annum, which are set to increase to a fixed $450,000 per annum on
January 2031 through December 2048.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Pending additional information on property performance, appraisal
and updates on the status of the loan's workout from the special
servicer, downgrades of one to two categories are likely should
property NCF and occupancy and/or market conditions deteriorate
beyond Fitch's current view of sustainable performance, including
if new leases are signed at rates significantly below market rates.
Downgrades are also possible with a significantly lower appraisal
valuation below Fitch's expectation and/or with continued lack of
clarity on the progress on the loan's workout.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are not considered likely due to the loan's delinquent
status and market conditions that could affect the property's cash
flow and recovery value, but may be possible with significant and
sustained improvement in Fitch NCF, positive leasing to occupancy
levels and rental rates above market and with greater certainty on
the ultimate resolution of the loan.
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.
BBCMS MORTGAGE 2024-C26: Fitch Assigns B-(EXP) on Cl. G-RR Certs
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and issued a presale
report on BBCMS Mortgage Trust 2024-C26 commercial mortgage
pass-through certificates series 2024-C26.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
- $7,000,000 class A-1 'AAAsf'; Outlook Stable;
- $15,000,000 class A-2 'AAAsf'; Outlook Stable;
- $125,000,000c class A-4 'AAAsf'; Outlook Stable;
- $409,700,000c class A-5 'AAAsf'; Outlook Stable;
- $10,497,000 class A-SB 'AAAsf'; Outlook Stable;
- $567,197,000a class X-A 'AAAsf'; Outlook Stable;
- $156,993,000a class X-B 'A-sf'; Outlook Stable;
- $84,067,000 class A-S 'AAAsf'; Outlook Stable;
- $42,540,000 class B 'AA-sf'; Outlook Stable;
- $30,386,000 class C 'A-sf'; Outlook Stable;
- $9,115,000a,b class X-D 'BBBsf'; Outlook Stable;
- $9,115,000b class D 'BBBsf'; Outlook Stable;
- $15,193,000b,d class E-RR 'BBB-sf'; Outlook Stable;
- $15,193,000b,d class F-RR 'BB-sf'; Outlook Stable;
- $10,129,000b,d class G-RR 'B-sf'; Outlook Stable;
Fitch does not expect to rate the following class:
- $36,462,761b,d class H-RR
Notes:
(a)Notional amount and interest only.
(b)Privately placed and pursuant to Rule 144A.
(c)The exact initial certificate balances of the Class A-4 and
Class A-5 certificates are unknown and will be determined based on
the final pricing of those classes of certificates. The expected
class A-4 balance range is $0 to $250,000,000 and the expected
class A-5 balance range is $284,700,000 to $534,700,000. The total
initial certificate balance of these classes is expected to be
$534,700,000 in the aggregate, subject to a variance of plus or
minus 5.0%. Fitch's certificate balances for classes A-5 and A-5
reflect the midpoints of each range.
(d)Horizontal Risk Retention Interest classes.
The expected ratings are based on information provided by the
issuer as of May 6, 2024.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in a
trust, the primary assets of which are 46 fixed-rate, commercial
mortgage loans with an aggregate principal balance of $810,282,762
as of the cutoff date. The mortgage loans are secured by the
borrowers' fee and leasehold interests in 101 commercial
properties.
The loans were contributed to the trust by Barclays Capital Real
Estate Inc., Societe Generale Financial Corporation, Bank of
Montreal, UBS AG, Bank of America, National Association, Argentic
Real Estate Finance 2 LLC, LMF Commercial, LLC, Starwood Mortgage
Capital, LLC, German American Capital Corporation, Ladder Capital
Corporation, KeyBank National Association and BSPRT CMBS Finance,
LLC.
The master servicer is expected to be Wells Fargo Bank, N.A and the
special servicer is expected to be Rialto Capital Advisors, LLC.
Computershare Trust Company, N.A. will act as trustee and
certificate administrator. These certificates are expected to
follow a sequential paydown structure.
The transaction's closing date is expected to be May 23, 2024.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 25 loans
totaling 82.7% of the pool by balance. Fitch's resulting net cash
flow (NCF) of $222.9 million represents a 15.7% decline from the
issuer's underwritten NCF of $264.5 million.
Lower Fitch Leverage: The pool has lower leverage compared to
recent multiborrower transactions rated by Fitch Ratings. The
pool's Fitch loan-to-value ratio (LTV) of 83.7% is lower than both
the 2024 YTD and 2023 averages of 87.1% and 88.3%, respectively.
The pool's Fitch NCF debt yield (DY) of 10.5% is worse than both
the 2024 YTD and 2023 averages of 11.6% and 10.9%, respectively.
Investment Grade Credit Opinion Loans: Two loans representing 12.8%
of the pool balance received an investment grade credit opinion.
Westwood Gateway II (9.3% of the pool) received a standalone credit
opinion of 'BBBsf*'. Woodfield Mall (3.6%) received a standalone
credit opinion of 'BBB+sf*'. The pool's total credit opinion
percentage of 12.8% is below the YTD 2024 average of 13.0% and the
2023 average of 17.8%. The pool's Fitch LTV and DY, excluding
credit opinion loans, are 91.7% and 10.1%, respectively.
High Pool Concentration: The largest 10 loans constitute 57.2% of
the pool, which is better than the 2024 YTD and 2023 averages of
61.7% and 63.7%, respectively. Despite this improvement, the pool
remains relatively concentrated. Fitch measures loan concentration
risk with an effective loan count, which accounts for both the
number and size of loans in the pool. The pool's effective loan
count is 25.7. Fitch views diversity as a key mitigant to
idiosyncratic risk. Fitch raises the overall loss for pools with
effective loan counts below 40.
Retail Mall Concentration: The pool has less property type
diversity compared to recently rated Fitch transactions. The pool's
effective property type count of 3.9 is worse than the YTD 2024 and
2023 averages of 4.2 and 4.0, respectively. The largest property
type concentration is retail (38.4% of the pool), which is higher
than the YTD 2024 and 2023 retail averages of 36.3% and 31.2%,
respectively. In particular, the transaction has a high
concentration of malls properties, which represent four of the
largest 15 loans totaling 18.9% of the pool. The second largest
property type concentration is multifamily (27.5% of the pool),
which is significantly higher than the YTD 2024 and 2023 averages
of 18.9% and 9.6%, respectively.
The third largest property type is office accounting (13.4% of the
pool), which is lower than the YTD 2024 average of 14.7% and
significantly lower than the 2023 average of 27.6%. Pools that have
a greater concentration by property type are at greater risk of
losses, all else equal. Fitch therefore raises the overall losses
for pools with effective property type counts below five property
types.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Decline:
'AA-sf'/'A-sf'/'BBB-sf'/'BBB-sf'/'BB-sf'/'B-sf'/'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Orignal Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Increase:
'AAAsf'/'AAsf'/'Asf'/'A-sf'/'BBBsf'/'BB+sf'/'B+sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BENCHMARK 2019-B10: Fitch Lowers Rating on 2 Tranches to CCsf
-------------------------------------------------------------
Fitch Ratings has downgraded six and affirmed 11 classes of
Benchmark 2019-B10 Mortgage Trust. The Rating Outlooks for six
affirmed classes were revised to Negative from Stable, and two
classes were assigned Negative Outlooks following their rating
downgrades.
Entity/Debt Rating Prior
----------- ------ -----
BMARK 2019-B10
A-1 08162VAA6 LT AAAsf Affirmed AAAsf
A-2 08162VAB4 LT AAAsf Affirmed AAAsf
A-3 08162VAD0 LT AAAsf Affirmed AAAsf
A-4 08162VAE8 LT AAAsf Affirmed AAAsf
A-M 08162VAG3 LT AAAsf Affirmed AAAsf
A-SB 08162VAC2 LT AAAsf Affirmed AAAsf
B 08162VAH1 LT AA-sf Affirmed AA-sf
C 08162VAJ7 LT A-sf Affirmed A-sf
D 08162VAV0 LT BBBsf Affirmed BBBsf
E 08162VAX6 LT Bsf Downgrade BBsf
F 08162VAZ1 LT CCCsf Downgrade B-sf
G 08162VBB3 LT CCsf Downgrade CCCsf
X-A 08162VAF5 LT AAAsf Affirmed AAAsf
X-B 08162VAK4 LT A-sf Affirmed A-sf
X-D 08162VAM0 LT Bsf Downgrade BBsf
X-F 08162VAP3 LT CCCsf Downgrade B-sf
X-G 08162VAR9 LT CCsf Downgrade CCCsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades to classes E, F, G,
X-D, X-F and X-G reflect increased pool loss expectations since
Fitch's prior rating action, driven by performance deterioration of
several Fitch Loans of Concern (FLOCs), including 3 Park Avenue
(6.0% of pool) and four specially serviced loans, Tulsa Office
Portfolio (2.7%), Sharon Park Apartments (2.7%), Spring Hollow
Apartments (2.6%) and 166 Geary Street (1.9%).
Thirteen loans are identified as FLOCs (37.2%), including five
loans (10.7%) currently in special servicing. Fitch's current
ratings incorporate a 'Bsf' rating case loss of 8.48%.
The Negative Outlooks reflect the high office concentration in the
pool (44.6%), many of which are FLOCs with lower occupancies,
tenant rollover concerns and experiencing deteriorating market
conditions, most notably 3 Park Avenue, 101 California (4.0%),
Tulsa Office Portfolio and 166 Geary. Downgrades of one category or
more are possible without performance stabilization of the FLOCs,
and should recovery prospects worsen beyond Fitch's expectations,
including limited clarity on valuations and ultimate workout, of
the two recently transferred multifamily specially serviced loans,
Sharon Park Apartments and Spring Hollow Apartments.
FLOCs with Largest Loss Increases: The largest increase in loss
since the prior rating action is the Sharon Park Apartments loan
(2.7%), which is secured a 636-unit multifamily property located in
Houston, TX. In March 2024, the loan transferred to special
servicing due to payment default. The borrower was unable to renew
their wind coverage insurance policy because of a significant rise
in premium costs. The servicer declined to approve a waiver for the
requirement and force placed coverage for the property.
The property has exhibited stable performance. As of September
2023, occupancy was 99% with a NOI DSCR of 1.54x, compared with 93%
and 1.57x, respectively, at YE 2022 and 95% and 1.54x at issuance.
Fitch's 'Bsf' rating case loss of 29.5% (prior to concentration
adjustments) reflects the TTM September 2023 NOI with a cap rate of
9% and accounts for the loan's transfer to special servicing and
delinquency status.
The second largest increase in loss since the prior rating action
is the Tulsa Office Portfolio loan (2.7%), which is 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 expire 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 11.00% cap rate, 10% stress to the YE 2023 NOI
and accounts for the loan's transfer to special servicing and
delinquency status.
The third largest increase in loss since the prior rating action is
the 3 Park Avenue loan (6.0%), which is secured by 641,186-sf of
office space on floors 14 through 41 and 26,260-sf of multi-level
retail space located on Park Avenue and 34th Street in the Murray
Hill office submarket of Manhattan. The top three tenants are
Houghton Mifflin Harcourt (15.2%; December 2027), P. Kaufman (6.9%;
December 2030) and Return Path, Inc. (3.5%; July 2025).
This FLOC was flagged for low occupancy and DSCR. Property
occupancy declined to 54% at YE 2023, in line with 2022, but
remains below 86% at issuance, largely from the departure of
TransPerfect Translations (13.7%) in 2019, Icon Capital Corporation
(3.4%) in 2023 and several tenants that have downsized their
spaces. The servicer-reported NOI DSCR was 0.91x at YE 2023,
compared with 0.81x at YE 2022 and significantly below 2.08x based
on the originator's underwritten NOI at issuance. The largest
tenant, Houghton Mifflin Harcourt, has listed two floors totaling
45,444-sf for sublease; this square footage represents 45% of the
Houghton Mifflin space and 6.8% of the total building space
footage.
Fitch's 'Bsf' rating case loss of 21.3% (prior to concentration
adjustments) is based on an 8.50% cap rate to the Fitch sustainable
NCF that is inline with Fitch's issuance NCF. Fitch's loss
expectation also factors a higher probability of default due to the
performance declines and low DSCR.
The fourth largest increase in loss since the prior rating action
is the Spring Hollow Apartments loan (2.6%), which is secured by a
506-unit multifamily property located in Toledo, OH. The loan
transferred to special servicer in March 2024 due to payment
default. A consensual receivership is being explored as the
borrower has indicated an unwillingness to fund further shortfalls.
Property performance continues to deteriorate, with September 2023
occupancy and NOI DSCR falling further to 61% and 0.98x,
respectively, from 71% and 1.31x at YE 2022.
Fitch's 'Bsf' rating case loss of 25.8% (prior to concentration
add-ons) reflects the YE 2022 NOI with a cap rate of 8.75% and
accounts for the loan's transfer to special servicing and
delinquency status.
The fifth largest increase in loss since the prior rating action is
the 166 Geary Street loan (1.9%), which is secured by a 34,343-sf
office property located in San Francisco, CA. The loan transferred
to special servicer in July 2023 due to payment default. As of
April 2024, the servicer is dual-tracking foreclosure. As of
December 2022, property occupancy was 66% and NOI DSCR was 0.81x.
The property's largest tenant at issuance, WeWork which had
occupied 36% of the NRA, has since vacated.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 43.4% incorporates the most recent appraisal value which equates
to stressed recovery of $347 psf.
An additional top contributor to overall loss expectations is the
Saint Louis Galleria loan (6.0%), which is secured by a
Brookfield-sponsored, super-regional mall located in St. Louis, MO.
This FLOC was flagged due to lagging post-pandemic performance and
upcoming rollover concerns. The mall is anchored by Dillard's,
Macy's and Nordstrom, which are non-collateral tenants.
Property-level NOI has declined since issuance, with the most
recent full-year reported YE 2022 NOI remaining approximately 29%
below the originator's underwritten NOI and 12% below YE 2020 NOI.
The NOI declines are mainly attributed to the lower revenue since
the pandemic, where YE 2022 revenue is 20% below YE 2019. As of
September 2023, the YTD servicer-reported NOI DSCR was 1.60x,
compared with 1.68x at YE 2021. The loan began to amortize in
November 2023.
Collateral occupancy declined to 90.5% as of September 2023 from
96% at YE 2021 as a result of several tenants vacating at or ahead
of their lease expirations. Total mall occupancy was 96.6% as of
the September 2023 rent roll. As of September 2022, reported TTM in
line comparable tenant sales were $536 psf ($419 psf excluding
Apple), compared with $523 psf ($401 psf excluding Apple) as of TTM
September 2021 and $364 psf ($294 psf excluding Apple) at YE 2020.
Fitch requested an updated tenant sales report, but it was not
provided.
Fitch's 'Bsf' rating case loss of 12.5% (prior to concentration
add-ons) is based on a 7.5% stress to the YE 2022 NOI for rollover
concerns and an 11.50% cap rate.
Fitch no longer considers the 101 California Street loan (4.0%) 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.
Increased Credit Enhancement (CE): As of the March 2024
distribution date, the pool's aggregate principal balance has been
paid down by 12.6% to $1.10 billion from $1.26 billion. There are
two loans (4.2% of pool) that are fully defeased. Loan maturities
are concentrated in 2028 (four loans; 14.9% of the pool) and 2029
(40 loans; 85.1%).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur.
Downgrades to junior 'AAAsf' rated classes with Negative Outlooks
are possible without improvement in performance of the FLOCs, and
should loss expectations of the loans in special servicing remain
unchanged or worsen given lower updated valuations, performance
deterioration or likelihood of a prolonged workout.
Downgrades to classes rated 'AA-sf', 'A-sf' and 'BBBsf' are likely
with limited to no performance improvement of the FLOCs, in
particular office loans with deteriorating performance including 3
Park Avenue, 101 California, Tulsa Office Portfolio and 166 Geary,
and/or with significant valuation declines beyond Fitch's
expectations or greater certainty of losses on the specially
serviced multifamily loans, Sharon Park Apartments and Spring
Hollow Apartments.
Downgrades to the class rated 'Bsf' and distressed ratings of
'CCCsf' and 'CCsf' 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 'AA-sf' and 'A-sf' are not expected, but
may be possible with sustained performance improvement on the FLOCs
and specially serviced loans, including 3 Park Avenue, 101
California, Tulsa Office Portfolio, Sharon Park Apartments, Spring
Hollow Apartments, 166 Geary Street and 116 University Place,
coupled with improving CE from loan repayments and/or defeasance.
Upgrades to classes rated in the 'BBBsf' and 'BBsf' categories are
unlikely absent greater performance improvement as well as better
than expected recoveries on the aforementioned FLOCs.
Upgrades to the class rated 'Bsf' and distressed ratings of 'CCCsf'
and 'CCsf' are unlikely absent better than expected recoveries of
loans in special servicing.
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.
BENEFIT STREET XXXIV: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Benefit Street Partners
CLO XXXIV Ltd./Benefit Street Partners CLO XXXIV LLC's
floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Benefit Street Partners LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Benefit Street Partners CLO XXXIV Ltd./
Benefit Street Partners CLO XXXIV LLC
Class A-1, $288.00 million: AAA (sf)
Class A-2, $13.50 million: Not rated
Class B, $40.50 million: AA (sf)
Class C (deferrable), $27.00 million: A (sf)
Class D (deferrable), $27.00 million: BBB- (sf)
Class E (deferrable), $18.00 million: BB- (sf)
Subordinated notes, $40.66 million: Not rated
BMO 2023-C6 MORTGAGE: Fitch Affirms 'B-sf' Rating on Two Tranches
-----------------------------------------------------------------
Fitch Ratings has affirmed 18 classes of BMO 2023-C6 Mortgage Trust
commercial mortgage pass-through certificates. The Rating Outlooks
remain Stable for all classes.
Entity/Debt Rating Prior
----------- ------ -----
BMO 2023-C6
A-1 055985AA3 LT AAAsf Affirmed AAAsf
A-2 055985AB1 LT AAAsf Affirmed AAAsf
A-4 055985AD7 LT AAAsf Affirmed AAAsf
A-5 055985AE5 LT AAAsf Affirmed AAAsf
A-S 055985AJ4 LT AAAsf Affirmed AAAsf
A-SB 055985AF2 LT AAAsf Affirmed AAAsf
B 055985AK1 LT AA-sf Affirmed AA-sf
C 055985AL9 LT A-sf Affirmed A-sf
D-RR 055985AM7 LT BBBsf Affirmed BBBsf
E-RR 055985AR6 LT BBB-sf Affirmed BBB-sf
F-RR 055985AV7 LT BB-sf Affirmed BB-sf
G-RR 055985AZ8 LT B-sf Affirmed B-sf
X-A 055985AG0 LT AAAsf Affirmed AAAsf
X-B 055985AH8 LT AA-sf Affirmed AA-sf
X-DRR 055985AP0 LT BBBsf Affirmed BBBsf
X-ERR 055985AT2 LT BBB-sf Affirmed BBB-sf
X-FRR 055985AX3 LT BB-sf Affirmed BB-sf
X-GRR 055985BB0 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Stable Performance and Loss Expectations: The rating affirmations
reflect overall stable pool performance since issuance. Given the
recent vintage of the transaction and lack of updated reporting,
loan-level issuance analysis was relied upon for the affirmations.
Two loans (1.57%) are considered Fitch Loans of Concern (FLOCs),
including one loan in special servicing (Society Hill Portfolio;
0.91% of the Pool). In total, six loans (8.82%) are on the
servicer's watchlist, mainly due to outstanding advances. The
transaction-level 'Bsf' ratings case losses are 4.41%
The Society Hill Portfolio loan, is secured by three multifamily
properties totaling 13 rental units. It was transferred to special
serving in February 2024 due to payment default. Updated reporting
is not available and the special servicer has reached out to the
borrower and is assessing next steps.
Minimal Change in Credit Enhancement: As of the March 15,2024
distribution date, the pool's aggregate balance has been reduced to
$603.8 million from $604.4 million at issuance. No loans have been
paid off or defeased.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly, more loans
experience performance deterioration and/or transfer to special
servicing.
Downgrades and/or Outlook revisions to the 'BBBsf', 'BBsf' and
'Bsf' categories are possible should additional loans transfer to
special servicing and/or with further performance deterioration and
higher than expected losses from the specially serviced loan.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE, coupled with
stable-to-improved pool-level loss expectations.
Upgrades to the 'BBBsf' and 'BBsf' category rated classes would be
limited based on sensitivity to concentrations or the potential for
future concentration. Classes would not be upgraded above 'AA+sf'
if there is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes could occur
only if the performance of the remaining pool is stable and if
there is sufficient CE to the classes.
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.
BX COMMERCIAL 2024-KING: Fitch Assigns B+(EXP) Rating on HRR Certs
------------------------------------------------------------------
Fitch Ratings has assigned the following expected ratings and
Ratings Outlooks to BX Commercial Mortgage Trust 2024-KING,
Commercial Mortgage Pass-Through Certificates, Series 2024-KING:
- $337,300,000a class A 'AAAsf'; Outlook Stable;
- $55,500,000a class B 'AA-sf'; Outlook Stable;
- $43,600,000a class C 'A-sf'; Outlook Stable;
- $61,400,000a class D 'BBB-sf'; Outlook Stable;
- $72,200,000a class E 'BB-sf'; Outlook Stable;
- $30,000,000a, b class HRR 'B+sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Horizontal risk retention interest, estimated to be
approximately 5% of the aggregate certificate balance
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in a
trust that will hold a $600.0 million, two-year, floating-rate, IO
commercial mortgage loan with three one-year extension options. The
mortgage will be secured by the borrower's fee simple interest in a
portfolio of 80 self-storage properties located across 16 states.
The loan is expected to be originated on May 15, 2024 by Wells
Fargo Bank, N.A. and Bank of America, N.A., which will act as trust
loan sellers. KeyBank National Association will be the master
servicer and Midland Loan Services, a Division of PNC Bank,
National Association, will be the special servicer. Computershare
Trust Company, N.A. will act as trustee and certificate
administrator. Park Bridge Lender Services LLC will act as
operating advisor. The transaction is scheduled to close on May 30,
2024.
KEY RATING DRIVERS
Net Cash Flow: Fitch's net cash flow (NCF) for the portfolio is
estimated at $47.5 million; this is 4.8% lower than the issuer's
NCF and 4.8% lower than the YE23 NCF. Fitch applied an 8.0% cap
rate to derive a Fitch value of $478.4 million for the portfolio.
Fitch Leverage: The $600.0 million trust loan equates to debt of
approximately $93.9 psf with a Fitch stressed debt service coverage
ratio (DSCR), loan-to-value ratio (LTV) and debt yield of 0.88x,
100.9% and 7.9%, respectively. The loan represents approximately
65.7% of the portfolio's appraised value of $912.7 million.
Geographic Diversity: The portfolio exhibits geographic diversity,
with 80 self-storage properties located across 16 states and 36
individual markets. The largest three state concentrations account
for 61.6% of the portfolio by 2023 NCF. This includes Florida (24
properties; 35.1% of 2023 NCF), Texas (16 properties; 17.1% of 2023
NCF) and North Carolina (seven properties; 9.7% of 2023 NCF). No
other state accounts for more than 7.3% of the portfolio by 2023
NCF.
Seven properties representing 9.5% of the portfolio by 2023 NCF are
located in the Raleigh-Durham market; five properties representing
8.9% of the portfolio by 2023 NCF are located in the Lakeland
market; and eight properties representing 7.6% of the portfolio by
2023 NCF are located in the Pensacola market. All other markets
represent less than 7.4% of the portfolio by 2023 NCF.
Sponsorship: The loan is sponsored by a joint venture between
affiliates of Blackstone Real Estate Income Trust and Andover
Properties. Founded in 1985, The Blackstone Group, L.P. is a New
York City-based global alternative asset manager and provider of
financial advisory services. The company employs over 3,000 in 23
offices worldwide. Blackstone is one of the world's leading
investment firms with approximately $1.0 trillion of assets under
management (AUM) as of Sept. 30, 2023, across investment vehicles
focused on private equity, real estate, public debt and equity,
infrastructure, life sciences, growth equity, opportunistic,
non-investment grade credit, real assets and secondary funds, all
on a global basis.
Blackstone's Real Estate group began investing in real estate in
1991 and is a global leader in real estate investing. Andover
Properties is an investment firm that owns, operates and develops
commercial property throughout the U.S., with a focus on
alternative real estate asset classes such as self-storage,
manufactured housing, RV parks and car washes. Andover is one of
the largest private owner-operators of self-storage facilities in
the U.S. Their current storage portfolio totals over 13 million
rentable sf across 163 facilities in 18 states and operates under
the Storage King USA brand.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating (MIR) sensitivity to changes in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AA-sf' / 'A-sf' / 'BBB-sf' / 'BB-sf' /
'B+sf';
- 10% NCF Decline: 'AA-sf' / 'BBB+sf' / 'BBB-sf' / 'BBsf' / 'Bsf' /
'B-sf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
MIR sensitivity to changes to in one variable, Fitch NCF:
- Original Rating: 'AAAsf' / AA-sf' / 'A-sf' / 'BBB-sf' / 'BB-sf' /
'B+sf';
- 10% NCF Increase: 'AAAsf' / 'AA+sf' / 'A+sf' / 'BBBsf' / 'BB+sf'
/ 'BBsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by KPMG LLP. The third-party due diligence described in
Form 15E focused on a comparison and re-computation of certain
characteristics with respect to each of the mortgage loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BX COMMERCIAL 2024-MDHS: Moody's Assigns (P)Ba1 Rating to E Certs
-----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to six classes of
CMBS securities, issued by BX Commercial Mortgage Trust 2024-MDHS,
Commercial Mortgage Pass-Through Certificates, Series 2024 –
MDHS:
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa2 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba1 (sf)
Cl. HRR, Assigned (P)Ba2 (sf)
RATINGS RATIONALE
The certificates are collateralized by a single loan backed by
first lien mortgages on the borrowers' fee simple interests in a
portfolio of 142 primarily industrial properties encompassing
approximately 17,129,207 SF. Moody's ratings are based on the
credit quality of the loan and the strength of the securitization
structure.
The collateral portfolio consists of 142 industrial properties
located across fifteen states and 22 markets. The largest
concentrations are in Atlanta (25.4% of UW NOI), Dallas-Fort Worth
(8.7% of UW NOI), Jacksonville (6.4% of UW NOI), Miami (6.0% of UW
NOI) and Memphis (5.8% of UW NOI). The portfolio is highly diverse,
with no single asset contributing more than 5.5% of UW NOI. The
portfolio's property-level Herfindahl score is 60.4 based on
allocated loan amount (the "ALA"). The properties are leased to 379
unique tenants, none of which comprises more than 4.5% of
underwritten base rent.
The collateral properties contain a total of 17,129,207 SF of NRA
and includes warehouse (49.1% of NRA, 43.9% of UW NOI), bulk
warehouse (27.6% of NRA, 29.7% of UW NOI), and light industrial
(20.3% of NRA, 22.0% of UW NOI) properties. Property size ranges
between 10,200 SF and 730,688 SF, and averages 120,628 SF. Clear
heights for properties range between 17 feet and 40 feet, and
average approximately 26.9 feet. The properties were built between
1964 and 2024 with an average year built of 1995.
Moody's approach to rating this transaction involved the
application of Moody's Large Loan and Single Asset/Single Borrower
Commercial Mortgage-Backed Securitizations Methodology. The rating
approach for securities backed by a single loan compares the credit
risk inherent in the underlying collateral with the credit
protection offered by the structure. The structure's credit
enhancement is quantified by the maximum deterioration in property
value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss
for various rating levels. In assigning single borrower ratings,
Moody's also consider a range of qualitative issues as well as the
transaction's structural and legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile.
The Moody's first mortgage actual DSCR is 0.97x and Moody's first
mortgage actual stressed DSCR is 0.77x. Moody's DSCR is based on
Moody's stabilized net cash flow.
The loan first mortgage balance of $1,380,000,00 represents a
Moody's LTV ratio of 108.2% based on Moody's value. Adjusted
Moody's LTV ratio for the first mortgage balance is 97.1% based on
Moody's Value using a cap rate adjusted for the current interest
rate environment.
With respect to loan level diversity, the pool's loan level
Herfindahl score is 60.4. The ten largest loans properties
represent 30.5% of the pool balance.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The pool's quality
grade is 0.75.
Notable strengths of the transaction include: proximity to global
gateway markets, infill locations, strong occupancy, geographic
diversity, tenant granularity and economic diversity, multiple
property pooling and experienced sponsorship.
Notable concerns of the transaction include: rollover risk,
property age, floating-rate interest-only loan profile,
non-sequential prepayment provision, and credit negative legal
features.
Moody's rating approach considers sequential pay in connection with
a collateral release as a credit neutral benchmark. Although the
loans' release premium mitigates the risk of a ratings downgrade
due to adverse selection, the pro rata payment structure limits
ratings upgrade potential as mezzanine classes are prevented from
building enhancement. The benefit received from pooling through
cross-collateralization is also reduced.
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published in July 2022.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
BX TRUST 2017-CQHP: DBRS Cuts Class F Rating to C
-------------------------------------------------
DBRS Limited downgraded its credit ratings on four classes of
Commercial Mortgage Pass-Through Certificates, Series 2017-CQHP
issued by BX Trust 2017-CQHP as follows:
-- Class X-EXT to BBB (low) (sf) from BBB (sf)
-- Class D to BB (high) (sf) from BBB (low) (sf)
-- Class E to B (sf) from B (high) (sf)
-- Class F to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
The trends on Classes D, E, and X-EXT were changed to Negative from
Stable. All other trends are Stable, excluding Class F, which has a
credit rating that does not generally carry a trend in commercial
mortgage-backed securities (CMBS).
The credit rating downgrades reflect the continued distressed
performance of the underlying collateral hotels and the
deterioration in the collateral's as-is appraised value. The credit
rating actions are further supported by a recoverability analysis
based on the newly derived Morningstar DBRS value, as further
described below. According to the February 2024 appraisals, the
aggregate as-is value of the collateral declined to $321.6 million,
representing a 10.7% decline from the October 2022 appraised values
and a 23.9% decline from the issuance appraised values.
Furthermore, outstanding advances continue to accrue, with
principal and interest advances totaling $32.2 million as of the
April 2024 remittance. Factoring in all outstanding advances and
cumulative unpaid advance interest, the loan's total exposure is
currently $317.8 million, resulting in an implied loan-to-value
ratio (LTV) approaching 100%. Morningstar DBRS considered a
stressed scenario based on a haircut to the most recent appraised
values to reflect the potential volatility that could be
experienced over the remainder of the workout period. The results
of the analysis suggested an as-is LTV of 100.1% based on the whole
loan amount of $273.7 million (116.2% when factoring in the loan's
total exposure), further supporting the credit rating downgrades.
The trend changes to Negative reflect the possibility of additional
value deterioration and increasing cumulative advances in the event
that the loan's workout period is prolonged.
The $273.7 million loan, along with $61.3 million of mezzanine debt
and $8.1 million of sponsor equity, refinanced $336.1 million in
existing debt and paid closing costs. The sponsor for this loan is
Blackstone Real Estate Partners VII, L.P. (Blackstone). The
transaction is collateralized by a single loan secured by a
portfolio of four Club Quarters Hotels totaling 1,228 keys across
four major U.S. cities: San Francisco (346 keys; 39.4% of allocated
loan amount (ALA)), Chicago (429 keys; 26.4% of ALA), Boston (178
keys; 18.2% of ALA), and Philadelphia (275 keys; 16.0% of ALA). The
collateral has been challenged since the onset of the coronavirus
pandemic in early 2020 and has remained with the special servicer
since June 2020. The loan's sponsor, Blackstone, advised the
special servicer that it was not willing to inject additional
capital to fund operating expenses or debt service payments and,
according to special servicer commentary, the trust was the winning
bidder at the February 2024 foreclosure sale of the Boston property
and the special servicer will be pursuing foreclosure of the other
three assets.
The portfolio was most recently appraised in February 2024 with a
combined value of $321.6 million, remaining in line with the June
2023 aggregate appraised value of $325.4 million. The February 2024
appraisals have not been provided to Morningstar DBRS as of the
date of this press release; however, when compared with the June
2023 appraisal, the aggregate value decline from the portfolio's
previous October 2022 appraised value was driven exclusively by the
San Francisco property, which saw it's as-is value decline 25.1%
from $160.8 million to $120.4 million, while the other three
properties reported modest value increases. In its analysis for
this review, Morningstar DBRS considered a hypothetical stressed
value scenario, as further described below, that suggested an
implied LTV figure in excess of 100%, based on the total loan
exposure.
For the trailing 12-month (T-12) period ended September 30, 2023,
the portfolio reported weighted-average (WA) occupancy rate,
average daily rate, and revenue per available room (RevPAR) figures
of 62.4%, $87, and $119, respectively. The WA RevPAR for the T-12
period ended December 31, 2022, was reported at $127. The WA RevPAR
penetration rate for the T-12 period was 75.0%, in line with the
prior T-12 period, suggesting the properties continue to
underperform relative to their competitive sets. Although
performance metrics have been trending positively year over year
since bottoming out in 2020, it is unlikely the portfolio will
stabilize to pre-pandemic figures in the near to medium term. The
subject properties rely heavily on commercial segmentation because
of the brand's focus on business travel and member-driven corporate
demand, which has seen a longer recovery period than other demand
segmentations. According to the financials for the nine months
ended September 30, 2023, annualized net cash flows continue to lag
well behind pre-pandemic levels and remain below breakeven levels,
with a consolidated trust loan debt service coverage ratio of 0.45
times.
In its analysis for this review, Morningstar DBRS derived a
stressed value of $273.4 million by applying a 15.0% haircut to the
February 2024 appraised value of $321.6 million. This value
represents a variance of -35.3% from the issuance appraised value
of $422.5 million and a variance of -5.1% from the previous
Morningstar DBRS value of $288.0 million derived at the last
surveillance review in May 2023. The updated Morningstar DBRS value
implies an LTV of 100.1% on the whole loan debt, increasing to
116.1% when factoring in the loan's total exposure inclusive of all
cumulative advances. Morningstar DBRS maintained its qualitative
adjustments totaling -0.5% for cash flow volatility because of the
collateral's reliance on business travel and 1.25% for market
fundamentals because of the hotels' locations in prime central
business district markets. Given the recent foreclosure sale for
the Boston property and the upcoming foreclosure sales for the
remaining three properties, Morningstar DBRS conducted a
recoverability analysis based on the newly derived Morningstar DBRS
value, which suggests significant credit support deterioration to
Classes D and E, with losses impacting Class F, supporting the
downgrades on those classes.
Notes: All figures are in U.S. dollars unless otherwise noted.
CHASE HOME 2024-4: DBRS Finalizes B(low) Rating on Class B-5 Certs
------------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the Mortgage
Pass-Through Certificates, Series 2024-4 (the Certificates) issued
by Chase Home Lending Mortgage Trust 2024-4 (CHASE 2024-4 or the
Issuer):
-- $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.
CIFC FUNDING 2018-IV: Moody's Cuts Rating on $16MM E Notes to Caa1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by CIFC Funding 2018-IV, Ltd.:
US$95,000,000 Class A-2 Senior Secured Floating Rate Notes due 2031
(the "Class A-2 Notes"), Upgraded to Aaa (sf); previously on
September 25, 2018 Definitive Rating Assigned Aa2 (sf)
US$36,000,000 Class B Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class B Notes"), Upgraded to Aa3 (sf);
previously on September 25, 2018 Definitive Rating Assigned A2
(sf)
US$48,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C Notes"), Upgraded to Baa2 (sf);
previously on September 25, 2018 Definitive Rating Assigned Baa3
(sf)
Moody's has also downgraded the rating on the following notes:
US$16,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class E Notes"), Downgraded to Caa1 (sf); previously
on September 25, 2018 Definitive Rating Assigned B3 (sf)
CIFC Funding 2018-IV, Ltd., issued in September 2018 is a managed
cashflow CLO. The notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in October 2023.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since April. The Class A-1 notes
have been paid down by approximately 4.2% or $21.6 million since
that time. Based on Moody's calculation, the OC ratios for the
Class A-1/A2, Class B, Class C and Class D notes are currently
131.15%, 123.55%, 114.69% and 107.46% respectively, versus trustee
reported April 2023 levels [1] of 130.48%, 123.17%, 114.61% and
107.61%, respectively.
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 Moody's calculation, the total collateral par balance,
including all principal payments made to senior notes and assumed
recoveries from defaulted securities, is $789.3 million, or $10.7
million less than the $800 million initial par amount targeted
during the deal's ramp-up. Furthermore, the trustee-reported
weighted average rating factor (WARF) has been deteriorating and
the current level is currently 3023 [1] compared to 2964 in April
2023[2].
No actions were taken on the Class A-1 and Class D 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: $764,442,849
Defaulted par: $7,310,329
Diversity Score: 85
Weighted Average Rating Factor (WARF): 2926
Weighted Average Spread (WAS): 3.38%
Weighted Average Recovery Rate (WARR): 47.3%
Weighted Average Life (WAL): 3.9 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.
CIFC FUNDING 2024-II: Fitch Assigns 'B-sf' Rating on Class F Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to CIFC
Funding 2024-II, Ltd.
Entity/Debt Rating
----------- ------
CIFC Funding
2024-II, Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
F LT B-sf New Rating
Subordinated A LT NRsf New Rating
Subordinated B LT NRsf New Rating
TRANSACTION SUMMARY
CIFC Funding 2024-II, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by CIFC
Asset Management LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $450 million of primarily first-lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.06, versus a maximum covenant, in accordance with
the initial expected matrix point of 25. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.94% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.29% versus a
minimum covenant, in accordance with the initial expected matrix
point of 69.40%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 45% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, 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-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'Asf' for
class D, 'BBBsf' 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 oinions 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 CIFC Funding
2024-II, 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.
CITIGROUP 2015-101A: Fitch Affirms 'B-sf' Rating on Class F Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed eight classes of Citigroup Commercial
Mortgage Trust 2015-101A, commercial mortgage pass-through
certificates series 2015-101A.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2015-101A
A 17290MAA2 LT AAAsf Affirmed AAAsf
B 17290MAJ3 LT AA-sf Affirmed AA-sf
C 17290MAL8 LT A-sf Affirmed A-sf
D 17290MAN4 LT BBB-sf Affirmed BBB-sf
E 17290MAQ7 LT BB-sf Affirmed BB-sf
F 17290MAS3 LT B-sf Affirmed B-sf
X-A 17290MAE4 LT AAAsf Affirmed AAAsf
X-B 17290MAG9 LT A-sf Affirmed A-sf
KEY RATING DRIVERS
Generally Stable Performance and Cash Flow: The affirmations
reflect generally stable performance and occupancy since issuance.
Fitch's net cash flow (NCF) is down from issuance primarily due to
a lower occupancy and increased expenses. However, Fitch's overall
long-term view of sustainable property performance remains in line
with issuance expectations. The largest two tenants occupy over 70%
of the property on longer term leases.
The updated Fitch sustainable NCF is $15 million, which is 7.9%
below Fitch's issuance NCF of $16.3 million. Fitch's NCF assumption
includes leases in place as of the most recently reported rent roll
(February 2024) and excludes tenants with lease expirations in 2024
that are confirmed to be vacating (approximately 7% of NRA).
The lower NCF also factors higher leasing cost assumptions that
reflect current office market conditions and a higher ground rent
assumption to account for a special additional rent (SAR) payment
estimated at $7.9 million due in 2030. In addition, Fitch assumed a
15% higher insurance expense due to expected future increases.
The most recent servicer-reported NCF debt service coverage ratio
(DSCR) as of December 2023 was 2.07x. According to the February
rent roll, the property continues to maintain a high occupancy
reported at 92.4%, compared to 94.5% at issuance. However,
occupancy is expected to decline to 85.2% due to vacating tenants
with upcoming lease expirations in 2024. Per CoStar, the property
has averaged 98% occupancy since 2015 and is outperforming the
submarket, which is reporting a 15.4% vacancy rate.
High-Quality Manhattan Asset: The certificates represent the
beneficial ownership in the issuing entity, the primary asset of
which is one loan secured by the leasehold interest in the 101
Avenue of the Americas office property in New York, NY. The
23-story, class A office building is located within the Hudson
Square submarket in Manhattan. The property was gut renovated
between 2011 and 2013, including upgraded building systems, as well
as a new lobby, restrooms and a green roof terrace. The property is
a LEED Silver Existing Building (EB), which has a positive impact
on the ESG score for Waste & Hazardous Materials Management;
Ecological Impacts.
The two largest tenants, NY Genome Center (38.5% of total square
footage) and Two Sigma Investments (32.3%) occupy approximately 71%
of the property. Other major tenants include Digital Ocean (10.3%)
and Regus (3.6%).
Tenant Rollover: Approximately 7% of leases expire in 2024 and are
not expected to renew. However, the majority of the building
rollover is associated with the two largest tenants, both of which
roll prior to the loan's maturity date in January 2035. The largest
tenant (NY Genome Center) has a lease expiration in 2033, and the
second largest tenant (Two Sigma Investments) has a lease
expiration in 2029. Two Sigma's lease is structured with a
termination option; however, the notice period for exercising the
option has passed and is no longer available. Additionally, media
reports indicate that the firm extended its lease through 2029 for
265,000-sf at the neighboring 100 Avenue of the Americas.
Leasehold Interest: The property is subject to a 99-year ground
lease that expires in December 2088. The ground lease has a fixed
component, which grows at 3% per annum for the remainder of the
term. In addition, the ground lease contains a variable component
(special additional rent, or SAR), which requires a specific
payment every 20 years (next payment due in 2030), as calculated
and defined in the ground lease.
The loan is structured with monthly reserves for all payments
associated with the ground lease and is recourse to the borrower
and guarantor for termination of the ground lease. The loan also
requires monthly reserves for the SAR payment beginning in 2025.
Fitch applied the average ground rent expense over a 15-year period
in its cash flow analysis.
Fitch Leverage: The $200 million mortgage loan ($465 psf) has a
Fitch DSCR and, LTV of 0.84x, 106.4%, respectively, compared to the
Fitch DSCR and LTV of 0.95x and 93.1% at issuance. The Fitch
stressed cap rate (8%) reflects the higher risks associated with a
leasehold mortgage.
Interest Only Loan: The loan is interest only (annual interest rate
of 4.65%) for the entire 20-year term (maturing in January 2035).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch does not currently expect downgrades given the long-term
leases to the two largest tenants. However negative rating actions,
including Negative Outlooks, are possible if one or both of these
two tenants vacate; no renewal information is available prior to
their lease expirations; and/or if market conditions deteriorate
where Fitch's sustainable NCF declines significantly.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes B through D are possible with stable to
improved occupancy and sustained cash flow improvement, but may be
limited given headwinds for the office sector from increased
vacancy and availability rates. Fitch rates class A at 'AAAsf';
therefore, upgrades to this class are not possible.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
CGCMT 2015-101A has an ESG Relevance Score of '4 [+]' for Waste &
Hazardous Materials Management; Ecological Impacts, due to the
collateral's sustainable building practices including Green
building certificate credentials, which has a positive impact on
the credit profile, and is relevant to the ratings in conjunction
with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
COMM 2015-CCRE26: Fitch Lowers Rating on Class F Certs to CCC
-------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed seven classes of
Deutsche Bank Securities, Inc.'s COMM 2015-CCRE26 Mortgage Trust
commercial mortgage pass-through certificates. Following their
downgrades, classes D, E and X-C were assigned Negative Outlooks.
Additionally, the Outlooks for classes A-M, B, C, and X-A have been
revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2015-CCRE26
A-3 12593QBD1 LT AAAsf Affirmed AAAsf
A-4 12593QBE9 LT AAAsf Affirmed AAAsf
A-M 12593QBG4 LT AAAsf Affirmed AAAsf
A-SB 12593QBC3 LT AAAsf Affirmed AAAsf
B 12593QBH2 LT AAsf Affirmed AAsf
C 12593QBJ8 LT Asf Affirmed Asf
D 12593QBK5 LT BBsf Downgrade BBB-sf
E 12593QAL4 LT BB-sf Downgrade BB+sf
F 12593QAN0 LT CCCsf Downgrade B-sf
X-A 12593QBF6 LT AAAsf Affirmed AAAsf
X-C 12593QAC4 LT BBsf Downgrade BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations: Downgrades to classes D, E, F, and X-E
reflect increased pool loss expectations driven by continued
performance deterioration of the Fitch Loans of Concern (FLOCs).
The downgrades also reflect higher expected losses for the JDSK
Hotel Portfolio (3.4%), cross-collateralized loans Hotel Lucia
(3.1%) and Hotel Max (3.1% of the pool) and lower sustainable cash
flow for the Prudential Plaza (11.6% of the pool) loan. Fitch's
current ratings incorporate a 'Bsf' ratings case loss of 6.6%.
The Negative Outlook assignment to classes D, E, and X-C, along
with the Negative Outlook revision to classes A-M, B, C, and X-A,
reflects the potential for downgrades should occupancy and cashflow
of the hotel and office FLOCs, mainly the Prudential Plaza,
Rosetree Corporate Center, Crossroads Office Portfolio, Hotel
Lucia, Hotel Max, deteriorate further and/or more loans than
expected default at or prior to their maturity.
The Negative Outlooks also incorporate an additional sensitivity
scenario that factors a heightened probability of default given
maturity default concerns of additional office FLOCs, including
Crossroads Office Portfolio (4.2% of the pool), Empire Corporate
Plaza (3.5%), 15 Valley Drive (1.2%) and the Grand Hilton Office
(0.6%).
Largest Increases to Loss Expectations: The largest increase to
loss expectations is Prudential Plaza (11.6% of the pool), which is
secured by two office towers totaling 2.2 million-sf located in
Chicago, IL, immediately north of Millennium Park. The property
transferred to special servicing in June 2023 due to imminent
default after the sponsors, a joint venture between Sterling Bay
and Wanxiang America Corp., sought a modification of the loan in
order to perform a $50 million renovation project, which would
include a new rooftop deck, 200,000-sf conference center and
entertainment area and coworking space.
The loan returned to the master servicer in March 2024 after the
execution of a loan modification which extended the maturity to
August 2027 with two, one-year extension options. According to
media reports, the sponsors are looking to backfill renovated space
with a major anchor tenant with interest in naming rights for the
building.
Per the most recent ASR, the property is 76% occupied with
occupancy expected to decline further due to the expected vacancy
of tenants accounting for 10% of the NRA.
Fitch's 'Bsf' rating case loss of 11.5% (prior to concentration
add-ons) is based on a lower stabilized cash flow that is
approximately 10.6% below Fitch's stressed cash flow at issuance to
account for performance declines, increasing operating expenses and
softening market conditions.
The next largest increase in loss expectations since the prior
rating action are the cross-collateralized loans Hotel Lucia (3.1%
of the pool) and Hotel Max (3.1%). Both loans are secured by
full-service boutique hotels, sponsored by Gordan Sondland. The
163-key Hotel Max is located in downtown Seattle, WA and the
127-key Hotel Lucia is located in downtown Portland, OR.
The Hotel Max has sustained performance declines since the pandemic
with the TTM February 2024 occupancy falling to 63.8% from
pre-pandemic levels of 86% at YE 2019. The YE 2023 NOI is 37.7%
below NOI at issuance with an NOI DSCR coverage of 1.23x. The hotel
is underperforming its competitive set with TTM February 2024
reported occupancy, ADR, and RevPAR penetration rates of 82.9%,
93.2%, and 77.3%, respectively.
Similarly, Hotel Lucia has sustained performance declines since the
pandemic, with the TTM February 2024 occupancy at 60.5% compared to
pre-pandemic levels of 78% at YE 2019. The hotel reported negative
cashflow for the YE 2023 and YE 2022 reporting periods. Hotel
performance remains in-line with its competitive set, with TTM
February 2024 occupancy, average daily rate (ADR) and
Revenue-Per-Available Room (RevPAR) penetration rates of 108.9%,
94.6%, and 103%, respectively. According to the servicer, several
factors are contributing to lower operating performance including
work from home trends, homelessness and safety concerns.
Fitch's loss expectations for the hotels includes an 11.25% cap
rate to a stabilized cash flow and an increased probability of
default to account for the loan's heightened default concerns.
Fitch's 'Bsf' ratings case losses for the loans reach 40.2% and
17.9%, respectively (prior to concentration adjustments).
The JDSK Portfolio - AHIP (3.4%) is secured by eight limited
service hotels located in Kansas (1), OK (3), IL (2), MO (1), and
IA (1). The portfolio has sustained pandemic-related performance
declines with the YE 2023 occupancy and NOI DSCR lower are 66.1%
and 1.65x compared to pre-pandemic levels of 73% and 2.91x at YE
2019. The YE 2023 and YE 2022 NOI remain 39.2% and 30.6% below NOI
at issuance.
Fitch's loss expectations of 14.4% (prior to concentration add-ons)
reflect an 11.25% cap rate and no stress to the YE 2023 NOI.
Large Contributors to Loss Expectations: Other large contributors
to loss expectations include the Rosetree Corporate Center (4.2%),
which is secured by a 273,879-sf office property in Media, PA. The
loan was identified as a FLOC due to sustained performance declines
with current occupancy of 76.4% and a DSCR near 1.00x since YE
2018. The loan transferred to special servicing in November 2023
after the borrower expressed hardship in continuing to fund
shortfalls to support the asset. The loan has remained current and
was returned to the master servicer in February 2024.
Per the YE 2023 rent roll, new leases totaling 14% of the property
were executed, which would improve occupancy to 90%. Rent for 10.0%
of the newly signed leases do not commence until at least January
2025.
Fitch's analysis reflects a 10.50% cap rate and to the YE 2023 NOI
and an increased probability of default due to the loan's
heightened maturity default concerns resulting in a 'Bsf' ratings
case loss (prior to concentration adjustments) of 27.4%.
Increasing Credit Enhancement (CE): As of the March 2024
distribution date, the pool's aggregate principal balance has been
reduced by approximately 15.4% to $977.8 million from $1.09 billion
at issuance. There are 10 loans (6.9% of the pool) that are fully
defeased. Loan maturities are concentrated in 2025 (51 loans for
88.4% of the remaining pool) and 2027 (one loan for 11.6% of the
remaining pool balance). Cumulative interest shortfalls of $351,764
and interest shortfalls of $180,002 are impacting the non-rated
class G.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes rated 'AAAsf' and 'AAsf' are not likely due
to increasing CE and expected pay off from non-FLOCs and performing
FLOCs. Downgrades may be possible should a large proportion of
non-FLOCs that Fitch expects to pay off default at or prior to
maturity, exposing these classes to prolonged workout losses.
Downgrades to classes rated 'Asf' and 'BBsf' may occur should the
Prudential Plaza sponsors be unable to execute their business plan,
performance of Rosetree Corporate Center, Crossroads Office
Portfolio, Hotel Lucia, and Hotel Max experience further
performance declines or performing FLOCs including the Devon Park
Drive Corporate Campus and Chapel Square Retail default at or prior
to maturity.
Further downgrades to classes rated 'BB-sf' and 'Bsf' are possible
should the aforementioned FLOCs experience further declines, or
should additional loans fail to repay at maturity.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated 'AAsf' and 'Asf' would occur with
sustained performance improvement on the FLOCs, including
Prudential Plaza, Rosetree Corporate Center, Crossroads Office
Portfolio, Hotel Lucia, and Hotel Max, coupled with improving CE
from loan repayments and/or defeasance.
Upgrades to classes rated 'BBsf' and 'BB-sf' are unlikely absent
greater clarity on loan refinanceability as well as better than
expected recoveries on the aforementioned FLOCs.
Upgrades to classes rated 'CCCsf' are unlikely unless FLOCs
anticipated to default at maturity refinance without issue.
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.
COMM MORTGAGE 2013-300P: Fitch Affirms B-sf Rating on Class C Notes
-------------------------------------------------------------------
Fitch Ratings has affirmed seven classes of COMM 2013-300P Mortgage
Trust. The Rating Outlooks for classes A1, A1P, B, C, and X-A
remain Negative.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2013-300P
A1 12625XAA5 LT BBB-sf Affirmed BBB-sf
A1P 12625XAC1 LT BBB-sf Affirmed BBB-sf
B 12625XAG2 LT BB-sf Affirmed BB-sf
C 12625XAJ6 LT B-sf Affirmed B-sf
D 12625XAL1 LT CCCsf Affirmed CCCsf
E 12625XAN7 LT CCCsf Affirmed CCCsf
X-A 12625XAE7 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
The affirmations reflect the continued performance stabilization of
the property, including improved occupancy and positive leasing
momentum since Fitch's last rating action.
The Negative Outlooks reflect the potential for downgrades of up to
one category if further progress is not made toward recovering
closer to Fitch's expectations for sustainable performance, market
conditions deteriorate and/or rents on future new leasing at the
property does not improve. Additionally, downgrades could occur in
the event the loan transfers to the special servicer at or before
the fully extended August 2025 modified maturity date and it
results in a workout that is prolonged or incurs fees/expenses that
affect the trust.
Loan Modification/Extension: The loan was transferred back to the
master servicer in June 2023 after being modified. The terms of the
loan modification included an extension of the maturity date from
August 2023 to August 2024, with the option for an additional
one-year extension until August 2025. The borrower funded a $5
million shortfall reserve and a $20 million capital expense and
leasing cost reserve. The loan's interest rate remains fixed at
4.41%.
Fitch Net Cash Flow (NCF): Fitch's updated property NCF of $25.6
million is 13.4% below Fitch's NCF of $29.5 million at the last
rating action, largely due to a decline in expense reimbursements
and other income, which includes Studio coworking space revenue
based on fee collections for desk/workspace rentals. Additionally,
a new lease signed in 2023 with Ally Bank (7.1% of NRA) was 24%
below Fitch's assumption of rent at the last rating action.
Fitch's updated NCF incorporates leases-in-place as of the YE 2023
rent roll, with credit for near-term contractual rent steps and
tenants expected to take occupancy, in addition to straight-lined
rent credit for a portion of Colgate-Palmolive's lease through
2033. Fitch's updated NCF assumed an occupancy of 86.1%, in-line
with the Costar's Plaza District submarket occupancy of 86%.
Since the last rating action, new leasing activity occurred on
approximately 13% of the NRA; these new leases have commencement
dates in 2024 and 2025. Tenants taking over vacant spaces include
Peapack-Gladstone Bank (2.1% of NRA; lease expiration in June
2033), The Nassau Companies of New York (1.6%; August 2030), Paloma
Partners Management (0.9%; October 2029), Bleichmar Fonti & Auld
LLP (0.8%; June 2033), Triton USA (0.6%; September 2029) and Naya
(0.3%; June 2033). Tenant Maxim Group LLC executed a lease on the
former EnTrust Global LLC space for 2.5% of the NRA, commencing in
March 2024 and expiring in June 2033. Yieldstreet Inc. leased 4.2%
of the NRA previously occupied by Nordstrom from May 2024 through
October 2027. Fitch requested lease terms on all of the new
leasing, but none was provided.
When factoring in Fitch rent assumptions of $75 psf on lower floors
and $85 psf for higher floors given lack of new leasing details,
combined with contractual rent bumps and straight-lined rent for
the investment-grade rated tenant, the overall average rent for the
office space is approximately $88 psf, down from approximately $90
psf at the last rating action.
The servicer-reported YE 2023 NCF DSCR was 1.38x, compared with
1.56x in 2022, 1.22x in 2021 and 1.49x in 2020 for the
interest-only loan.
Stable to Improving Occupancy: Reported occupancy as of the
December 2023 rent roll was 83%, compared with 84% in December
2022, 81% in August 2022, 78.5% in June 2021 89.7% in June 2020 and
98.9% in June 2019. Fitch estimates current occupancy to be
approximately 86% when incorporating known new leasing activity to
date. Upcoming lease rollover prior to the extended loan maturity
in August 2025 consists of 8.3% of the NRA.
High Fitch Leverage: The $485 million mortgage loan ($629 psf) has
a Fitch-stressed DSCR and LTV of 0.59x and 151.8%, respectively,
compared to 1.32x and 67.2% at issuance and 0.68x and 131.3% at the
last rating action in April 2023. Fitch maintained a cap rate of 8%
from the last rating action, compared to 7.75% at issuance.
Sponsorship: The loan sponsor is controlled by Prime Plus
Investments, Inc. (PPI), a private Maryland REIT. PPI is a
partnership of a Tishman Speyer-affiliated entity, the National
Pension Service of Korea and the second Swedish National Pension
Fund AP2, which owns 51.0% of PPI and an affiliate of GIC Real
Estate Private Ltd., a sovereign wealth fund established and funded
by the Singapore government, which owns the remaining 49%.
Limited Structural Features: The loan has no reserves, no structure
in place to mitigate the upcoming Colgate-Palmolive lease
expiration, springing cash management and there is no carve-out
guarantor.
Strong Location; ESG Factors: 300 Park Avenue consists of a
25-story, LEED Gold high-rise office building totaling 771,259 sf.
The property's LEED certification was upgraded to Gold in 2017 from
Silver at the time of issuance. The property's location is in the
Plaza District submarkets and is situated between 49th and 50th
Streets on the west side of Park Avenue. The location is four
blocks north of Grand Central Terminal and offers excellent
accessibility and proximity to public transportation. The building
holds a LEED-Gold designation, which has a positive impact on the
transaction's ESG score for Waste & Hazardous Materials Management;
Ecological Impacts.
The property underwent substantial renovations between 1998 and
2000, including a new lobby, elevator modernization and upgraded
building systems. Additionally, a facade renovation around the same
time completely transformed the property's exterior with new
windows, aluminum spandrel panels and retail storefronts. Fitch
assigned 300 Park Avenue a property quality grade of 'B+' at
issuance. The building is also a part of Tishman Speyer's global
amenity network for tenants called "ZO", which is a comprehensive
suite of services including wellness, backup child care, on-site
health screenings and medical services, corporate services, travel
planning, community volunteer engagement, and more.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades may be possible in the event the loan transfers to the
special servicer for not being able to refinance before the fully
extended August 2025 modified maturity date and it results in a
workout that is prolonged or incurs fees/expenses that affect the
trust.
Additionally, should leasing momentum slow or reverse course or if
new leasing occurs at rates significantly below the submarket and
performance does not recover to Fitch's expectations on sustainable
performance downgrades are possible.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are not likely given the challenges facing office and
retail properties in the submarket and single-event risk. The
current ratings reflect Fitch's view of sustainable performance;
however, upgrades are possible with significant and sustained
leasing that contributes to improved Fitch sustainable NCF from
occupancy well in excess of the current 83%, new leasing above the
average in-place rates of $88 psf, and more certain prospects for
refinancing/payoff.
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
COMM 2013-300P has an ESG Relevance Score of '4' [+] for Waste &
Hazardous Materials Management; Ecological Impacts due to
{DESCRIPTION OF ISSUE/RATIONALE}, 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.
CROWN CITY V: S&P Assigns Prelim BB- (sf) Rating on Cl. DR Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1R, A-2R, BR, C-1aR, C-1bR, C-2R, and DR replacement debt and
proposed new class X debt from Crown City CLO V/Crown City CLO V
LLC, a CLO originally issued in April 2023 that is managed by
Western Asset Management Co. LLC.
The preliminary ratings are based on information as of May 7, 2024.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the May 9, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. At that
time, S&P expects to withdraw its ratings on the original debt and
assign ratings to the replacement debt. However, if the refinancing
doesn't occur, S&P may affirm its ratings on the original debt and
withdraw its preliminary ratings on the replacement debt.
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class A-1R, A-2R, BR, C-1aR, C-1bR, C-2R, and
DR debt are expected to be issued at a lower weighted average cost
of debt than the original debt.
-- The replacement class A-1R, A-2R, BR, C-1aR, C-2R, and DR debt
are expected to be issued at a floating spread; and the class C-1bR
debt is expected to be issued at a fixed coupon.
-- The class C-1aR, C-1bR, and C-2R debt are expected to replace
the existing class C debt.
-- The stated maturity and reinvestment period will each be
extended by three years.
-- A new non-call period will be established, which will expire
on, but excluding the payment date in, April 2026.
-- The new proposed class X debt issued in connection with this
refinancing is expected to be paid down beginning with the payment
date in July 2024.
-- The target par amount will be increased to $400.00 million from
$350.00 million.
Replacement And Original Debt Issuances
Replacement debt
-- Class X, $2.50 million: Three-month CME term SOFR + 1.15%
-- Class A-1R, $248.00 million: Three-month CME term SOFR + 1.60%
-- Class A-2R, $56.00 million: Three-month CME term SOFR + 2.10%
-- Class BR (deferrable), $24.00 million: Three-month CME term
SOFR + 2.60%
-- Class C-1aR (deferrable), $17.00 million: Three-month CME term
SOFR + 4.10%
-- Class C-1bR (deferrable), $3.00 million: 8.43%
-- Class C-2R (deferrable), $8.00 million: Three-month CME term
SOFR + 5.15%
-- Class DR (deferrable), $10.00 million: Three-month CME term
SOFR + 7.49%
Original debt
-- Class A-1, $217.00 million: Three-month CME term SOFR + 2.02%
-- Class A-2, $49.00 million: Three-month CME term SOFR + 2.50%
-- Class B (deferrable), $21.00 million: Three-month CME term SOFR
+ 3.60%
-- Class C (deferrable), $17.50 million: Three-month CME term SOFR
+ 5.65%
-- Class D (deferrable), $12.25 million: Three-month CME term SOFR
+ 8.37%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Crown City CLO V/Crown City CLO V LLC
Class X, 2.50 million: AAA (sf)
Class A-1R, 248.00 million: AAA (sf)
Class A-2R, 56.00 million: AA (sf)
Class BR (deferrable), 24.00 million: A (sf)
Class C-1aR (deferrable), 17.00 million: BBB+ (sf)
Class C-1bR (deferrable), 3.00 million: BBB+ (sf)
Class C-2R (deferrable), 8.00 million: BBB- (sf)
Class DR (deferrable), 10.00 million: BB- (sf)
Other Debt
Crown City CLO V/Crown City CLO V LLC
Subordinated notes, $31.70 million: Not rated
ELMWOOD CLO 27: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to Elmwood CLO 27
Ltd./Elmwood CLO 27 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Elmwood CLO 27 Ltd./Elmwood CLO 27 LLC
Class A, $320.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $20.00 million: BB- (sf)
Subordinated notes, $52.25 million: Not rated
ELMWOOD CLO 29: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
29 Ltd./Elmwood CLO 29 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC. This is
a reset of the Logan 1 CLO Ltd. transaction that originally closed
in June 2021, which was not rated by S&P Global Ratings.
The preliminary ratings are based on information as of May 6, 2024.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO 29 Ltd./Elmwood CLO 29 LLC
Class X, $2.00 million: AAA (sf)
Class A-1R, $310.00 million: AAA (sf)
Class A-2R, $7.50 million: AAA (sf)
Class B-R, $62.50 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-1R (deferrable), $30.00 million: BBB- (sf)
Class D-2R (deferrable), $3.75 million: BBB- (sf)
Class E-R (deferrable), $15.25 million: BB- (sf)
Subordinated notes, $42.00 million: Not rated
FLAGSHIP CREDIT 2022-4: S&P Affirms BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings affirmed its ratings on six classes of notes
from Flagship Credit Auto Trust (FCAT) 2022-4. At the same time,
S&P removed the rating on the class E notes from CreditWatch
negative, which began on Nov. 6, 2023, and was extended on Feb. 5,
2024.
S&P said, "The rating actions reflect the transaction's collateral
performance to date and our expectations regarding future
collateral performance, including an increase in the remaining
cumulative net loss (CNL) expectation. These rating actions also
account for the transaction's structure and its respective credit
enhancement level. 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 FC Funding LLC's capital contribution of $8.7 million
to the series on May 2, 2024."
Since the extension of the CreditWatch placement in February 2024,
the transaction's collateral performance continues to trend worse
than S&P's original CNL expectation. Cumulative gross losses are
notably higher, which, coupled with lower cumulative recoveries,
resulted in elevated monthly CNLs. Excess spread has largely been
used to cover net losses, leaving very little or no funds available
to build the transaction's overcollateralization amount in dollar
terms, resulting in the transaction being below its
overcollateralization target. Additionally, delinquencies for this
transaction are elevated.
Table 1
FCAT 2022-4 collateral performance (%)
Pool 60+ day
Mo.(i) factor delinq. Ext. CGL CRR CNL
Jan-23 97.49 1.36 0.61 0.00 1.73 0.00
Feb-23 96.01 3.00 0.77 0.09 40.03 0.05
Mar-23 94.06 3.94 0.84 0.54 29.07 0.39
Apr-23 91.36 4.29 2.26 1.33 30.54 0.92
May-23 88.94 5.22 4.49 2.14 34.28 1.41
Jun-23 86.15 5.73 7.03 3.04 37.33 1.90
Jul-23 83.66 6.28 4.93 4.08 38.34 2.52
Aug-23 80.88 6.91 6.39 5.27 35.86 3.38
Sep-23 78.13 6.83 6.45 6.43 35.52 4.14
Oct-23 75.63 6.71 5.04 7.52 35.50 4.85
Nov-23 73.28 6.94 4.44 8.69 36.58 5.51
Dec-23 71.11 8.06 4.10 9.64 36.49 6.12
Jan-24 69.01 8.70 4.98 10.65 36.53 6.76
Feb-24 66.80 9.22 3.47 11.70 36.58 7.42
Mar-24 64.58 8.30 2.55 12.86 36.55 8.16
Apr-24 62.49 8.35 1.36 13.79 36.90 8.70
(i)As of the monthly distribution period.
FCAT--Flagship Credit Auto Trust.
Mo.--Month.
Delinq.--Delinquencies.
Ext.--Extensions.
CGL--Cumulative gross loss.
CRR--Cumulative recovery rate.
CNL--Cumulative net loss.
Table 2
FCAT 2022-4 overcollateralization summary (%)
Current Target Target Target Current
Mo.(i) (%)(ii) (%)(iii) (%)(iii) ($ mil.)(iii) ($ mil.)(iv)
Jan-23 6.00 9.90 1.00 40,537,361 24,549,897
Feb-23 6.78 9.90 1.00 39,922,736 27,333,812
Mar-23 7.27 9.90 1.00 39,108,336 28,712,409
Apr-23 7.62 9.90 1.00 37,988,237 29,222,564
May-23 7.85 9.90 1.00 36,981,865 29,327,888
Jun-23 8.09 9.90 1.00 35,822,730 29,280,676
Jul-23 8.06 9.90 1.00 34,784,336 28,332,271
Aug-23 7.92 9.90 1.00 33,631,418 26,902,274
Sep-23 7.84 9.90 1.00 32,485,472 25,724,851
Oct-23 7.80 9.90 1.00 31,445,401 24,774,317
Nov-23 7.71 9.90 1.00 30,471,856 23,736,147
Dec-23 7.66 9.90 1.00 29,568,896 22,892,670
Jan-24 7.61 9.90 1.00 28,692,561 22,042,789
Feb-24 7.49 9.90 1.00 27,775,068 21,019,298
Mar-24 7.27 9.90 1.00 26,851,466 19,708,292
Apr-24 7.25 9.90 1.00 25,981,827 19,016,619
(i)As of the monthly distribution period.
(ii)Percentage of the current collateral pool balance.
(iii)The target overcollateralization amount on any distribution
date for series 2022-4 is equal to the greater of (a) 9.90% of the
current pool balance and (b) 1.00% of the initial pool balance.
(iv)Amount of overcollateralization for the distribution period.
Mo.--Month.
FCAT--Flagship Credit Auto Trust.
In view of the series' performance to date, which is trending worse
than our initial CNL expectation, along with adverse economic
headwinds and possibly continued weaker recovery rates, S&P revised
and raised its expected CNL for the series.
Table 3
CNL expectations (%)
Original Previous revised Current revised
lifetime lifetime lifetime
Series CNL exp. CNL exp. CNL exp.
2022-4 11.25-11.75 N/A 19.25
CNL exp.--Cumulative net loss expectations.
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 remains at its required
level, which increases as a percentage of the current pool balance
as the pool amortizes.
S&P said, "In our analysis, we also considered a written plan from
FC Funding LLC to contribute $8.7 million in capital to FCAT
2022-4, effective May 2, 2024. The capital contribution to the
series is a one-time cash infusion intended to build the
overcollateralization to its target. The remaining amount after
satisfying the overcollateralization target, will be credited to
the series' reserve account. The excess reserve amount will provide
additional credit enhancement and is to remain at that amount for
the remainder of the transaction. Based on our updated cash flow
analysis, we believe the notes' creditworthiness is consistent with
the affirmed ratings.
"We incorporated a cash flow analysis to assess the loss coverage
levels for the notes, giving credit to stressed excess spread. Our
cash flow scenarios included forward-looking assumptions on
recoveries, the timing of losses, and voluntary absolute prepayment
speeds that we believe are appropriate given each transaction's
performance. Additionally, we conducted sensitivity analyses to
determine the impact that a moderate ('BBB') stress level scenario
would have on our ratings if losses trended higher than our revised
base-case loss expectations.
"We will continue to monitor the performance of each transaction to
ensure that the credit enhancement remains sufficient, in our view,
to cover our CNL expectations under our stress scenarios for each
of the rated classes."
RATING AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE
Flagship Credit Auto Trust 2022-4
Rating
Class To From
E BB- (sf) BB- (sf)/Watch Neg
RATINGS AFFIRMED
Flagship Credit Auto Trust 2022-4
Class Rating
A-2 AAA (sf)
A-3 AAA (sf)
B AA (sf)
C A (sf)
D BBB (sf)
GALAXY 33: S&P Assigns BB- (sf) Rating on $10.50MM Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Galaxy 33 CLO
Ltd./Galaxy 33 CLO LLC's floating- and fixed-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by PineBridge Investments LLC.
The 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.
Ratings Assigned
Galaxy 33 CLO Ltd./Galaxy 33 CLO LLC
Class X, $2.00 million: AAA (sf)
Class A-1, $215.25 million: AAA (sf)
Class A-2, $12.25 million: AAA (sf)
Class B-1, $30.50 million: AA (sf)
Class B-2, $8.00 million: AA (sf)
Class C (deferrable), $21.00 million: A (sf)
Class D-1 (deferrable), $21.00 million: BBB- (sf)
Class D-2 (deferrable), $3.50 million: BBB- (sf)
Class E (deferrable), $10.50 million: BB- (sf)
Subordinated notes, $28.50 million: Not rated
GALAXY CLO XXI: Moody's Cuts Rating on $8MM Cl. F-R Notes to Caa1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Galaxy XXI CLO, Ltd.:
US$44,000,000 Class B-R Senior Floating Rate Notes due 2031 (the
"Class B-R Notes"), Upgraded to Aaa (sf); previously on March 31,
2023 Upgraded to Aa1 (sf)
US$24,000,000 Class C-R Deferrable Mezzanine Floating Rate Notes
due 2031 (the "Class C-R Notes"), Upgraded to Aa2 (sf); previously
on March 31, 2023 Upgraded to A1 (sf)
US$22,000,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2031 (the "Class D-R Notes"), Upgraded to Baa1 (sf); previously
on March 1, 2018 Assigned Baa3 (sf)
Moody's has also downgraded the rating on the following notes:
US$8,000,000 Class F-R Deferrable Junior Floating Rate Notes due
2031 (the "Class F-R Notes"), Downgraded to Caa1 (sf); previously
on March 1, 2018 Assigned B3 (sf)
Galaxy XXI CLO, Ltd., originally issued in December 2015 and
refinanced in March 2018 is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in April 2023.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
These upgrade rating actions are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since March 2023. The Class A-R
notes have been paid down by approximately 30% or $79.0 million
since that time. Based on Moody's calculation, the OC ratios for
the Class A-R/B-R, Class C-R ,Class D-R and Class E-R notes are
currently 137.89%, 124.59%, 114.48% and 107.35% respectively,
versus trustee reported April 2023 levels [1] of 129.94%, 120.44%,
112.87% and 107.35%, respectively.
The downgrade rating action on the Class F-R notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the Moody's calculation, the total collateral par balance,
including all principal payments made to senior notes and assumed
recoveries from defaulted securities, is $389.2 million, or $10.8
million less than the $400 million initial par amount targeted
during the deal's ramp-up. Furthermore, based on Moody's
calculation, exposure to issuers rated Caa1 or lower increased to
7.7% from 4.9% since March 2023.
No actions were taken on the Class A-R and Class E-R notes because
their expected losses remain commensurate with their current
ratings, after taking into account the CLO's latest portfolio
information, its relevant structural features and its actual
over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $308,600,524
Defaulted par: $3,606,495
Diversity Score: 69
Weighted Average Rating Factor (WARF): 2775
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.12%
Weighted Average Recovery Rate (WARR): 47.8%
Weighted Average Life (WAL): 3.6 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, 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.
GLS AUTO 2024-2: S&P Assigns Prelim BB (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GLS Auto
Receivables Issuer Trust 2024-2's (GCAR 2024-2's) automobile
receivables-backed notes.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of May 6, 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 availability of approximately 56.5%, 47.6%, 37.2%, 28.9%,
and 24.3% of credit support (hard credit enhancement and haircut to
excess spread) for the class A (classes A-1, A-2, and A-3,
collectively), B, C, D, and E notes, respectively, based on
stressed cash flow scenarios. These credit support levels provide
at least 3.20x, 2.70x, 2.10x, 1.60x, and 1.38x our 17.50% expected
cumulative net loss for the class A, B, C, D, and E notes,
respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.60x S&P's expected loss level), all else being equal, its
preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB
(sf)' ratings on the class A, B, C, D, and E notes, respectively,
are within its credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the series' subprime
automobile loans, including the representation in the transaction
documents that all contracts in the pool have made at least one
payment, 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 UMB Bank N.A., which do not
constrain the preliminary ratings.
-- S&P's operational risk assessment of Global Lending Services
LLC, as servicer, and its view of the company's underwriting and
backup servicing arrangement with UMB Bank N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors that are in
line with its sector benchmark.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
GLS Auto Receivables Issuer Trust 2024-2
Class A-1, $78.10 million: A-1+ (sf)
Class A-2, $163.00 million: AAA (sf)
Class A-3, $60.54 million: AAA (sf)
Class B, $96.06 million: AA (sf)
Class C, $89.19 million: A (sf)
Class D, $79.67 million: BBB (sf)
Class E, $52.45 million: BB (sf)
GOODLEAP SUSTAINABLE 2024-1: Fitch Gives BB(EXP) Rating on C Debt
-----------------------------------------------------------------
Fitch Ratings has assigned GoodLeap Sustainable Home Solutions
Trust Series 2024-1 (GoodLeap 2024-1) expected ratings.
The assignment of final ratings is contingent on the receipt of
final documents conforming to information already reviewed.
Entity/Debt Rating
----------- ------
GoodLeap Sustainable
Home Solutions Trust 2024-1
A LT A(EXP)sf Expected Rating
B LT BBB(EXP)sf Expected Rating
C LT BB(EXP)sf Expected Rating
TRANSACTION SUMMARY
The transaction is a securitization of 20-to-25-year consumer loans
primarily backed by solar equipment.
KEY RATING DRIVERS
Default Assumptions Extrapolated from Historical Performance: Fitch
extrapolated Goodleap historical data to derive lifetime default
expectations, within distinct FICO groups. The weighted average
(WA) base case default rate is set at 9.0%. The WA base constant
prepayment rate (CPR) begins at 6.8% and adjusts to 5.2% over time,
reflecting the borrowers prepaying to reach their target balance
amounts. However, Fitch's recovery rate assumption does not vary
with FICO scores, maintaining a consistent 25% across the board.
Fitch's rating-specific default rates (RDRs) are 27.4% for 'Asf',
20.1% for 'BBBsf', and 13.7% for 'BBsf'. The corresponding rating
recovery rates (RRRs) are set at 16.0%, 18.3%, and 20.5%,
respectively.
Turbo Sequential on Trigger Breach: The notes initially amortize
based on target overcollateralization (OC) percentages. Should
asset performance deteriorate, first, additional principal will be
paid to cover any defaulted amounts; second, once the cumulative
loss trigger is breached, the payment waterfall will switch to
"turbo" sequential for the senior class.
Ratings Sensitive to Small Changes: Slight deviations from Fitch's
performance assumptions can have a material ratings impact,
particularly in certain model scenarios. To ensure robust ratings,
its analysis considers the notes' ability to repay under severe
stresses, as well as sensitivities and the effectiveness of
amortization triggers.
Standard, Reputable Counterparties; No Swap: The transaction
account is with Wilmington Trust (A/Negative/F1) and the servicer's
lockbox account is with KeyBank (BBB+/Stable/F2). Commingling risk
is mitigated by the daily transfer of collections, the high ACH
(automated clearing house) share at closing and KeyBank's ratings.
Established Lender, but New Assets: GoodLeap has grown to be one of
the largest U.S. solar loan lenders. Underwriting is mostly
automated and in line with those of other U.S. ABS originators. In
addition to the solar lending business, GoodLeap also originates
home efficiency loans and mortgages. Some loan servicing is
outsourced to Genpact (UK) Limited, the subservicer, while GoodLeap
has increased its role in direct servicing over time. Servicing
disruption risk is further mitigated by the appointment of Vervent,
Inc. as the backup servicer.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Additional performance data that imply annualized default rates
(ADRs) in excess of 1.2% or show lower-than-expected prepayment
rates may contribute to an Outlook revision to Negative or a
downgrade.
Material adverse changes in policy support, the economics of
purchasing and financing photovoltaic panels and batteries, and/or
ground-breaking technological advances that make the existing
equipment obsolete may also affect the ratings negatively.
Increase of defaults (Class A / B / C)
+10%: 'A-' / 'BBB-' / 'BB-'
+25%: 'BBB+' / 'BB+' / 'B+'
+50%: 'BBB-' / 'BB' / 'B-'
Decrease of recoveries (Class A / B / C)
-10%: 'A-' / 'BBB' / 'BB'
-25%: 'A-' / 'BBB-' / 'BB'
-50%: 'BBB+' / 'BBB-' / 'BB-'
Increase of defaults/decrease of recoveries (Class A / B / C)
+10% / -10%: 'BBB+' / 'BBB-' / 'BB-'
+25% / -25%: 'BBB' / 'BB+' / 'B'
+50% / -50%: 'BB+' / 'BB-' / 'CCC'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch does not rate solar transactions 'AAAsf' due to limited data
history. The rating cap may be lifted should more robust
performance data be provided. Positive rating actions may also
result from data specific to the level of defaults after the
investment tax credit due date, more data on recoveries, and the
performance of interest-only loans.
Subject to those conditions, good transaction performance, credit
enhancement at the target over-collateralization levels and ADRs
materially below 1.2% would support an upgrade.
Decrease of defaults (Class A / B / C)
-10%: 'A' / 'BBB' / 'BB+'
-25%: 'A+' / 'A-' / 'BBB-'
-50%: 'A+' / 'A+' / 'BBB+'
Increase of recoveries (Class A / B / C)
+10%: 'A' / 'BBB' / 'BB'
+25%: 'A' / 'BBB' / 'BB'
+50%: 'A' / 'BBB+' / 'BB+'
Decrease of defaults/increase of recoveries (Class A / B / C)
-10% / +10%: 'A' / 'BBB+' / 'BB+'
-25% / +25%: 'A+' / 'A-' / 'BBB-'
-50% / +50%: 'A+' / 'A+' / 'A-'
CRITERIA VARIATION
This analysis includes a criteria variation due to model-implied
rating (MIR) variations in excess of the limit stated in the
consumer ABS criteria report for new ratings. According to the
criteria, the committee can decide to deviate from the MIRs but, if
the MIR variation is greater than one notch, this will be a
criteria variation. The MIR variations for the class B and C notes
are greater than one notch.
Given the sensitivity of ratings to model assumptions and
conventions, repayment timing and tranche size, the ultimate
ratings were constrained by sensitivity analysis.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on comparing or re-computing certain
information with respect to 200 loan contracts from the collateral
pool of assets for the transaction. Fitch considered this
information in its analysis and it did not have an effect on
Fitch's analysis or conclusions.
DATA ADEQUACY
Similar to other solar ABS originators, GoodLeap can provide
historical information only covering a small share of the whole up
to 25-year loan tenor. Fitch applied default and recovery stresses
at the high or median-high level of the criteria range. The
amortizing nature of the assets and the application of an annual
default rate to the static portfolio allowed us to determine
lifetime default assumptions.
In addition, Fitch considered proxy data from other originators and
borrower characteristics (including demographics and fairly high
FICO scores) to derive asset assumptions, as envisaged under the
Consumer ABS Rating Criteria. Taking into account this analytical
approach, the rating committee decided to cap the rating in the
'Asf' rating category.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
GS MORTGAGE 2024-PJ5: Moody's Assigns (P)B3 Rating to B-5 Certs
---------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to 56 classes of
residential mortgage-backed securities (RMBS) to be issued by GS
Mortgage-Backed Securities Trust 2024-PJ5, and sponsored by Goldman
Sachs Mortgage Company.
The securities are backed by a pool of prime jumbo (80.2% by
balance) and GSE-eligible (19.8% by balance) residential mortgages
aggregated by GSMC, including loans aggregated by MAXEX Clearing
LLC (MAXEX, 5.4% by balance), and originated by multiple entities
and serviced by NewRez LLC d/b/a Shellpoint Mortgage Servicing
(Shellpoint), PennyMac Loan Services, LLC. (PennyMac) and United
Wholesale Mortgage, LLC. (UWM).
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2024-PJ5
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-1-X*, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-A, Assigned (P)Aaa (sf)
Cl. A-3-X*, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4-A, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-X*, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-X*, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-9-X*, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-X*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-13-X*, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aaa (sf)
Cl. A-15, Assigned (P)Aaa (sf)
Cl. A-15-X*, Assigned (P)Aaa (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-17-X*, Assigned (P)Aaa (sf)
Cl. A-18, Assigned (P)Aaa (sf)
Cl. A-19, Assigned (P)Aaa (sf)
Cl. A-19-X*, Assigned (P)Aaa (sf)
Cl. A-20, Assigned (P)Aaa (sf)
Cl. A-21, Assigned (P)Aaa (sf)
Cl. A-21-X*, Assigned (P)Aaa (sf)
Cl. A-22, Assigned (P)Aaa (sf)
Cl. A-23, Assigned (P)Aaa (sf)
Cl. A-23-X*, Assigned (P)Aaa (sf)
Cl. A-24, Assigned (P)Aaa (sf)
Cl. A-X*, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)A2 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-1-A, Assigned (P)Aa3 (sf)
Cl. B-1-X*, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-2-A, Assigned (P)A3 (sf)
Cl. B-2-X*, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-3-A, Assigned (P)Baa3 (sf)
Cl. B-3-X*, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
Cl. B-X*, Assigned (P)A3 (sf)
Cl. A-3L, Assigned (P)Aaa (sf)
Cl. A-4L, Assigned (P)Aaa (sf)
Cl. A-16L, Assigned (P)Aaa (sf)
Cl. A-22L, Assigned (P)Aaa (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.44%, in a baseline scenario-median is 0.22% and reaches 5.40% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
GS MORTGAGE 2024-RPL3: Fitch Gives 'Bsf' Rating on Class B-2 Certs
------------------------------------------------------------------
Fitch Ratings rates the residential mortgage-backed certificates
issued by GS Mortgage-Backed Securities Trust 2024-RPL3 (GSMBS
2023-RPL3).
Entity/Debt Rating
----------- ------
GSMBS 2024-RPL3
A-1 LT AAAsf New Rating
A-2 LT AAsf New Rating
A-3 LT AAsf New Rating
A-4 LT Asf New Rating
A-5 LT BBBsf New Rating
B LT NRsf New Rating
B-1 LT BBsf New Rating
B-2 LT Bsf New Rating
B-3 LT NRsf New Rating
B-4 LT NRsf New Rating
B-5 LT NRsf New Rating
M-1 LT Asf New Rating
M-2 LT BBBsf New Rating
PT LT NRsf New Rating
R LT NRsf New Rating
RISKRETEN LT NRsf New Rating
SA LT NRsf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
The notes are supported by 3,318 reperforming loans (RPLs) with a
total balance of $641 million as of the cutoff date.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.4% above a long-term sustainable level versus
11.1% on a national level as of 4Q23, remained unchanged since the
prior quarter. Housing affordability is at its worst level in
decades, driven by high interest rates and elevated home prices.
RPL Credit Quality (Negative): The collateral pool consists
primarily of peak-vintage RPLs. As of the cutoff date, the pool was
96.0% current. Approximately 33.8% of the loans were treated as
having clean payment histories for the past two years or more
(clean current) or have been clean since origination if seasoned
less than two years. Additionally, 86.4% of loans have a prior
modification. The borrowers have a moderate credit profile (669
FICO and 45% debt-to-income ratio [DTI]) and relatively low
leverage (64% sustainable loan-to-value ratio [sLTV]).
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. The credit enhancement consists of subordinated
notes, the distributions of which will be subordinated to P&I
payments due to senior noteholders. In addition, excess cash flow
resulting from the difference between the interest earned on the
mortgage collateral and that paid on the notes may be available to
pay down the bonds sequentially (after prioritizing fees to
transaction parties, net weighted average coupon shortfalls and to
the breach reserve account).
No Servicer P&I Advances (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduce liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' rated classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper 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 42.4% at 'AAA'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by various firms. The third-party due diligence described
in Form 15E focused on a regulatory compliance review that covered
applicable federal, state and local high-cost loan and/or
anti-predatory laws, as well as the Truth In Lending Act (TILA) and
Real Estate Settlement Procedures Act (RESPA). The scope was
consistent with published Fitch criteria for due diligence on RPL
RMBS. Fitch considered this information in its analysis and, as a
result, Fitch made the following adjustments to its analysis:
- Loans with an indeterminate HUD1 located in states that fall
under Freddie Mac's "Do Not Purchase List" received a 100% LS
over-ride;
- Loans with an indeterminate HUD1 but not located in states that
fall under Freddie Mac's "Do Not Purchase List" received a
five-point LS increase;
- Loans with a missing modification agreement received a
three-month liquidation timeline extension;
- Unpaid taxes and lien amounts were added to the LS.
In total, these adjustments increased the 'AAAsf' loss by
approximately 50bps.
ESG CONSIDERATIONS
GSMBS 2024-RPL3 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to the adjustment for the Rep &
Warranty framework without other operational mitigants, which has a
negative impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
HARBOR PARK CLO: S&P Affirms BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class B-1R and C-R
replacement debt from Harbor Park CLO Ltd./Harbor Park CLO LLC, a
CLO originally issued in December 2018 that is managed by
GSO/Blackstone Debt Funds Management LLC. At the same time, S&P
withdrew its ratings on the class A-1, B-1, and C debt following
payment in full on the May 3, 2024, refinancing date. S&P also
affirmed its ratings on the class B-2R, D, and E debt, which were
not refinanced.
The replacement debt was issued via a conformed indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture, the non-call period for the newly issued
debt was set to Nov. 3, 2024.
Replacement And Outstanding Debt Issuances
Replacement debt
-- Class A-R loans, $418.96 million: Three-month term SOFR +
1.15%
-- Class B-1R, $47.80 million: Three-month term SOFR + 1.70%
-- Class C-R, $39.20 million: Three-month term SOFR + 2.05%
-- Outstanding debt (balances as reported within the March 2024
trustee report)
-- Class A-1, $412.13 million: Three-month term SOFR + 1.43161%
-- Class A-2, $42.88 million: Three-month term SOFR + 1.66161%
-- Class B-1, $47.80 million: Three-month term SOFR + 1.96161%
-- Class C, $39.20 million: Three-month term SOFR + 2.36161%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them, and we will take rating actions as we
deem necessary."
Ratings Assigned
Harbor Park CLO Ltd./Harbor Park CLO LLC
Class A-R, $418.96 million: NR
Class B-1R, $47.80 million: AA (sf)
Class C-R, $39.20 million: A (sf)
Ratings Affirmed
Harbor Park CLO Ltd./Harbor Park CLO LLC
Class B-2R: AA (sf)
Class D: BBB- (sf)
Class E: BB- (sf)
Ratings Withdrawn
Harbor Park CLO Ltd./Harbor Park CLO LLC
Class A-1 to NR from 'AAA (sf)'
Class B-1 to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Other Outstanding Debt
Harbor Park CLO Ltd./Harbor Park CLO LLC
Subordinated notes: NR
NR--Not rated.
HGI CRE CLO 2021-FL1: DBRS Confirms B(low) Rating on Class G Notes
------------------------------------------------------------------
DBRS, Inc. confirmed all credit ratings on the classes issued by
HGI CRE CLO 2021-FL1, LTD. as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which has largely remained in line
with Morningstar DBRS' expectations as the trust continues to be
primarily secured by multifamily collateral.
In conjunction with this press release, Morningstar DBRS has
published a Surveillance Performance Update report with in-depth
analysis and credit metrics for the transaction as well as business
plan updates on select loans. For access to this report, please
click on the link under Related Documents below or contact us at
info-DBRS@morningstar.com.
The initial collateral included 23 mortgage loans or senior notes
secured by multifamily properties with an initial cut-off date
balance totaling $498.2 million. Most loans were in a period of
transition with plans to stabilize performance and improve values
for the underlying assets. The transaction was a managed vehicle
with an 18-month reinvestment period, which expired with the
January 2023 Payment Date.
As of the April 2024 remittance, the pool comprises 27 loans
secured by 27 properties with a cumulative trust balance of $358.6
million, as there has been collateral reduction of 35.8%. Since
issuance, 21 loans with a prior cumulative trust balance of $471.1
million have been successfully repaid from the pool, including
seven loans totaling $133.5 million that have repaid since the
previous Morningstar DBRS rating action in June 2023.
The pool is primarily secured by properties in suburban markets,
with 17 loans, representing 56.5% of the pool, with a Morningstar
DBRS Market Rank of 3, 4, or 5. An additional eight loans,
representing 33.4% of the pool, are secured by properties with a
Morningstar DBRS Market Rank of 2, denoting a tertiary market,
while two loans, representing 10.1% of the pool, are secured by
properties with a Morningstar DBRS Market Rank of 6, denoting an
urban market. In comparison, in June 2023, properties in suburban
markets represented 55.8% of the collateral, properties in tertiary
markets represented 25.6% of the collateral, and properties in
urban markets represented 11.2% of the collateral.
The current weighted-average (WA) as-is appraised loan-to-value
ratio (LTV) is 68.2% as of the March 2024 reporting, with a current
WA stabilized LTV of 78.1%. In comparison, these figures were 73.9%
and 62.7%, respectively, at issuance. Morningstar DBRS recognizes
that select property values may be inflated as the majority of the
individual property appraisals were completed in 2021 and 2022 and
may not reflect the current rising interest rate or widening
capitalization rate (cap rate) environment. In the analysis for
this review, Morningstar DBRS applied upward LTV adjustments for 14
loans, representing 87.3% of the current trust balance.
Through March 2024, the collateral manager had advanced cumulative
loan future funding of $56.7 million to 24 of the outstanding
individual borrowers. The largest advance, $10.6 million, has been
made to the borrower of the Marbella Apartments loan, which is
secured by a multifamily property in Corpus Christi, Texas. Funds
were advanced to fund the borrower's capital improvement plan
across the property. The loan is currently being monitored on the
servicer's watchlist for cash flow concerns as the property was
57.3% occupied as of the December 2023 rent roll, with negative
cash flow reported as of September 2023 financials. The loan
matures in June 2024 and has two 12-month extension options
remaining; however, according to the collateral manager, the loan
will likely be modified as the borrower will not be able to meet
the performance-based extension requirements. In its analysis,
Morningstar DBRS applied an upward LTV adjustment and increased the
loan's probability of default to increase the loan's expected loss
to a level that was approximately two times the pool average
expected loss.
An additional $14.2 million of loan future funding allocated to six
individual borrowers remains available. The largest portion of
available funds is allocated to the borrower of The Lofts at
Twenty25 ($5.9 million), which is secured by a redeveloped
623-unit, high-rise multifamily property in Atlanta. The available
funds will fund the borrowers' capital improvement plans. According
to the financials provided by the collateral manager, the property
was 29.4% occupied as of the February 2024 rent roll, down from 46%
as of March 2023 and 57.6% at closing. The collateral manager noted
that the drop in occupancy was related to a number of tenant
evictions. In addition, the borrower has extinguished all available
funds from the interest reserve and is covering debt service out of
pocket. The loan has an initial maturity date of July 2025. In its
analysis, Morningstar DBRS applied an upward LTV adjustment and
increased the loan's probability of default to increase the loan's
expected loss.
As of April 2024, there were no specially serviced or delinquent
loans; however, 16 loans, representing 57.3% of the current pool
balance, were on the servicer's watchlist. The loans have primarily
been flagged for upcoming loan maturity dates and low occupancy
rates. The largest loan on the servicer's watchlist, Tzadik
Portfolio - Pool 1, is secured by a portfolio of five multifamily
properties in Florida. The loan is being monitored for low in-place
cash flows; the loan posted a 0.59 times (x) debt service coverage
ratio as of year-end 2023. The borrower is progressing with its
business plan, which calls for the completion of property-wide
renovations. As of the March 2024 reporting, the lender has
advanced nearly all of the $7.6 million future funding component.
As of February 2024, the portfolio had a combined occupancy of
88.2%. In its analysis, Morningstar DBRS applied an upward LTV
adjustment, increasing the loan's expected loss in excess of deal
average.
Notes: All figures are in U.S. dollars unless otherwise noted.
HILDENE TRUPS A10BC: Moody's Assigns (P)B3 Rating to $16MM B Notes
------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to two classes of
notes to be issued by Hildene TruPS Resecuritization A10BC, LLC
(the "Issuer").
Moody's rating action is as follows:
US$38,000,000 Class A Notes due 2036, Assigned (P)Baa3 (sf)
US$16,000,000 Class B Notes due 2036, Assigned (P)B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the
risks associated with the portfolio of ALESCO Preferred Funding X,
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 March 15, 2006:
US$22,717,780.00 of the $80,734,073 Class B Deferrable Third
Priority Secured Floating Rate Notes Due 2036 (the "Class B
Notes")
US$23,302,115.88 of the $98,372,724 Class C-1 Deferrable Fourth
Priority Mezzanine Secured Floating Rate Notes Due 2036 (the "Class
C-1 Notes")
US$53,481,720.25 of the $66,041,809 Class C-2 Deferrable Fourth
Priority Mezzanine Secured Fixed/Floating Rate Notes Due 2036 (the
"Class C-2 Notes"
The Class B Notes, the Class C-1 Notes and the Class C-2 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 July 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 and insurance companies,
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 assesses the default
probability of insurance company obligors that do not have public
ratings through credit assessments provided by its insurance
ratings team based on the credit analysis of the underlying
insurance companies' annual statutory financial reports. Moody's
assumes a fixed recovery rate of 10% for bank obligations.
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: $376,529,000.00
Weighted Average Rating Factor (WARF): 1434
Weighted Average Spread (WAS): 1.96%
Weighted Average Recovery Rate (WARR): 10.0%
Weighted Average Life (WAL): 8.71 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.
HILDENE TRUPS A5C: Moody's Assigns B3 Rating to $2MM Cl. B Notes
----------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of notes issued
by Hildene TruPS Resecuritization A5C, LLC (the "Issuer")
Moody's rating action is as follows:
US$47,000,000 Class A Notes due 2035, Assigned Baa3 (sf)
US$2,000,000 Class B Notes due 2035, Assigned B3 (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 V,
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 September 14, 2004:
US$16,814,658.62 of the $45,941,986.65 Class C-1 Deferrable
Mezzanine Secured Floating Rate Notes due December 2034 (current
outstanding balance including deferred interest of $3,591,986.65),
(the "Class C-1 Notes")
US$41,220,740.01 of the $41,220,740.01 Class C-2 Deferrable
Mezzanine Secured Fixed/Floating Rate due December 2034 (current
outstanding balance including deferred interest of $3,520,740.01)
(the "Class C-2 Notes")
US$2,199,426.64 of the $5,592,827.76 Class C-3 Deferrable Mezzanine
Secured Fixed/Floating Rate due December 2034 (current outstanding
balance including deferred interest of $1,142,827.76) (the "Class
C-3 Notes")
The Class C-1 Notes, the Class C-2 Notes and the Class C-3 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 Q3-2023
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: $154,255,000
Weighted Average Rating Factor (WARF): 768
Weighted Average Spread (WAS): 2.75%
Weighted Average Coupon (WAC): 7.24%
Weighted Average Life (WAL): 7.8 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.
HILT 2024-ORL: S&P Assigns Prelim 'BB+ (sf)' Rating on HRR Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to HILT
Commercial Mortgage Trust 2024-ORL's commercial mortgage
pass-through certificates series 2024-ORL.
The certificate issuance is a U.S. CMBS transaction backed by
commercial mortgage loan that is secured by the borrowers' fee
simple interest in Hilton Orlando, a 1,424-guestroom full-service
hotel adjacent to the Orange County Convention Center.
The preliminary ratings are based on information as of May 6, 2024.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect the collateral's historical and
projected performance, the sponsor's and manager's experience, the
trustee-provided liquidity, the loan terms, and the transaction
structure. We determined that the loan has a beginning and ending
loan-to-value ratio of 74.2%, based on our value of the property
backing the transaction.
Preliminary Ratings Assigned
HILT Commercial Mortgage Trust 2024-ORL
Class A, $265,300,000: AAA (sf)
Class B, $80,000,000: AA- (sf)
Class C, $59,400,000: A- (sf)
Class D, $78,600,000: BBB- (sf)
Class E, $15,450,000: BB+ (sf)
Class HRR(i), $26,250,000: BB+ (sf)
(i)Horizontal residual interest certificate.
HPS LOAN 2024-19: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its 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 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.
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-1A, $20.00 million: AA+ (sf)
Class B-1B, $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 2019-LTV2: Moody's Hikes Rating on Cl. B-5 Certs From B1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of three bonds issued by
J.P. Morgan Mortgage Trust 2019-LTV2. The collateral backing this
deal consists of prime jumbo mortgage loans.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2019-LTV2
Cl. B-3, Upgraded to Aa1 (sf); previously on Oct 4, 2022 Upgraded
to Aa3 (sf)
Cl. B-4, Upgraded to Aa2 (sf); previously on Oct 4, 2022 Upgraded
to Baa1 (sf)
Cl. B-5, Upgraded to A2 (sf); previously on Dec 13, 2021 Upgraded
to B1 (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 an average
of approximately 6% for the upgraded bonds since Moody's last
review. Collateral performance remains strong as only two loans are
currently delinquent more than 60 days and the cumulative net
losses for the transaction are 0.21% as of the April distribution
date.
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 the remaining rated classes in this deal
as those classes are already at the highest achievable levels
within Moody's rating scale.
Principal Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings 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.
JP MORGAN 2019-LTV3: Moody's Ups Rating on Cl. B-5 Certs From Ba3
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of four bonds issued by
J.P. Morgan Mortgage Trust 2019-LTV3. The collateral backing this
deal consists of prime jumbo mortgage loans.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2019-LTV3
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 6, 2023 Upgraded
to Aa3 (sf)
Cl. B-3-A, Upgraded to Aaa (sf); previously on Jul 6, 2023 Upgraded
to Aa3 (sf)
Cl. B-4, Upgraded to Aa2 (sf); previously on Jul 6, 2023 Upgraded
to Baa1 (sf)
Cl. B-5, Upgraded to A1 (sf); previously on Jul 6, 2023 Upgraded to
Ba3 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's 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 an average of
approximately 2% for the upgraded bonds since Moody's last review.
Collateral performance remains strong as only two loans are
currently delinquent more than 60 days and the cumulative net
losses for the transaction are 0.19% as of the April distribution
date. 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 the remaining rated classes in this deal
as those classes are already at the highest achievable levels
within Moody's rating scale.
Principal Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
JP MORGAN 2021-12: Moody's Upgrades Rating on Cl. B-5 Certs to Ba3
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 70 bonds from six US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo and agency eligible mortgage loans.
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: J.P. Morgan Mortgage Trust 2021-12
Cl. A-14, Upgraded to Aaa (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-A, Upgraded to Aaa (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-X*, Upgraded to Aaa (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Upgraded to Aa1 (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-X*, Upgraded to Aa1 (sf); previously on Sep 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Sep 30, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2-A, Upgraded to A1 (sf); previously on Sep 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-2-X*, Upgraded to A1 (sf); previously on Sep 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Sep 30, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Sep 30, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Sep 30, 2021
Definitive Rating Assigned B3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2021-13
Cl. A-14, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-A, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-B, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-C, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Upgraded to Aa1 (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-X*, Upgraded to Aa1 (sf); previously on Oct 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Oct 29, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2-A, Upgraded to A1 (sf); previously on Oct 29, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-2-X*, Upgraded to A1 (sf); previously on Oct 29, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Oct 29, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Oct 29, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Oct 29, 2021
Definitive Rating Assigned B3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2021-14
Cl. A-14, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
`Cl. A-15-A, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-B, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-C, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Upgraded to Aa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-X*, Upgraded to Aa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Nov 30, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2-A, Upgraded to A1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-2-X*, Upgraded to A1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Nov 30, 2021 Definitive
Rating Assigned B3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2021-15
Cl. A-14, Upgraded to Aaa (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-A, Upgraded to Aaa (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-B, Upgraded to Aaa (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15-C, Upgraded to Aaa (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Upgraded to Aa2 (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-X*, Upgraded to Aa2 (sf); previously on Dec 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Dec 30, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2-A, Upgraded to A1 (sf); previously on Dec 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-2-X*, Upgraded to A1 (sf); previously on Dec 30, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Dec 30, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Dec 30, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Dec 30, 2021 Definitive
Rating Assigned B3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2021-LTV2
Cl. A-3, Upgraded to Aa1 (sf); previously on Jul 14, 2023 Upgraded
to Aa2 (sf)
Cl. B-1, Upgraded to A2 (sf); previously on Jul 14, 2023 Upgraded
to Ba1 (sf)
Cl. B-2, Upgraded to Ba1 (sf); previously on Jul 14, 2023 Upgraded
to B1 (sf)
Cl. M-1, Upgraded to A1 (sf); previously on Jul 14, 2023 Upgraded
to Baa1 (sf)
Issuer: J.P. Morgan Wealth Management Reference Notes, Series
2021-CL1
Cl. M-3, Upgraded to Baa1 (sf); previously on Feb 26, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. M-4, Upgraded to Baa3 (sf); previously on Feb 26, 2021
Definitive Rating Assigned Ba1 (sf)
Cl. M-5, Upgraded to Ba2 (sf); previously on Feb 26, 2021
Definitive Rating Assigned B1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool. The
rating upgrades are a result of the stable performance of the
related pool, and an increase in credit enhancement an average of
approximately 3% for the upgraded bonds since Moody's last review.
Collateral performance remains stable as on average only about
0.72% of loans are currently delinquent more than 60 days and the
cumulative net losses for the transactions are on average about
0.01% as of the March distribution date.
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.
In four cases, no actions were taken on the rated classes because
the expected losses remain commensurate with the current ratings,
after taking into account the updated performance information,
structural features and other qualitative considerations. No
actions were taken on the remaining rated classes in this deal as
those classes are already at the highest achievable levels within
Moody's rating scale.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds and/or pools.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
JP MORGAN 2024-4: Moody's Assigns B3 Rating to Cl. B-5 Certs
------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to 33 classes of
residential mortgage-backed securities (RMBS) issued by J.P. Morgan
Mortgage Trust 2024-4, and sponsored by J.P. Morgan Mortgage
Acquisition Corp. (JPMMAC).
The securities are backed by a pool of prime jumbo (80.9% by
balance) and GSE-eligible (19.1% by balance) residential mortgages
aggregated by JPMMAC, including loans aggregated by MAXEX Clearing
LLC (MAXEX; 15.2% by loan balance) and Verus Mortgage Trust 1A
(Verus; 0.2% by loan balance) and originated and serviced by
multiple entities.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2024-4
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-4-A, Definitive Rating Assigned Aaa (sf)
Cl. A-4-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-5-A, Definitive Rating Assigned Aaa (sf)
Cl. A-5-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6-A, Definitive Rating Assigned Aaa (sf)
Cl. A-6-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7-A, Definitive Rating Assigned Aaa (sf)
Cl. A-7-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-8-A, Definitive Rating Assigned Aaa (sf)
Cl. A-8-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aa1 (sf)
Cl. A-9-A, Definitive Rating Assigned Aa1 (sf)
Cl. A-9-X*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-3*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-X*, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-2-A, Definitive Rating Assigned A3 (sf)
Cl. B-2-X*, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE.
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's Ratings expected loss for this pool in a baseline
scenario-mean is 0.61%, in a baseline scenario-median is 0.31% and
reaches 8.24% at a stress level consistent with Moody's Ratings Aaa
ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's 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 original
expectations as a result of a higher number of obligor defaults or
deterioration in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for worse-than-expected performance include poor servicing, error
on the part of transaction parties, inadequate transaction
governance and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
KKR CLO 32: S&P Assigns 'BB- (sf)' Rating on Class E-R Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-L loans and class A-R, A-L, B-R, C-R, D-1-R, D-2-R, and E-R notes
from KKR CLO 32 Ltd./KKR CLO 32 LLC, a CLO originally issued in
December 2020 that is managed by KKR Financial Advisors II LLC.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
proposed supplemental indenture:
-- The replacement class A-L loans and class A-R, A-L, C-R, D-1-R,
and E-R notes are expected to be issued at a lower spread over
three-month term SOFR than the original debt, and the class B-R and
D-2-R notes are expected to be issued at a higher spread over
three-month term SOFR.
-- The replacement class A-L loans and class A-R, A-L, B-R, C-R,
D-1-R, D-2-R, and E-R notes are expected to be issued at a floating
spread, replacing the current floating spread.
-- The stated maturity will be extended 5.25 years.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-L loans, $127.0 million: Three-month CME term SOFR +
1.55%
-- Class A-L notes, $0.0 million: Three-month CME term SOFR +
1.55%
-- Class A-R, $125.0 million: Three-month CME term SOFR + 1.55%
-- Class B-R, $52.0 million: Three-month CME term SOFR + 2.10%
-- Class C-R (deferrable), $24.0 million: Three-month CME term
SOFR + 2.50%
-- Class D-1-R (deferrable), $20.0 million: Three-month CME term
SOFR + 3.65%
-- Class D-2-R (deferrable), $6.0 million: Three-month CME term
SOFR + 5.30%
-- Class E-R (deferrable), $12.00 million: Three-month CME term
SOFR + 7.10%
Original debt
-- Class A-1, $240.00 million: Three-month CME term SOFR + 1.32% +
CSA(i)
-- Class A-2, $16.00 million: Three-month CME term SOFR + 1.57% +
CSA(i)
-- Class B, $48.00 million: Three-month CME term SOFR + 1.75% +
CSA(i)
-- Class C, $24.00 million: Three-month CME term SOFR + 2.40% +
CSA(i)
-- Class D, $22.00 million: Three-month CME term SOFR + 3.75% +
CSA(i)
-- Class E, $15.00 million: Three-month CME term SOFR + 7.15% +
CSA(i)
-- Class F, $4.00 million: Three-month CME term SOFR + 9.00% +
CSA(i)
-- Subordinated notes, $38.9 million: Residual
(i)The CSA is 0.26161%.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
KKR CLO 32 Ltd./KKR CLO 32 LLC
Class A-L loans, $127.0 million: AAA (sf)
Class A-L notes, $0.0 million: AAA (sf)
Class A-R, $125.0 million: AAA (sf)
Class B-R, $52.0 million: AA (sf)
Class C-R (deferrable), $24.0 million: A (sf)
Class D-1-R (deferrable), $20.0 million: BBB (sf)
Class D-2-R (deferrable), $6.0 million: BBB- (sf)
Class E-R (deferrable), $12.00 million: BB- (sf)
Ratings Withdrawn
KKR CLO 32 Ltd./KKR CLO 32 LLC
Class A-1 to NR from 'AAA (sf)'
Class A-2 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A(sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
Class F to NR from 'B- (sf)'
Other Outstanding Debt
KKR CLO 32 Ltd./KKR CLO 32 LLC
Subordinated notes, $38.9 million: NR
NR--Not rated.
KKR CLO 50: Moody's Assigns B3 Rating to $200,000 Class F Notes
---------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of notes issued
by KKR CLO 50 Ltd. (the "Issuer" or "KKR 50").
Moody's rating action is as follows:
US$252,000,000 Class A Senior Secured Floating Rate Notes due 2037,
Definitive Rating Assigned Aaa (sf)
US$200,000 Class F Senior Secured Deferrable Floating Rate Notes
due 2037, Definitive Rating Assigned B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
KKR 50 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
first lien senior secured loans, cash and eligible investments, and
up to 7.5% of the portfolio may consist of second lien loans,
unsecured loans and permitted non-loan assets, provided that no
more than 5.0% of the portfolio may consist of permitted non-loan
assets and no more than 2.5% of the portfolio may consist of
unsecured permitted non-loan assets. The portfolio is approximately
99% ramped as of the closing date.
KKR Financial Advisors II, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued six other classes
of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3017
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 45.00%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
KKR FINANCIAL 2013-1: Moody's Assigns Ba3 Rating to Cl. D-R2 Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to five classes of CLO
refinancing notes (the "Refinancing Notes") issued by KKR Financial
CLO 2013-1, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$131,567,543 Class A-1-R2 Senior Secured Floating Rate Notes due
2029, Assigned Aaa (sf)
US$48,750,000 Class A-2-R2 Senior Secured Floating Rate Notes due
2029, Assigned Aaa (sf)
US$27,000,000 Class B-R2 Senior Secured Deferrable Floating Rate
Notes due 2029, Assigned Aa1 (sf)
US$32,500,000 Class C-R2 Senior Secured Deferrable Floating Rate
Notes due 2029, Assigned Baa1 (sf)
US$26,750,000 Class D-R2 Senior Secured Deferrable Floating Rate
Notes due 2029, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the rating is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
KKR Financial Advisors II, LLC (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer.
The Issuer previously issued one class of subordinated notes, which
will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing, including extension of the Refinancing Notes'
non-call period.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $294,301,140
Defaulted par: $5,246,990
Diversity Score: 54
Weighted Average Rating Factor (WARF): 3248
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.81%
Weighted Average Recovery Rate (WARR): 46.48%
Weighted Average Life (WAL): 3.4 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the rated notes.
KRR CLO 50: Fitch Assigns 'BB+sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to KKR CLO
50 Ltd.
Entity/Debt Rating
----------- ------
KKR CLO 50 Ltd.
A LT NRsf New Rating
B LT AAsf New Rating
C-1 LT A+sf New Rating
C-2 LT A+sf New Rating
D-1 LT BBB+sf New Rating
D-2 LT BBB-sf New Rating
E LT BB+sf New Rating
F LT NRsf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
KKR CLO 50 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by KKR
Financial Advisors II, LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B/B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
97.3% first-lien senior secured loans and has a weighted average
recovery assumption of 74.84%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% of the portfolio balance in aggregate while the
top five obligors can represent up to 12% of the portfolio balance
in aggregate. The level of diversity required by industry, obligor
and geographic concentrations is in line with other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B, between 'BB-sf'
and 'A-sf' for class C-1, between 'B+sf' and 'BBB+sf' for class
C-2, between less than 'B-sf' and 'BB+sf' for class D-1, between
less than 'B-sf' and 'BB+sf' for class D-2, and between less than
'B-sf' and 'BB-sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
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-1, 'AA+sf'
for class C-2, 'A+sf' for class D-1, 'Asf' for class D-2, and
'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for KKR CLO 50, 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.
MELLO MORTGAGE 2021-INV3: Moody's Ups Cl. B-5 Certs Rating to B2
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 21 bonds from five US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo, agency eligible and investment mortgage loans issued by
Mello Mortgage Capital Acceptance between 2018 and 2022.
The complete rating actions are as follows:
Issuer: Mello Mortgage Capital Acceptance 2018-MTG1
Cl. B3, Upgraded to Aaa (sf); previously on Jun 30, 2023 Upgraded
to Aa1 (sf)
Cl. B4, Upgraded to Aaa (sf); previously on Jun 30, 2023 Upgraded
to A2 (sf)
Cl. B5, Upgraded to Aaa (sf); previously on Dec 10, 2021 Upgraded
to Baa3 (sf)
Issuer: Mello Mortgage Capital Acceptance 2018-MTG2
Cl. B4, Upgraded to Aa1 (sf); previously on Dec 10, 2021 Upgraded
to A3 (sf)
Cl. B5, Upgraded to Aa2 (sf); previously on Dec 10, 2021 Upgraded
to Baa3 (sf)
Issuer: Mello Mortgage Capital Acceptance 2021-INV4
Cl. B-1, Upgraded to Aa2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Nov 30, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-4, Upgraded to Ba2 (sf); previously on Nov 30, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B2 (sf); previously on Nov 30, 2021 Definitive
Rating Assigned B3 (sf)
Issuer: Mello Mortgage Capital Acceptance 2021-MTG2
Cl. A19, Upgraded to Aaa (sf); previously on May 27, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A20, Upgraded to Aaa (sf); previously on May 27, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A21, Upgraded to Aaa (sf); previously on May 27, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. AX20*, Upgraded to Aaa (sf); previously on May 27, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. AX21*, Upgraded to Aaa (sf); previously on May 27, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. AX22*, Upgraded to Aaa (sf); previously on May 27, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B1, Upgraded to Aa2 (sf); previously on May 27, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. B1A, Upgraded to Aa2 (sf); previously on May 27, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B4, Upgraded to Ba1 (sf); previously on May 27, 2021 Definitive
Rating Assigned Ba2 (sf)
Cl. BX1*, Upgraded to Aa2 (sf); previously on May 27, 2021
Definitive Rating Assigned Aa3 (sf)
Issuer: Mello Mortgage Capital Acceptance 2022-INV1
Cl. B-1, Upgraded to Aa2 (sf); previously on Jan 28, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Jan 28, 2022 Definitive
Rating Assigned A3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pools.
Each of the transactions Moody's reviewed continue to display
strong collateral performance, with cumulative losses for each
transaction under .01% as of original pool balance and a small
number of loans in delinquency. In addition, enhancement levels for
most tranches have grown significantly, as the pools amortize
relatively quickly. The credit enhancement since closing has grown,
on average, 2x for the tranches reviewed.
Moody's analysis also considered the existence of historical
interest shortfalls for some of the bonds. While all shortfalls
have since been recouped for the rated bonds, 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 the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features and credit enhancement. In
addition, no action was taken on Class B-3 from Mello Mortgage
Capital Acceptance 2018-MTG2 as Moody's analysis reflects interest
risk from past and 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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds and/or pools.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
MORGAN STANLEY 2012-C6: Moody's Lowers Rating on 2 Tranches to C
----------------------------------------------------------------
Moody's Ratings has affirmed the ratings on two classes and
downgraded the ratings on seven classes in Morgan Stanley Bank of
America Merrill Lynch Trust 2012-C6, Commercial Mortgage
Pass-Through Certificates, Series 2012-C6 as follows:
Cl. C, Downgraded to B1 (sf); previously on Sep 12, 2023 Downgraded
to Ba1 (sf)
Cl. D, Downgraded to Caa1 (sf); previously on Sep 12, 2023
Downgraded to B3 (sf)
Cl. E, Downgraded to Ca (sf); previously on Sep 12, 2023 Downgraded
to Caa3 (sf)
Cl. F, Downgraded to C (sf); previously on Sep 12, 2023 Downgraded
to Ca (sf)
Cl. G, Affirmed C (sf); previously on Sep 12, 2023 Affirmed C (sf)
Cl. H, Affirmed C (sf); previously on Sep 12, 2023 Affirmed C (sf)
Cl. PST, Downgraded to B1 (sf); previously on Sep 12, 2023
Downgraded to Ba1 (sf)
Cl. X-B*, Downgraded to B1 (sf); previously on Sep 12, 2023
Downgraded to Ba1 (sf)
Cl. X-C*, Downgraded to C (sf); previously on Sep 12, 2023 Affirmed
Ca (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on four P&I classes, Cl. C, Cl. D, Cl. E and Cl. F,
were downgraded due to a decline in loan performance, higher
anticipated losses and increased interest shortfalls from the
significant exposure to loans in special servicing. All three
remaining loans (100% of the pool) are in special servicing and two
of these loans, 1880 Broadway/15 Central Park West Retail (88% of
the pool) and 152 Geary Street (6% of the pool), have been deemed
non-recoverable. As a result of the non-recoverability
determinations, appraisal reductions and exposure to special
servicing, interest shortfalls impacted up to Cl. C as of the April
2024 remittance statement.
The ratings on two P&I classes, Cl. G, and Cl. H, were affirmed
because their ratings are consistent with Moody's expected loss.
The ratings on the IO classes, Cl. X-B and Cl. X-C, were downgraded
based on a decline in the credit quality of their referenced
classes.
The rating on the exchangeable class, Cl. PST, was downgraded due
to a decline in the credit quality of its outstanding referenced
exchangeable class. Cl. PST originally referenced Classes A-S, B
and C, however, Classes A-S and B have already paid off in full.
Moody's rating action reflects a base expected loss of 55.2% of the
current pooled balance, compared to 54.9% at Moody's last review.
Moody's base expected loss plus realized losses is now 10.5% of the
original pooled balance, compared to 9.7% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or a
significant improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 100% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced loan that it
expects will generate a loss and estimates a loss given default
based on a review of broker's opinions of value (if available),
other information from the special servicer, available market data
and Moody's internal data. The loss given default for each loan
also takes into consideration repayment of servicer advances to
date, estimated future advances and closing costs. Translating the
probability of default and loss given default into an expected loss
estimate, Moody's then applies the aggregate loss from specially
serviced loans to the most junior classes and the recovery as a pay
down of principal to the most senior classes.
DEAL PERFORMANCE
As of the April 17, 2024 distribution date, the transaction's
aggregate certificate balance has decreased by 87% to $141.5
million from $1.12 billion at securitization. The certificates are
collateralized by three mortgage loans (100% of the pool), all of
which are in special servicing.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $40.0 million (for an average loss
severity of 97%). As of the April 2024 remittance statement,
cumulative interest shortfalls were $3.8 million and impacted up to
Cl. C. Moody's anticipates interest shortfalls will continue
because of the exposure to specially serviced loans and
non-recoverability determinations.
The largest specially serviced loan is the 1880 Broadway/15 Central
Park West Retail Loan ($125.0 million -- 88.4% of the pool), which
is secured by an 84,000 SF, four-level (two levels below grade),
multi-tenant retail condominium located on the Upper West Side of
Manhattan. The loan has been in special servicing since September
2022 after it was unable to pay off at its September 2022 maturity
date. The property had been previously 100% leased to four tenants
since securitization, however, the former largest tenant, Best Buy,
vacated ahead of their January 2023 lease expiration, reducing the
property's occupancy to 46%. Best Buy represented just over 40% of
the property's base rent in 2021. Furthermore, JP Morgan Chase (13%
of the NRA) renewed their lease at the property at a lower rent
which will further reduce the property's net operating income
(NOI). The 2023 reported NOI was only $4.6 million compared to
$11.3 in 2022 causing the NOI DSCR to drop to 0.82X. Servicer
commentary indicates the JP Morgan Chase renewal is effective
January 2024 and will cause a further $2.2 million annual income
decline. The special servicer commentary also indicated they are
dual tracking foreclosure while evaluating workout alternatives and
have engaged a broker to market the note for sale. A December 2023
appraisal valued the property approximately 68% lower than at
securitization and 50% below the outstanding loan balance. The loan
has been deemed non-recoverable and as of the April 2024 remittance
statement no interest payment was remitted on this loan leading to
an increase interest shortfalls. The loan also has approximately
$1.3 million of tax and insurance servicer advances.
The second largest specially serviced loan is the 152 Geary Street
Loan ($8.6 million -- 6.1% of the pool), which is secured by an
8,100 SF, 3-story, retail building in San Francisco, California.
The loan transferred to special servicing in June 2020 due to
payment default as the single tenant was not paying rent. The
borrower recently signed a new lease with a replacement tenant and
the tenant was expected to take occupancy by June 2023. Forbearance
was granted and the loan was paid through its February 2024 payment
date, however, the loan did not pay off at the March 2024
forbearance expiration date. Servicer commentary indicates the
borrower stated that the closing of take out refinancing is
expected in the next two months. The loan has amortized 25% since
securitization and as of the April 2024 remittance report a recent
appraisal valued the property above the outstanding loan balance.
The remaining specially serviced loan is the Palmdale Gateway Loan
($7.9 million -- 5.6% of the pool), which is secured by a grocery
anchored retail center located in Palmdale, California,
approximately 63 miles northeast of Los Angeles. The property was
92% leased as of December 2023, compared to 89% in June 2022 and
90% at securitization. The loan has been in specially servicing
since October 2022 after failing to payoff at its scheduled
maturity date. The loan has amortized over 35% since securitization
and had an NOI DSCR of 2.14X as of December 2023. The loan faces
significant lease rollover as the two largest tenants (combining
for 46% of the NRA) have lease expirations in or prior to April
2025. A forbearance was executed in July 2023 and cash management
has been implemented. A January 2023 appraisal valued the property
higher than at securitization and significantly higher than the
outstanding loan amount. The loan is now paid through its April
2024 payment date and was classified as performing past maturity.
MORGAN STANLEY 2015-C20: DBRS Confirms B Rating on Class X-E Certs
------------------------------------------------------------------
DBRS Limited confirmed its credit ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2015-C20 issued by
Morgan Stanley Bank of America Merrill Lynch Trust 2015-C20 as
follows:
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class PST at A (high) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at B (sf)
-- Class E at B (low) (sf)
-- Class F at CCC (sf)
All trends are Stable, with the exception of Class F, which is
assigned a credit rating that does not typically carry a trend in
commercial mortgage-backed securities (CMBS) credit ratings.
The credit rating confirmations reflect the stable performance of
the transaction, which remains in line with Morningstar DBRS'
expectations. Overall, the pool continues to exhibit healthy credit
metrics, as evidenced by the weighted-average (WA) debt service
coverage ratio (DSCR) of almost 2.0 times (x); based on the most
recent financial reporting available. Although there is a high
concentration of loans secured by office properties, which
represent 25.8% of the current pool balance, the majority of those
loans continue to perform as expected, with the underlying
collateral demonstrating stable to improving operating performance
over the last few reporting periods, including the largest loan in
the pool, Discovery Business Center (Prospectus ID#1; 12.9% of the
pool). In addition, the transaction, as a whole, continues to
benefit from increased credit support to the bonds as a result of
scheduled amortization, loan repayments, and defeasance, further
supporting the credit rating confirmations and Stable trends
assigned with this review.
As of the April 2024 remittance, 70 of the original 88 loans remain
in the pool, with a trust balance of $784.1 million, representing
collateral reduction of 31.7% since issuance. To date, the trust
has incurred approximately $9.0 million of losses, which have been
contained to the nonrated Class G certificate. Thirteen loans,
representing 19.1% of the pool balance, are on the servicer's
watchlist; however only eight of those loans, representing 15.0% of
the pool balance, are being monitored for credit-related reasons.
In addition, five loans, representing 7.6% of the pool balance, are
in special servicing and 19 loans, representing 19.2% of the pool
balance, are fully defeased. With this review, Morningstar DBRS
considered a liquidation scenario for one specially serviced loan,
33 West 46th Street (Prospectus ID#12; 2.2% of the pool), details
of which are described below. Morningstar DBRS stressed the
remaining four specially serviced loans with an elevated
probability of default (POD) penalty and/or loan-to-value ratio
(LTV) to reflect increased refinance risk, given the loans'
near-term maturity dates between September 2024 and February 2025.
The 33 West 46th Street loan is secured by a 42,525-square-foot
(sf) office property in Midtown Manhattan, New York. The loan
transferred to special servicing in August 2020 for payment
default, with the last payment received in January 2023. A receiver
was appointed in March 2022, and a foreclosure auction is scheduled
to take place during Q2 2024. Operating performance at the property
has consistently declined since issuance with the loan's DSCR
remaining well below break-even since YE2021. The property was
approximately 57.0% occupied as of September 2023 with the top
three tenants, Teamamerica & Volatour, Inc. (lease expiration in
November 2027), Dana Saltzman MD (lease expiration in March 2038)
and Lifespan Pilates LLC (lease expiration in April 2032) occupying
more than 35.0% of the net rentable area (NRA). The remainder of
the rent roll is relatively granular, with no other tenant
occupying more than 6.0% of the NRA. In addition, lease rollover at
the property is moderate, with two leases, representing
approximately 11.0% of the NRA, scheduled to roll within the next
12 months. The January 2023 appraised value of $18.3 million, was
below the May 2022, and issuance appraised values of $22.1 million
and $26.0 million, respectively. In the analysis for this review,
Morningstar DBRS maintained a conservative approach and applied a
haircut to the most recent appraisal value, resulting in a loss
severity in excess of 50.0%.
The largest loan on the servicer's watchlist, Orlando Maitland
Office Portfolio (Prospectus ID#2; 10.7% of the pool), is secured
by four Class A office buildings totaling 588,678 sf in Maitland,
Florida, located eight miles north of Orlando's central business
district. The buildings, referred to as Summit Tower, Summit Park
I, Summit Park II, and Summit Park III, were constructed between
1992 and 2009. The two oldest buildings, Summit Park I and Summit
Park II, were renovated between 2009 and 2013. Electronic Arts
(EA), which formerly occupied 22.0% of the portfolio's NRA (128,240
sf) and 100% of the NRA at Summit Park I, exercised an early
termination option in November 2021, ahead of its October 2025
lease expiration date, after Orlando's city council approved an
agreement to move EA from its Maitland headquarters to Orlando's
Creative Village area in the downtown core. EA paid a termination
fee of $1.9 million and a cash flow sweep was initiated. In
addition, FedEx Corporate Services, Inc. (FedEx) (37,940 sf; 6.45%
of total NRA with a lease expiration in April 2024), who is
currently located at the Summit Tower property, failed to renew its
lease prior to the October 2023 deadline, which is also considered
a trigger event for the loan. Another tenant located at the Summit
Tower property, Staples Contract & Commercial LLC (Staples) 57,818
sf; 9.82% of total NRA) also has a near term lease expiration in
May 2024. These two tenants collectively represent 80.0% of the NRA
at that building, suggesting the current occupancy rate of nearly
100.0% could decrease drastically should those tenants fail to
renew their leases. Morningstar DBRS has reached out to the
servicer for leasing updates.
According to the September 2023 rent roll, the portfolio was 85.5%
occupied. The former EA space has been partially backfilled with
one tenant, ThreatLocker, Inc., which occupies 44,246 sf of space
at the Summit Park I building. The remaining three properties
reported occupancy rates nearing 100.0%. Despite the significant
tenant rollover risk at the Summit Tower property, a mitigating
factor is the loan structure as the borrower is no longer entitled
to any disbursement of excess cash reserve funds during the
remaining term of the loan considering two trigger events have
occurred. In addition, the borrower is obligated to pay excess cash
to lender on each payment date until the outstanding debt is paid
in full. Tenancy across the portfolio is concentrated, with less
than 10 tenants constituting the tenant base and the top three
tenants making up approximately 77.0% of the total NRA. Based on
the financial reporting for the trailing-nine-month period ended
September 30, 2023, the annualized NCF was $8.2 million, a
considerable improvement from the YE2022 figure of $5.1 million and
relatively in line with the YE2021 figure of $8.1 million. However,
if FedEx and Staples do not renew their respective leases,
Morningstar DBRS estimates the loan's DSCR could fall below
breakeven.
According to Reis, Class A office properties in the Maitland
submarket reported a YE2023 vacancy rate of 18.7%, slightly above
the YE2022 figure of 16.7%. As of the April 2024 loan-level reserve
report, $5.3 million is currently held across all reserves
including $1.3 million in replacement reserves and $3.6 million in
leasing reserves. Given the portfolio's recent volatility in
occupancy and cash flow, coupled with soft submarket conditions,
Morningstar DBRS estimates the collateral's as-is value has likely
declined from issuance, thereby elevating the refinance risk.
Morningstar DBRS analyzed the loan with an elevated POD penalty and
stressed LTV ratio, resulting in an expected loss that was almost
triple the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2018-SUN: DBRS Confirms B Rating on Class G Certs
----------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2018-SUN issued by Morgan Stanley
Capital I Trust 2018-SUN as follows:
-- Class A at AAA (sf)
-- Class X-EXT at AAA (sf)
-- Class B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (sf)
-- Class H at B (low) (sf)
In addition, Morningstar DBRS changed the trends on Classes E, F,
G, and H to Negative from Stable. All other classes have Stable
trends.
The floating-rate interest-only (IO) loan is secured by the
fee-simple interest in two luxury beachfront hotels totaling 327
keys in Santa Monica, California. The Negative trends reflect an
update to the Morningstar DBRS value, which has declined to $291.5
million as of the most recent analysis from the previous
Morningstar DBRS value of $336.4 million derived in 2020.
Morningstar DBRS¿ resulting loan-to-value ratio (LTV) increased to
122.4% from 106.0%, driven by performance declines evidenced by a
significant decrease in net cash flow (NCF) as a result of declines
in occupancy and revenue per available room (RevPAR) for the
trailing 12-month (T-12) period ended September 2023. Morningstar
DBRS notes the superior quality of both properties, their location
on irreplaceable beachfront parcels, cash reserves, and historical
sponsor commitment as mitigating factors that contributed to the
confirmation of the credit ratings.
The Shutters on the Beach (Shutters) hotel consists of 198 guest
rooms, three food and beverage locations, a spa, and approximately
8,600 square feet (sf) of meeting space. The Casa del Mar hotel
consists of 129 guest rooms, one restaurant and bar/lounge, a spa,
and roughly 11,000 sf of meeting space. The properties are the only
hotels directly on the beach in the Santa Monica market. Both
hotels are recognized as premier luxury hotels in Southern
California, and their respective restaurants derive considerable
income from nonhotel guests.
According to the most recent STR reports provided, both properties
continue to outperform their competitive sets. However,
year-over-year performance for competing properties has improved
across all metrics, whereas the year-over-year occupancy and RevPAR
for the subject properties has declined. This resulted in combined
reported room revenue for YE2023 declining by 6.4% from the YE2022
figure. Insurance costs have also increased, further stressing
operating income. Based on the YE2023 financials, the loan reported
an NCF of $23.0 million, down from the YE2022 NCF of $27.7 million
and the previous Morningstar DBRS NCF of $26.1 million. In
addition, the debt service coverage ratio (DSCR) declined to 0.7
times (x), down from 1.63x in YE2022 as a result of rising interest
rates, which resulted in a 193.7% increase in debt service
obligations between YE2022 and YE2023. The loan is structured with
a cash flow sweep in the event the debt yield falls below 6.25% at
any time during the third extension and onward. Based on the most
recent financials, the YE2023 debt yield on the trust debt was
5.36%. Given the current DSCR, there is likely no excess cash being
swept at this time. According to the servicer, the cash management
account balance is currently $8.1 million, with an additional $5.3
million in repair and other reserves.
The loan was previously in special servicing in April 2020
following the sponsor's request for a forbearance; ultimately, a
modification was approved in December 2020 that required the
borrower to bring all delinquent debt service and reserve deposits
current. In addition, the sponsors contributed $3.5 million in cash
to satisfy all legal fees and ancillary costs incurred by the
special servicer. In consideration for the borrower's commitment,
the special servicer agreed to accept a cure of loan defaults and
conditionally waive the pursuit of accrued default interest given
no future default occurs over the remainder of the loan term. The
loan was transferred back to the master servicer in April 2021.
The loan is scheduled to mature in July 2024 but has a final
one-year extension option remaining with a fully extended maturity
in July 2025. The extension is subject to the purchase of an
interest rate cap agreement. According to the servicer, the
borrower has notified of its intention to exercise the final
extension option. As noted above, Morningstar DBRS¿ credit rating
actions reflect concern with increased refinance risk given the
declining performance of the subject and its weakened competitive
position within the submarket as the loan nears maturity.
With this review, Morningstar DBRS derived an NCF of $22.6 million
based on a haircut to the YE2023 NCF. Using a capitalization rate
of 7.75%, the resulting Morningstar DBRS value of $291.5 million
represents a 13.4% deterioration from the previous value of $336.4
million. In its analysis, Morningstar DBRS maintained qualitative
adjustments totaling 8.0%, giving credit to the properties¿
historical popularity with tourists and corporate guests, high
property quality, and the significant barrier to entry for
beachfront hotels in the submarket.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2019-L2: Fitch Lowers Rating on G-RR Certs to CCCsf
------------------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed 13 classes of
Morgan Stanley Capital I Trust 2019-L2 commercial mortgage
pass-through certificates, series 2019-L2 (MSC 2019-L2).
Fitch has affirmed 17 classes of Morgan Stanley Capital I Trust
2019-H6 commercial mortgage pass-through certificates (MSC
2019-H6).
The Rating Outlooks on classes E, F-RR and X-D in MSC 2019-L2 have
been revised to Negative from Stable. The Outlooks on classes G-RR,
H-RR and J-RR in MSC 2019-H6 have been revised to Negative from
Stable.
Entity/Debt Rating Prior
----------- ------ -----
MSC 2019-L2
A-2 61768HAT3 LT AAAsf Affirmed AAAsf
A-3 61768HAV8 LT AAAsf Affirmed AAAsf
A-4 61768HAW6 LT AAAsf Affirmed AAAsf
A-S 61768HAZ9 LT AAAsf Affirmed AAAsf
A-SB 61768HAU0 LT AAAsf Affirmed AAAsf
B 61768HBA3 LT AA-sf Affirmed AA-sf
C 61768HBB1 LT A-sf Affirmed A-sf
D 61768HAC0 LT BBBsf Affirmed BBBsf
E 61768HAE6 LT BBB-sf Affirmed BBB-sf
F-RR 61768HAG1 LT Bsf Affirmed Bsf
G-RR 61768HAJ5 LT CCCsf Downgrade B-sf
X-A 61768HAX4 LT AAAsf Affirmed AAAsf
X-B 61768HAY2 LT AA-sf Affirmed AA-sf
X-D 61768HAA4 LT BBB-sf Affirmed BBB-sf
MSC 2019-H6
A-1 61769JAW1 LT AAAsf Affirmed AAAsf
A-2 61769JAX9 LT AAAsf Affirmed AAAsf
A-3 61769JAZ4 LT AAAsf Affirmed AAAsf
A-4 61769JBA8 LT AAAsf Affirmed AAAsf
A-S 61769JBD2 LT AAAsf Affirmed AAAsf
A-SB 61769JAY7 LT AAAsf Affirmed AAAsf
B 61769JBE0 LT AAsf Affirmed AAsf
C 61769JBF7 LT Asf Affirmed Asf
D 61769JAC5 LT BBB+sf Affirmed BBB+sf
E-RR 61769JAE1 LT BBBsf Affirmed BBBsf
F-RR 61769JAG6 LT BBB-sf Affirmed BBB-sf
G-RR 61769JAJ0 LT BB+sf Affirmed BB+sf
H-RR 61769JAL5 LT BB-sf Affirmed BB-sf
J-RR 61769JAN1 LT B-sf Affirmed B-sf
X-A 61769JBB6 LT AAAsf Affirmed AAAsf
X-B 61769JBC4 LT Asf Affirmed Asf
X-D 61769JAA9 LT BBB+sf Affirmed BBB+sf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' rating case
losses are 5.1% for MSC 2019-L2 and 4.0% for MSC 2019-H6. There are
seven Fitch Loans of Concern (FLOCs; 16% of the pool) in MSC
2019-L2, including four specially serviced loans (13.6%), and six
FLOCs (10.1%) in MSC 2019-H6, including three specially serviced
loans (6.4%).
The downgrade to class G-RR in MSC 2019-L2 reflects the increase in
pool loss expectations since the last rating action, driven by
continued performance deterioration and lower updated appraisal
valuations of several FLOCs, including the State of Kentucky
Portfolio (2.4%), Shingle Creek Crossing (2.5%), and 170 Mercer
(0.5%). The Negative Outlooks in MSC 2019-L2 reflects the high
office concentration comprising 42.5% of the pool and declining
performance trends and refinanceability concerns on the office
collateral. The Twin Oaks loan (1.9%), secured by a 170,250-sf
suburban office property located in Norfolk, VA, was scheduled to
mature in April 2024. Fitch increased its probability of default
assumption due to declining property occupancy since issuance (74%
at YE 2023) and uncertainty surrounding the loan's ability to
refinance.
The affirmations of all classes in MSC 2019-H6 reflect the
relatively stable pool performance and loss expectations since the
last rating action. The Negative Outlooks in MSC 2019-H6 reflect
possible downgrades with further performance deterioration on the
FLOCs, primarily Columbia Corporate Center (3.1%), AC by Marriott
San Jose (2.3%) and 65 Broadway (2.3%).
Fitch Loans of Concern; Largest Loss Contributors: The largest
contributor to overall pool loss expectations and the largest
increase in loss since the prior rating action in MSC 2019-L2 is
the State of Kentucky Portfolio loan, secured by a portfolio of
five office properties totaling 379,135-sf in Frankfort, KY. The
loan transferred to special servicing in August 2022 due to cash
flow issues stemming from underperformance. A receiver has been
appointed and the special servicer is in the process of taking
title. Fitch's 'Bsf' rating case loss of 55.3% (prior to
concentration add-ons) is based on a stress to the November 2023
appraisal.
The second largest increase in loss since the prior rating action
in MSC 2019-L2, Shingle Creek Crossing, is secured by a 173,107-sf
retail center located in Brooklyn Center, MN. The non-collateral,
shadow anchor Walmart terminated its lease in April 2023. According
to servicer updates, no tenants have exercised their co-tenancy
clause lease termination option. Occupancy was 90% per the
September 2023 rent roll. Upcoming rollover at the property
includes 1.8% of the NRA in 2024, 27.2% in 2025 and 2.1% in 2026.
Fitch's 'Bsf' rating case loss of 12.2% (prior to concentration
add-ons) reflects a 10.5% cap rate and 15% stress to the TTM
September 2023 NOI to reflect rollover concerns and secondary
location.
The third largest increase in loss since the prior rating action in
MSC 2019-L2, 170 Mercer, is secured by a 2,013-sf retail property
located in New York, NY. The loan transferred to special servicing
in May 2022 and the asset became REO in November 2022. According to
servicer updates, the special servicer is negotiating a long-term
lease; if the lease is executed, the asset will be taken to market
for sale. Fitch's 'Bsf' rating case loss of approximately 94%
(prior to concentration add-ons) is based on a stress to the August
2023 appraisal.
The largest increase in loss since the prior rating action in MSC
2019-H6 is the Columbia Corporate Center loan (3.1%), which is
secured by a 159,058-sf suburban office property located in Florham
Park, NJ. The loan transferred to special servicing in August 2023
due to monetary default. According to servicer updates, a large
vacancy is anticipated in the second quarter 2024, which would
result in an occupancy drop to approximately 50%. Fitch's 'Bsf'
rating case loss of 30.4% (prior to concentration add-ons) is based
on a 10% cap rate, a 20% stress to the YE 2022 NOI and an increased
probability of default.
The next largest increase in loss since the prior rating action in
MSC 2019-H6, AC by Marriott San Jose, is secured by a 210-room
select-service hotel located in San Jose, CA. This FLOC was flagged
due to low DSCR. Property performance has struggled to rebound from
the pandemic. While performance has slightly improved since the
prior rating action, DSCR remains low; the TTM September 2023 NOI
DSCR was 1.04x, compared with 0.83x at YE 2022 and -0.19x at YE
2021. Occupancy was 63% as of September 2023, compared with 61% at
YE 2022 and well above 39% at YE 2021. Fitch's 'Bsf' rating case
loss of 22.5% (prior to concentration add-ons) is based on an
11.25% cap rate and the TTM September 2023 NOI.
The third largest increase in loss expectations since the prior
rating action in MSC 2019-H6 is the 65 Broadway loan, which is
secured by a 355,217-sf office property located in New York, NY.
The building has been renovated multiple times, is LEED-certified
and qualifies for the Lower Manhattan Energy Program. The loan
transferred to special servicing in February 2024 due to imminent
default. The loan was not repaid at its scheduled maturity in April
2024. Occupancy has continued to decline, with March 2024 occupancy
reported at 66%, compared with 67% at YE 2023 and 75% at YE 2022.
Upcoming rollover includes 3.2% of the NRA in 2024, 13.5% in 2025
and 7.2% in 2026. Fitch's 'Bsf' rating case loss of 17.8% (prior to
concentration add-ons) is based on a 9.25% cap rate, 10% stress to
the TTM September 2023 NOI and a 100% probability of default due to
the specially serviced loan status and maturity default.
Minimal Changes to Credit Enhancement (CE): As of the March 2024
distribution date, the aggregate balances of the MSC 2019-L2 and
MSC 2019-H6 have been paid down by 2.3% and 2.6%, respectively. The
MSC 2019-L2 transaction includes four loans (9.1%) that have fully
defeased and MSC 2019-H6 has five loans (3.4%) that have fully
defeased. Cumulative interest shortfalls of $1.4 million are
affecting the non-rated class H-RR in MSC 2019-L2 and $283 thousand
are affecting the non-rated K-RR class in MSC 2019-H6.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs and/or more loans than expected
experience performance deterioration and/or default at or prior to
maturity.
Downgrades to the 'BBBsf' category is possible with higher than
expected losses from continued underperformance of the FLOCs, in
particular retail and office loans with deteriorating performance,
and/or with greater certainty of losses on the specially serviced
loans and/or FLOCs. These elevated risk loans include State of
Kentucky Portfolio, Shingle Creek Crossing, 170 Mercer and 199
Lafayette Street in MSC 2019-L2, and Columbia Corporate Center, AC
by Marriott San Jose, 65 Broadway and 9201 West Sunset Boulevard in
MSC 2019-H6.
Downgrades to the 'BBsf' and 'Bsf' categories would occur with
greater certainty of losses on the specially serviced loans or
FLOCs, should additional loans transfer to special servicing or
default and as losses are realized or become more certain.
Downgrades to distressed 'CCCsf' ratings would occur 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 'AAsf' and 'Asf' category may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance on the FLOCs, including State
of Kentucky Portfolio, Shingle Creek Crossing and 170 Mercer Street
in MSC 2019-L2, and Columbia Corporate Center, AC by Marriott San
Jose and 65 Broadway in MSC 2019-H6.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'AA+sf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable, recoveries on the FLOCs and
special serviced loans are better than expected and there is
sufficient CE to the classes.
Upgrades to distressed ratings of 'CCCsf' is not expected but
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.
MORGAN STANLEY 2024-2: Fitch Assigns 'B-sf' Rating on Cl. B-5 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Morgan Stanley
Residential Mortgage Loan Trust 2024-2 (MSRM 2024-2).
Entity/Debt Rating Prior
----------- ------ -----
MSRM 2024-2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1-IO LT AAAsf New Rating AAA(EXP)sf
A-X-IO1 LT AA+sf New Rating AA+(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-2-IO LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-IO LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-IO LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-IO LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-IO LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-IO LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-IO LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-IO LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-10-IO LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-11-IO LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-12-IO LT AAAsf New Rating AAA(EXP)sf
A-13 LT AA+sf New Rating AA+(EXP)sf
A-13-IO LT AA+sf New Rating AA+(EXP)sf
A-14 LT AA+sf New Rating AA+(EXP)sf
A-14-IO LT AA+sf New Rating AA+(EXP)sf
A-15 LT AA+sf New Rating AA+(EXP)sf
A-15-IO LT AA+sf New Rating AA+(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-3-A LT BBB-sf New Rating BBB-(EXP)sf
B-3-X LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT B-sf New Rating B-(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
MSRM 2024-2 is the 19th post-crisis transaction off the Morgan
Stanley Residential Mortgage Loan Trust (MSRM) shelf and includes
their most recent transaction that closed in April 2024 (MSRM
2024-INV2). The first MSRM transaction was issued in 2014. This is
also the 17th MSRM transaction to comprise loans from various
sellers that were acquired by Morgan Stanley in its prime-jumbo
aggregation process and their fourth prime transaction in 2024.
The certificates are supported by 363 prime-quality loans with a
total balance of approximately $328.72 million as of the cut-off
date. The pool consists of 100% fixed-rate mortgages (FRMs) from
various mortgage originators. The largest originators are Rocket
Mortgage at 17.5% and Guaranteed Rate at 13.2%, with all other
originators making up less than 10% of the overall pool.
The servicers for this transaction are Shellpoint servicing 82.0%
of the loans, Specialized Loan Servicing, LLC (SLS) servicing 16.8%
of the loans, and PennyMac (which includes PennyMac Corp. and
PennyMac Loan Services) servicing 1.2% of the loans. Nationstar
Mortgage LLC (Nationstar) will be the master servicer.
Of the loans, 99.9% qualify as Safe Harbor qualified mortgage
(SHQM) average prime offer rate (APOR) loans. The remaining 0.1%
are higher-priced QM (HPQM) APOR loans.
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).
As with other prime transactions, this transaction utilizes a
senior-subordinate, shifting-interest structure with subordination
floors to protect against tail risk.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 9.9% above a long-term sustainable level (vs. 11.1%
on a national level as of 4Q23, down 0% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices. Home prices have
increased 5.5% YoY nationally as of February 2024 despite modest
regional declines, but are still being supported by limited
inventory.
High Quality Prime Mortgage Pool (Positive): The collateral
consists of 100% first-lien, prime-quality mortgage loans with
terms of mainly 30 years. More specifically, the collateral
consists of 15- or 30-year, fixed-rate fully amortizing loans
seasoned at approximately 6.0 months in aggregate as determined by
Fitch (four months per the transaction documents). Of the loans,
65.9% were originated through the sellers' retail channels. The
borrowers in this pool have strong credit profiles with a 769 WA
FICO according to Fitch's analysis (FICO scores range from 663 to
818) and represent either owner-occupied homes or second homes.
Of the pool, 90.9% of loans are collateralized by single-family
homes, including single-family, planned unit development (PUD) and
single-family attached homes, while condominiums make up the
remaining 9.0% and multifamily homes make up 0.2%. There are no
investor loans in the pool, which Fitch views favorably.
The WA combined loan-to-value ratio (CLTV) is 73.9%, which
translates into an 81.0% sustainable LTV (sLTV) as determined by
Fitch. The 73.9% CLTV is driven by the large percentage of purchase
loans (92.0%), which have a WA CLTV of 74.8%.
A total of 157 loans are over $1.0 million, and the largest loan
totals $3.0 million. Fitch considered 100% of the loans in the pool
to be fully documented loans.
Eighteen loans in the collateral pool for this transaction have an
interest rate buydown feature. Fitch increased its loss
expectations on these loans to address the potential payment shock
that the borrower may face.
Lastly, eight loans in the pool comprise nonpermanent residents,
and none of the loans in the pool were made to foreign nationals.
Based on historical performance, Fitch found that nonpermanent
residents performed in line with U.S. citizens; as a result, this
loan did not receive additional adjustments in the loss analysis.
Approximately 38% of the pool is concentrated in California with
moderate MSA concentration for the pool as a whole. The largest MSA
concentration is in the Los Angeles MSA (12.2%), followed by the
San Diego MSA (6.8%) and the San Francisco MSA (6.5%). The top
three MSAs account for 25.5% of the pool. There was no adjustment
for geographic concentration.
Loan Count Concentration (Negative): The loan count for this pool
(363 loans) results in a loan count concentration penalty. The loan
count concentration penalty applies when the WA number (WAN) of
loans is less than 300; in this pool, the WAN is 280. The loan
count concentration for this pool results in a 1.03x penalty, which
increases loss expectations by 26 basis points (bps) at the 'AAAsf'
rating category.
Shifting-Interest Structure and 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 servicers will provide full advancing for the life of the
transaction. Although full principal and interest (P&I) advancing
will provide liquidity to the certificates, it will also increase
the loan-level loss severity (LS) since the servicers look to
recoup P&I advances from liquidation proceeds, which results in
less recoveries.
Nationstar is the master servicer and will advance if the servicers
are unable to. If the master servicer is not able to advance, then
the securities administrator (Citibank, N.A.) will advance.
Credit Enhancement Floor (Positive): A CE or senior subordination
floor of 2.15% has been considered to mitigate potential tail-end
risk and loss exposure for senior tranches as the pool size
declines and performance volatility increases due to adverse loan
selection and small loan count concentration. Additionally, a
junior subordination floor of 1.30% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses were conducted at
the state and national levels to assess the effect of higher MVDs
for the subject pool as well as lower MVDs, illustrated by a gain
in home prices.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20% and 30%, in addition to the model
projected MVD, which is 41.5% in the 'AAAsf' stress. The analysis
indicates that there is some potential rating migration with higher
MVDs, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modelling process uses the modification
of these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC and Consolidated Analytics. The third-party
due diligence described in Form 15E focused on four areas:
compliance review, credit review, valuation review and data
integrity. Fitch considered this information in its analysis and,
as a result, Fitch did not make any adjustments to its analysis
based on the findings. Due to the fact that there was 100% due
diligence provided and there were no material findings, Fitch
reduced the 'AAAsf' expected loss by 0.34%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC and Consolidated Analytics were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades, and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for more detail.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
MORGAN STANLEY 2024-INV2: Fitch Assigns B-sf Rating on B-5 Certs
----------------------------------------------------------------
Fitch Ratings has assigned final ratings to Morgan Stanley
Residential Mortgage Loan Trust 2024-INV2 (MSRM 2024-INV2).
Entity/Debt Rating Prior
----------- ------ -----
MSRM 2024-INV2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1-IO LT AAAsf New Rating AAA(EXP)sf
A-X-IO1 LT AA+sf New Rating AA+(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-2-IO LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-IO LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-IO LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-IO LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-IO LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-IO LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-IO LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-IO LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-10-IO LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-11-IO LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-12-IO LT AAAsf New Rating AAA(EXP)sf
A-13 LT AA+sf New Rating AA+(EXP)sf
A-13-IO LT AA+sf New Rating AA+(EXP)sf
A-14 LT AA+sf New Rating AA+(EXP)sf
A-14-IO LT AA+sf New Rating AA+(EXP)sf
A-15 LT AA+sf New Rating AA+(EXP)sf
A-15-IO LT AA+sf New Rating AA+(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT B-sf New Rating B-(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
PT LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
MSRM 2024-INV2 is the 18th post-financial crisis transaction off
the Morgan Stanley Residential Mortgage Loan Trust shelf; the first
transaction was issued in 2014. This is the fourth 100%
non-owner-occupied MSRM transaction and the 16th MSRM transaction
that comprises loans from various sellers and is acquired by Morgan
Stanley in its prime-jumbo and agency investor aggregation
process.
The certificates are supported by 899 prime-quality loans with a
total balance of approximately $306.85 million as of the cut-off
date. The pool consists of 100% fixed-rate mortgages (FRMs) from
various mortgage originators. The servicers for this transaction
are Newrez LLC/Shellpoint Mortgage (RPS2), PennyMac Loan Services,
LLC, PennyMac Corp (RPS3+), and Specialized Loan Servicing, LLC
(SLS) (RPS2+). Nationstar Mortgage LLC (Nationstar (RMS2+)) will be
the master servicer. Of the loans, 2.5% qualify as Safe Harbor QM
Average Prime Offer Rate (APOR). The remaining 97.5% of loans are
exempt from the QM rule.
There is no exposure to Libor in this transaction. The collateral
comprises 100% fixed-rate loans, and the certificates are fixed
rate and capped at the net weighted average coupon (WAC).
Like other prime transactions, this transaction utilizes a
senior-subordinate, shifting-interest structure with subordination
floors to protect against tail risk.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 12.0% above a long-term sustainable level (vs.
11.1% on a national level as of 4Q23, down 0% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices. Home prices have
increased 5.5% YoY nationally as of February 2024 despite modest
regional declines, but are still being supported by limited
inventory.
Prime Credit Quality (Positive): The collateral consists of 899
loans totaling $306.85 million and seasoned at approximately seven
months in aggregate. The borrowers have a strong credit profile,
with a 764 FICO and a 37.0% debt-to-income ratio (DTI), coupled
with high leverage, as reflected by an 81.4% sustainable
loan-to-value ratio (sLTV).
Fitch viewed the pool as having 1.1% nonconforming loans while the
remaining 98.9% are agency conforming loans (per the transaction
documents, 98.9% are agency conforming loans and 1.1% are
nonconforming). The majority of the loans (97.5%) are exempt from
QM rule standards, as they are loans on investor occupied homes
that serve business purposes. The remaining 2.5% qualify as Safe
Harbor (APOR) loans. Roughly 32.3% of the pool is originated by a
retail channel.
The pool consists of 100% investor properties. Single-family homes
make up 67.6% of the pool, condos make up 10.2% and multifamily
homes make up 22.2%. Cashouts comprise only 9.6% of the pool while
purchases comprise 86.3%, and rate refinances comprise 4.1% (as
determined by Fitch). Based on the information provided, there are
no foreign nationals in the pool. Three loans in the pool are over
$1.0 million, and the largest loan is $1.49 million.
Approximately 20.5% of the pool is concentrated in California. The
largest MSA concentration is in the New York-Northern New
Jersey-Long Island, NY-NJ-PA MSA (6.6%), followed by the Los
Angeles-Long Beach-Santa Ana, CA MSA (4.1%) and the Dallas-Fort
Worth-Arlington, TX MSA (3.4%). The top three MSAs account for 14%
of the pool. As a result, there was no probability of default (PD)
penalty for geographic concentration.
Non-Owner-Occupied Loans (Negative): Of the pool, 100% of loans
were made to investors and 98.9% are conforming loans, which were
underwritten to Fannie Mae and Freddie Mac guidelines and approved
per Desktop Underwriter (DU) or Loan Product Advisor (LPA), the
automated underwriting systems for Fannie Mae and Freddie Mac,
respectively. The remaining 1.1% of loans were underwritten to the
underlying sellers' guidelines and were full documentation loans.
All loans were underwritten to the borrower's credit risk; this
differs from investor cash flow loans, which are underwritten to
the property's income. Fitch applies a 1.25x PD penalty for agency
investor loans and a 1.60x PD penalty for investor loans
underwritten to the borrower's credit risk.
For the loss analysis of this pool, Fitch used a customized version
of the U.S. RMBS Loan Loss model that has a 1.25x PD penalty for
agency investor loans and a 1.60x PD penalty for investor loans
underwritten to the borrower's credit risk. The 1.25x PD penalty
was used only for agency eligible loans (98.9%), with the remaining
loans receiving a 1.60x PD penalty for being investor occupied.
Post-crisis performance indicates that loans underwritten to DU/LPA
guidelines have relatively lower default rates compared to normal
investor loans used in regression data with all other attributes
controlled. The implied penalty has been reduced to approximately
25% for agency investor loans in the customized model, down from
approximately 60% for regular investor loans in the production
model.
Multifamily Loans (Negative): Of the pool, 22.2% of loans are for
multifamily homes. Fitch views these as riskier than single-family
homes since the borrower may be relying upon rental income to fund
mortgage payment on the property. To account for this risk, Fitch
adjusts the PD upward by 25% from the baseline for multifamily
homes.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. This lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the
transaction.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained. Due to the
leakage to the subordinate bonds, the shifting-interest structure
requires more CE.
The servicers will provide full advancing (until deemed
non-recoverable) for the life of the transaction. While this helps
the liquidity of the structure, it also increases the expected loss
due to unpaid servicer advances. If the servicers are unable to
advance, the master servicer will provide advancing. If the master
servicer is unable to advance, the securities administrator will
ultimately be responsible for advancing.
Subordination Floor (Positive): A CE or senior subordination floor
of 1.70% has been considered to mitigate potential tail end risk
and loss exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 1.20% has been considered to mitigate
potential tail end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses were conducted at
the state and national levels to assess the effect of higher MVDs
for the subject pool as well as lower MVDs, illustrated by a gain
in home prices.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20% and 30%, in addition to the model
projected MVD, which is 42.8% in the 'AAAsf' stress. The analysis
indicates that there is some potential rating migration with higher
MVDs, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modelling process uses the modification
of these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC and Consolidated Analytics. The third-party
due diligence described in Form 15E focused on four areas:
compliance review, credit review, valuation review and data
integrity. Fitch considered this information in its analysis and,
as a result, Fitch did not make any adjustments to its analysis
based on the findings. Due to the fact that there was 100% due
diligence provided and there were no material findings, Fitch
reduced the 'AAAsf' expected loss by 0.62%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC and Consolidated Analytics were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades, and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for more detail.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
NASSAU 2019: Fitch Affirms BB-sf Rating on Cl. B Notes, Outlook Neg
-------------------------------------------------------------------
Fitch Ratings has taken the following rating actions on Nassau 2019
CFO LLC (Nassau 2019):
- $20.0 million undrawn liquidity facility affirmed at 'A+sf';
Outlook Stable;
- $88.8 million class A notes affirmed at 'BBBsf'; Outlook Stable;
- $43.3 million class B notes affirmed at 'BB-sf'; Outlook
Negative.
Nassau 2019 is a private equity collateralized fund obligation (PE
CFO) managed by Nassau Alternative Investments (NAI). The manager
is an affiliate of Nassau Financial Group. Nassau 2019 owns
interests in a diversified pool of alternative investment funds
(buyout, mezzanine, debt and venture). The issuance consists of
notes backed by the ownership interests in, and cash flows
generated by, the funds.
The underlying assets consisted of approximately $178 million of
net asset value (NAV) of funded commitments and $51 million of
unfunded capital commitments across 107 funds as of the Jan. 31,
2024 distribution report. The NAV as of Jan. 31, 2024 was based on
valuations of the underlying private equity funds as of Sept. 30,
2023, and adjusted for subsequent capital calls and distributions.
Entity/Debt Rating Prior
----------- ------ -----
Nassau 2019 CFO LLC
Class A 63172DAA9 LT BBBsf Affirmed BBBsf
Class B 63172DAB7 LT BB-sf Affirmed BB-sf
Liquidity Loans LT A+sf Affirmed A+sf
TRANSACTION SUMMARY
TRANSACTION PERFORMANCE
Nassau 2019's underlying fund investments performed well from 1Q21
to 1Q22 and better than stress scenarios run by Fitch during this
same time period. However, more recent performance has been weaker
due to the market environment and the portfolio's exposures. Nassau
2019 received distributions of $463 million and capital calls of
$61 million since inception, as of Jan. 31, 2024.
Nassau 2019 has had sufficient cash distributions to cover
expenses, interest payments for the class A notes, and capital
calls thus far. Additionally, there have been no draws on the
transaction's liquidity facility.
COUNTERPARTY REPLACEMENT
Certain structural features of the transaction involve reliance on
counterparties, such as the liquidity loan facility provider and
bank account providers, and the rating on the notes could be
negatively affected in the event of a counterparty downgrade. Fitch
believes this risk is mitigated by minimum counterparty rating
requirements counterparty replacement provisions in the transaction
documents that align with Fitch's criteria.
KEY RATING DRIVERS
The rating affirmation of the undrawn liquidity facility reflects
its senior position in the capital structure and low loan to value
(LTV) of approximately 11%, if fully drawn. The Stable Outlook for
the undrawn liquidity facility reflects Fitch's expectation that
the facility, if drawn, can withstand Fitch's stress scenarios at
the current rating category.
The affirmation of the class A notes at 'BBBsf' reflects the notes
ability to withstand Fitch's stress scenarios at the 'BBBsf' rating
level. The stable Outlook for the class A notes reflects that at
the current LTV level of 50%, the class A notes could withstand a
17% decline in NAV before breaching Fitch's relevant stress
scenarios at the 'BBBsf' rating level. The affirmation of the class
B Notes at 'BB-sf' reflects a marginal shortfall under one of
Fitch's stress scenarios at the 'BBsf' rating level. The Negative
Outlook on the class B notes reflects greater vulnerability to
ongoing weakness in distributions and market volatility at the
'BB-sf' rating level. The class B notes had an LTV ratio of
approximately 74% of NAV as of Jan. 31, 2024.
Fitch expects weak or negative NAV growth, driven by the
transaction's exposure to fund investments focused on the buyout
and venture capital sectors, which have been particularly impacted
by the weaker exit environment. Nassau 2019's underlying fund
valuations declined in five of the last seven quarters but are
showing signs of stabilization having appreciated in two of the
last three quarters. Absent an increase in distributions, which is
contingent on an improving exit environment for underlying
investments, Fitch expects that the class A and B notes'
loan-to-value (LTV) ratios will sustain at or above 50% and 70%,
respectively, for a prolonged period of time. The transaction's
liquidity will also be constrained while distributions remain low,
with the primary sources of liquidity to meet uncalled capital
commitments, service debt and cover expenses being the liquidity
facility and distributions from the underlying funds.
Key structural protections include amortization triggers tied to
LTV levels, a liquidity facility to cover class A interest,
expenses, and capital calls in the event of liquidity gaps, and
long final maturities on the bonds to allow the structure
additional time to potentially weather down markets.
In the 12 months through Jan. 31, 2024, the transaction's liquidity
needs included approximately $4.6 million in capital calls, $1.3
million in expenses, and $7.6 million in class A and class B note
interest, totaling $13.5 million. Over the same period liquidity
sources included $20 million of capacity available on the liquidity
facility, and $36 million of cash from distributions. Based on
these figures, Fitch calculates the transaction's liquidity
coverage ratio for a period of 12 months to be 4.2x. An additional
source of potential liquidity is Nassau 2019's right to require
Nassau's affiliates to contribute capital to the issuer to satisfy
capital calls if there is a cash shortfall. However, Fitch did not
consider this potential capital contribution in its analysis, as
Fitch does not have a formal credit view on Nassau, or its parent
NAI. A capital contribution by the sponsor would be viewed as
supportive of the transaction.
Fitch believes the manager (NAI) has sufficient capabilities and
resources required to manage this transaction. NAI's management
team has extensive experience, although it is comparably smaller
than the managers of other Fitch-rated PE CFOs.
The sponsor and noteholders' interests are aligned, as the sponsor
and its affiliates hold the equity stake and a portion of the class
B notes in Nassau 2019.
Fitch has a rating cap at the 'Asf' category for PE CFO
transactions, primarily driven by the uncertain nature of
alternative investment fund cash flows.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The class A note rating could be downgraded to 'BBB-sf' if the
LTV cushion relative to Fitch's stress scenario results at the
'BBBsf' category level sustain at low single digits for more than a
temporary period. The class A notes could be downgraded to 'BBsf'
category if Fitch's 'BBBsf' category stress scenario results are
breached for more than a temporary period, or if liquidity
deteriorates materially.
- The class B note rating could be downgraded to 'Bsf' category if
Fitch's 'BBsf' category stress scenario is breached in multiple
launch year scenarios for more than a temporary period, or if
liquidity deteriorates materially.
- The liquidity facility could be downgraded if it is drawn and the
transaction's liquidity position is expected to deteriorate
materially. However, Fitch does not view this as likely in the
near-term given the low-LTV of the liquidity facility (if fully
drawn) and resiliency under Fitch's 'Asf' stress scenarios.
- The ratings assigned to the notes may be sensitive to actual cash
flows coming in lower than model projections, creating an increased
risk that the funds will not generate enough overall cash to repay
the noteholders, or pay for capital calls, expenses, and interest
on time.
- The ratings assigned to the notes may be also sensitive to
additional declines in NAV that in Fitch's view indicate
insufficient forthcoming cash distributions to support the notes at
the current rating level stress.
- The ratings assigned to the notes are also sensitive to the
financial health of the transaction's counterparties. A rating
downgrade of a counterparty may be linked to and materially affect
the ratings on the notes, given the reliance of the issuer on
counterparties to provide functions, including providers of the
liquidity facility and bank accounts.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The class A notes could be upgraded if they pass Fitch's 'Asf'
rating stresses with sufficient cushion to downside scenarios for
more than a temporary period.
- The class B notes could be upgraded to 'BBsf', or the Outlook
could be revised to Stable from Negative, if they pass Fitch's
'BBsf' rating stresses with sufficient cushion to downside
scenarios for more than a temporary period.
- Fitch has an 'A' category rating cap for PE CFOs. Therefore,
positive rating sensitivities are not applicable for the undrawn
liquidity facility.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
No third-party due diligence was provided or reviewed in relation
to this rating action.
DATA ADEQUACY
As the timing and size of the cash flows are uncertain, Fitch used
historical private equity fund performance data from a well-known
third-party data provider, which covers all performance quartiles
of the various fund strategies and vintages ranging from 1990 to
2023, to model expected distributions, capital calls and NAVs of
the underlying funds.
NEW RESIDENTIAL 2020-2: Moody's Ups Rating on 9 Tranches from Ba1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 46 bonds issued by New
Residential Mortgage Loan Trust 2020-2. The transaction is backed
by seasoned performing and modified re-performing residential
mortgage loans (RPL). The collateral has multiple servicers and
Nationstar Mortgage LLC is the master servicer.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: New Residential Mortgage Loan Trust 2020-2
Cl. A-3, Upgraded to Aaa (sf); previously on May 5, 2020 Definitive
Rating Assigned Aa1 (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. A-5, Upgraded to Aaa (sf); previously on May 5, 2020 Definitive
Rating Assigned Aa1 (sf)
Cl. A-6, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-1, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1A, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1B, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1C, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1D, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1E, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1F, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1G, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-1H, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa1 (sf)
Cl. B-2, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2A, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2B, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2C, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2D, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2E, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2F, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2G, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-2H, Upgraded to Aaa (sf); previously on Jun 28, 2023 Upgraded
to Aa3 (sf)
Cl. B-3, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3A, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3B, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3C, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3D, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3E, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3F, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3G, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-3H, Upgraded to Aa2 (sf); previously on Jun 28, 2023 Upgraded
to A3 (sf)
Cl. B-4, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4A, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4B, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4C, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4D, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4E, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4F, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4G, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-4H, Upgraded to A2 (sf); previously on Jun 28, 2023 Upgraded
to Ba1 (sf)
Cl. B-5, Upgraded to Baa2 (sf); previously on Jun 28, 2023 Upgraded
to B2 (sf)
Cl. B-5A, Upgraded to Baa2 (sf); previously on Jun 28, 2023
Upgraded to B2 (sf)
Cl. B-5B, Upgraded to Baa2 (sf); previously on Jun 28, 2023
Upgraded to B2 (sf)
Cl. B-5C, Upgraded to Baa2 (sf); previously on Jun 28, 2023
Upgraded to B2 (sf)
Cl. B-5D, Upgraded to Baa2 (sf); previously on Jun 28, 2023
Upgraded to B2 (sf)
Cl. B-7, Upgraded to Baa2 (sf); previously on Jun 28, 2023 Upgraded
to B1 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's 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 of 11% to 13%
for the bonds since Moody's last review. The loans underlying the
pool have fewer delinquencies and have prepaid at a faster rate
than originally anticipated, resulting in an improvement of
approximately 15% in Moody's loss projections for the pool since
Moody's last review (link above provides Moody's current
estimates).
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 the remaining rated classes in this deal
as those classes are already at the highest achievable levels
within Moody's rating scale.
Principal Methodologies
The methodologies used in these ratings were "Non-performing and
Re-performing Loan Securitizations" published in April 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
NEW RESIDENTIAL 2024-RPL1: Fitch Gives B(EXP) Rating on B-5 Notes
-----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed notes
to be issued by New Residential Mortgage Loan Trust 2024-RPL1
(NRMLT 2024-RPL1).
Entity/Debt Rating
----------- ------
NRMLT 2024-RPL1
A LT AAA(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
B-1 LT AA(EXP)sf Expected Rating
B-2 LT A(EXP)sf Expected Rating
B-3 LT BBB(EXP)sf Expected Rating
B-4 LT BB(EXP)sf Expected Rating
B-5 LT B(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The NRMLT 2024-RPL1 notes are supported by 1,212 seasoned
performing and re-performing loans as well as newly originated
guideline exception loans that have a balance of $225 million as of
the March 31, 2024 cutoff date.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11% above a long-term sustainable level (vs. 11.1%
on a national level as of 3Q23, up 1.68% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices. Home prices have
increased 5.5% YoY nationally as of December 2023 despite modest
regional declines, but are still being supported by limited
inventory.
RPL Credit Quality (Negative): The collateral consists of 1,021
seasoned performing and re-performing first and second lien loans,
totaling $165 million, and seasoned approximately 204 months in
aggregate. This portion of the pool is 73.2% current and 26.8% DQ.
Over the last two years 23.4% of loans have been clean current.
Additionally, 94.6% of loans have a prior modification. The
borrowers have a weak credit profile (653 FICO and 44% DTI) and low
leverage (56% sLTV). This portion of the pool consists of 95% of
loans where the borrower maintains a primary residence, while 5%
are investment properties or second home.
Scratch & Dent Collateral (Negative): The transaction includes a
separate cohort of collateral (although all issued as a single pool
backing the bonds) comprised of more recently originated agency
loans with various guidelines exceptions that prevented sale to the
end investor (typically Fannie or Freddie). This subset is
approximately 25% of the total collateral ($60.45 million) and is
made up of 191 loans and seasoned 33 months in the aggregate. 92.7%
of this portion is current although 36% has had a prior delinquency
in the past two years. These borrowers have a stronger credit
profile (716 FICO) but higher leverage (71.8 sLTV). The most common
exceptions were issues around income or employment documentation as
well as miscalculated DTIs.
No Advancing (Mixed): The deal is structured to no servicer
advances for delinquent principal and interest. The limited
advancing reduces loss severities as there is a lower amount repaid
to the servicer when a loan liquidates and liquidation proceeds are
prioritized to cover principal repayment over accrued but unpaid
interest. The downside to this is the additional stress on the
structure side as there is limited liquidity in the event of large
and extended delinquencies.
Sequential Pay Structure (Positive): The transaction utilizes a
sequential pay structure. The CE consists of subordinated notes,
the distributions of which will be subordinated to principal and
interest payments due to senior noteholders. In addition, excess
cash flow resulting from the difference between the interest earned
on the mortgage collateral and that paid on the notes may be
available to pay down additional principal on the notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 42.1% at 'AAA'. The
analysis indicates that there is some potential for rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by multiple third-party review firms. The third-party due
diligence described in Form 15E focused on a mix of credit,
compliance and property valuation reviews based upon the seasoning
of the loans. Fitch considered this information in its analysis
and, as a result, made the following adjustments to its analysis:
- Loans with a missing or indeterminate HUD-1 received a 5% loss
severity add on;
- Loans with high cost issues received a 200% loss severity;
- Loans with improper DTI calculations were run with a 55% DTI and
a 100% loss severity penalty.
ESG CONSIDERATIONS
NRMLT 2024-RPL1 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to due to the adjustment for the Rep
& Warranty framework without other operational mitigants, which has
a negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
NRPL TRUST 2024-RPL1: Fitch Assigns Bsf Rating on Class B2 Notes
----------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed notes issued by NRPL 2024-RPL1 Trust (NRPL
2024-RPL1).
Entity/Debt Rating
----------- ------
NRPL 2024-RPL1
A1 LT AAAsf New Rating
A2 LT AAsf New Rating
A3 LT Asf New Rating
M1 LT BBBsf New Rating
B1 LT BBsf New Rating
B2 LT Bsf New Rating
B3 LT NRsf New Rating
B4 LT NRsf New Rating
B LT NRsf New Rating
PT LT NRsf New Rating
R LT NRsf New Rating
SA LT NRsf New Rating
XS LT NRsf New Rating
TRANSACTION SUMMARY
The NRPL2024-RPL1 notes are supported by 988 loans with a balance
of $211.4 million (this includes $17.9 million of deferred
balances) as of the cutoff date. This will be the second NRPL
transaction rated by Fitch.
The notes are secured by a pool of seasoned re-performing and
performing, fixed-rate, adjustable-rate and step-rate, fully
amortizing and interest-only mortgage loans primarily secured by
first liens on one- to four-family residential properties, planned
unit developments, condominiums, townhouses, manufactured housing
and co-operatives. The majority of the loans in the pool have been
modified (86.3%), and 94.9% of the loans in the pool are current
with 5.1% of the loans in the pool being 30 days delinquent.
Shellpoint Mortgage Servicing LLC (Shellpoint) will service 100% of
the loans. Fitch rates Shellpoint 'RSS2'. Shellpoint has been the
servicer on prior Fitch-rated re-performing transactions. Fitch
believes that Shellpoint has the requisite controls and practices
in place to effectively servicer seasoned performing and
re-performing loans.
There is no Libor exposure in this transaction. The majority of the
loans in the collateral pool comprise fixed-rate mortgages, 4.19%
of the pool comprises adjustable-rate mortgages (ARMs) and 6.54%
are step-rate mortgages. The ARM and step-rate loans in the pool
reference: the one-year and five-year constant Maturity Treasury,
six-month and one-year Secured Overnight Financing Rate (SOFR), and
PRIME Rate.
The offered class A-1 notes do not have Libor exposure as the
coupons are fixed rate and capped at the net weighted average
coupon (WAC). The class A-2, A-3, M-1, B-1, B-2, B-3, and B-4 notes
have coupons based on the net WAC. The class B and PT notes are
exchangeable and will not have a note rate but are entitled on each
payment date to receive the interest payment amount and interest
carryforward amounts otherwise payable to the related initial
exchangeable notes for such payment date.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 9.5% above a long-term sustainable level (vs. 11.1%
on a national level as of 4Q23, down 0% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices. Home prices have
increased 5.5% YoY nationally as of February 2024 despite modest
regional declines, but are still being supported by limited
inventory.
Seasoned Performing and Reperforming Credit Quality (Negative): The
collateral consists of 988 seasoned performing and reperforming
first lien fixed-rate, adjustable-rate and step-rate, fully
amortizing, balloon and IO mortgages with maturities of up to 63
years totaling $211.4 million (including deferred balances). The
pool is seasoned at 196 months per the transaction documents and is
~86% modified.
The borrowers in this pool have moderate credit profiles with a
Fitch-determined WA FICO score of 666 and a 47.6% Fitch-determined
debt-to-income ratio (DTI), as well as low leverage, with an
original combined loan-to-value ratio (CLTV), as determined by
Fitch, of 51.6%, translating to a Fitch-calculated sustainable LTV
ratio (sLTV) of 57.4%.
Fitch's analysis considers 92.1% of the pool consisting of loans
where the borrower maintains a primary residence while 6.6%
comprises investor properties and 1.3% represents second homes. In
Fitch's analysis about 6.6% of the pool comprises loans for
investor properties, this includes "unavailable" loan purpose
types. There are no second liens in the pool and 118 loans (7.14%)
have subordinate financing. Fitch treated loans with an associated
Property Assessed Clean Energy Program loan (PACE) as a subordinate
lien. Fitch also added the current amount of the PACE loan to the
LS of the pool to account for the servicer potentially having to
advance on the PACE lien to maintain the 1st lien status of the
mortgage in this pool if the PACE loan was to go delinquent.
In Fitch's analysis, the majority of the loans (84.3%) are to
single-family homes and planned unit developments (PUDs); 5.7% are
to condos; 0.2% are to co-ops; and 9.9% are to multifamily homes
and manufactured housing. In the analysis, Fitch treated
manufactured properties and properties coded as other occupancy
types as multifamily; as a result, the probability of default (PD)
was increased for these loans.
In Fitch's analysis all loans were treated as originated through a
broker/correspondent channel. According to Fitch, 4.9% of the loans
are designated as non-QM loans and 0.0% are safe-harbor QM loans,
while the remaining 95.1% are exempt from QM status as they were
originated prior to the ATR rule taking effect in January 2014 or
since the occupancy type is investor occupied.
The pool contains eight loans over $1.0 million, including deferred
balance, with the largest loan at $2.2 million.
Around 23.7% of the pool is concentrated in Florida. The largest
MSA concentration is in the Miami-Fort Lauderdale MSA (19.7%),
followed by the New York MSA (14.2%), and the Los Angeles MSA
(9.8%). The top three MSAs account for 43.7% of the pool. As a
result, there was a 23bps increase to Fitch's expected loss at the
'AAAsf' stress due to geographic concentration.
According to Fitch, 94.9% of the pool is current as of the cut-off
date. Overall, the pool characteristics resemble reperforming
collateral; therefore, the pool was analyzed using Fitch's Alt-A
model and time lines were extended.
No Advancing (Mixed): The servicer will not be advancing delinquent
monthly payments of principal and interest. Because P&I advances
made on behalf of loans that become delinquent and eventually
liquidate reduce liquidation proceeds to the trust, the loan-level
loss severities (LS) are less for this transaction than for those
where the servicer is obligated to advance P&I. The downside to
this is the additional stress on the structure side as there is
limited liquidity in the event of large and extended
delinquencies.
Sequential deal structure with No Advancing (Mixed): The
transaction utilizes a sequential payment structure with no
advancing of delinquent principal and interest. In a sequential
structure, the subordinate classes do not receive principal until
the senior classes are repaid in full. Furthermore, the provision
to re-allocate principal to pay interest on the 'AAAsf' rated notes
prior to other principal distributions is highly supportive of
timely interest payments to that class with no advancing.
There is not advancing of delinquent principal and interest in this
transaction. This results in a lower LS, since funds will not have
to be paid out to the servicer for delinquent principal and
interest amounts on which they advanced. However, the credit
enhancement (CE) will be increased as principal funds will need to
be used to pay interest if loans become delinquent.
The coupons on the class A-1 notes are based on the lower of the
net WAC or the stated coupon. The coupons on the class A-2, A-3,
M-1, B-1, B-2, B-3, and B-4 notes are based on the net WAC. The
class B and PT notes do not have a stated coupon but are paid
interest based on the classes with which they are exchangeable.
Besides subordination, the transaction has excess interest that
will help to protect the classes from losses if they are to occur.
Although the excess interest is limited in this transaction.
Losses will be allocated to the notes in reverse sequential order
starting with class B-4.
In Fitch's cash flow analysis, all classes received ultimate
principal in the rating stresses associated with their assigned
ratings, the 'AAAsf' received timely interest in the 'AAAsf' rating
stresses, and the remaining rated classes received ultimate
interest in the rating stresses associated with their assigned
ratings. None of the classes received principal writedowns in the
rating stresses associated with their assigned ratings.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the
model-projected 41.2%, at 'AAA'. The analysis indicates there is
some potential rating migration, with higher MVDs for all rated
classes compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence described in
Form 15E focused on a regulatory compliance for 99.6% of the pool
(the four loans without compliance grades are loans to investors
that do not need to receive a compliance review per Fitch's
criteria. In addition to the compliance review, 4.6% of the pool
received a credit review and a valuation review. A data integrity
check and updated tax and title search was also performed on 100%
of the loans in the pool. All loans were confirmed to be in the
first lien position and none of the loans had damage reported that
would materially impact the transaction based on the information
provided to Fitch.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments: increased the LS on 119 loans
(12.4% of the pool) due to HUD-1 issues, increased the LS to
account for outstanding PACE lien amounts and for potential TRID
issues. These adjustments resulted in an increase in the 'AAAsf'
expected loss of approximately 100bps. The increase in loss was
driven by the HUD-1 issues, as the lien and TRID issues did not
materially increase the loss severity.
Fitch did not increase the loss expectations for delinquent
taxes/tax liens, outstanding HOA liens, and outstanding Municipal
liens as these will be taken care of outside of the trust within
120 days post-closing.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 99.6% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria".
The sponsor, Nomura Corporate Funding Americas, LLS, engaged
SitusAMC to perform the review. 99.6% of the loans were reviewed
for compliance and they received initial and final grades for this
subcategory. The loans that did not receive compliance grades are
investor occupied homes which do not receive compliance grades.
4.6% of the loans reviewed received a credit and valuation review
by SitusAMC and they received initial and final grades for these
subcategories.
For seasoned loans a payment history review was performed, a
custodial reviewed was performed, a servicer comment review was
performed and a tax and title search was performed. This is in
addition to the servicer confirming the payment history and the
current lien status.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format. The ASF data tape
layout was established with input from various industry
participants, including rating agencies, issuers, originators,
investors and others, to produce an industry standard for the
pool-level data in support of the U.S. RMBS securitization market.
The data contained in the data tape layout were populated by the
due diligence company and no material discrepancies were noted.
ESG CONSIDERATIONS
NRPL 2024-RPL1 Trust has an ESG Relevance Score of '4' for
Transaction Parties & Operational Risk due to elevated operational
risk, which has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors. While
the aggregator and servicer did not have an impact on the expected
losses, the Tier 2 R&W framework with an unrated counterparty
resulted in an increase in the expected losses.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
OCTAGON 63: Fitch Assigns 'B-(EXP)sf' Rating on Class F Notes
-------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Octagon 63, Ltd.
Entity/Debt Rating
----------- ------
Octagon 63, 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 A LT NR(EXP)sf Expected Rating
Subordinated B LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Octagon 63, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Octagon Credit Investors, LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.9, versus a maximum covenant, in accordance with
the initial expected matrix point of 25.68. Issuers rated in the
'B' rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
96.44% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.02% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.2-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'A-sf' and 'AAAsf' 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 between less than 'B-sf' and '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 Octagon 63, 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.
RR 5: S&P Assigns Preliminary BB- (sf) Rating on Class D-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the
replacement class A-1-R, A-1L, A-2-R, B-R, C-R, and D-R notes and
A-1L loans from RR 5 Ltd./RR 5 LLC, a CLO originally issued in
October 2018 that is managed by Redding Ridge Asset Management LLC,
an affiliate of Apollo Global Management LLC.
The preliminary ratings are based on information as of May 2, 2024.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the May 16, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. S&P
said, "At that time, we expect to withdraw our ratings on the
original debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class A-1-R, A-1L, A-2-R, C-R, and D-R notes
and class A-1L loans are expected to be issued at a higher spread
over three-month SOFR than the original notes, while the class B-R
notes are expected to be issued at a lower spread over three-month
SOFR than the original notes.
-- The replacement class A-1-R, A-1L, A-2-R, B-R, C-R, and D-R
notes and class A-1L loans are expected to be issued at a floating
spread, replacing the current floating spread.
-- The stated maturity will be extended by 7.75 years.
-- The reinvestment period will be extended by 5.75 years, and the
non-call period will be extended by 5.59 years.
-- The transaction is expected to include class A-1L loans, all or
a portion of which can be converted to class A-1L notes. Class A-1L
notes cannot be converted to class A-1L loans.
-- The class A-1-R, A-1L, A-2-R, B-R, C-R, and D-R notes and class
A-1L loans are expected to be issued in connection with this
refinancing with the proceeds used to redeem the original notes.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1-R, $205.00 million: Three-month CME term SOFR +
1.50%
-- Class A-1L loans, $58.50 million: Three-month CME term SOFR +
1.50%
-- Class A-1L, $0.00 million: Three-month CME term SOFR + 1.50%
-- Class A-2-R, $55.25 million: Three-month CME term SOFR + 1.95%
-- Class B-R (deferrable), $29.75 million: Three-month CME term
SOFR + 2.50%
-- Class C-R (deferrable), $25.50 million: Three-month CME term
SOFR + 3.60%
-- Class D-R (deferrable), $14.90 million: Three-month CME term
SOFR + 6.60%
Original debt
-- Class A-1, $289.51 million: Three-month CME term SOFR + 1.38%
-- Class A-2, $52.50 million: Three-month CME term SOFR + 1.91%
-- Class B, $54.50 million: Three-month CME term SOFR + 2.51%
-- Class C, $32.00 million: Three-month CME term SOFR + 3.36%
-- Class D, $18.50 million: Three-month CME term SOFR + 6.01%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
RR 5 Ltd./RR 5 LLC
Class A-1-R, $205.00 million: AAA (sf)
Class A-1L loans, $58.50 million: AAA (sf)
Class A-1L(i), $0.00 million: AAA (sf)
Class A-2-R, $55.25 million: AA (sf)
Class B-R (deferrable), $29.75 million: A (sf)
Class C-R (deferrable), $25.50 million: BBB- (sf)
Class D-R (deferrable), $14.90 million: BB- (sf)
(i)All or a portion of the class A-1L loans can be converted into
class A-1L notes. Upon such conversion, the class A-1L loans will
be decreased by such converted amount, with a corresponding
increase in class A-1L notes. Class A-1L notes cannot be converted
to class A-1L loans.
Other Outstanding Debt
RR 5 Ltd./RR 5 LLC
Subordinated notes(i), $43.00 million: Not rated
(i)The subordinated notes are expected to be increased to $76.62
million upon the refinancing.
SEQUOIA MORTGAGE 2024-5: Fitch Assigns BB-(EXP) Rating on B4 Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to the residential
mortgage-backed certificates to be issued by Sequoia Mortgage Trust
2024-5 (SEMT 2024-5).
Entity/Debt Rating
----------- ------
SEMT 2024-5
A1 LT AAA(EXP)sf Expected Rating
A2 LT AAA(EXP)sf Expected Rating
A3 LT AAA(EXP)sf Expected Rating
A4 LT AAA(EXP)sf Expected Rating
A5 LT AAA(EXP)sf Expected Rating
A6 LT AAA(EXP)sf Expected Rating
A7 LT AAA(EXP)sf Expected Rating
A8 LT AAA(EXP)sf Expected Rating
A9 LT AAA(EXP)sf Expected Rating
A10 LT AAA(EXP)sf Expected Rating
A11 LT AAA(EXP)sf Expected Rating
A12 LT AAA(EXP)sf Expected Rating
A13 LT AAA(EXP)sf Expected Rating
A14 LT AAA(EXP)sf Expected Rating
A15 LT AAA(EXP)sf Expected Rating
A16 LT AAA(EXP)sf Expected Rating
A17 LT AAA(EXP)sf Expected Rating
A18 LT AAA(EXP)sf Expected Rating
A19 LT AAA(EXP)sf Expected Rating
A20 LT AAA(EXP)sf Expected Rating
A21 LT AAA(EXP)sf Expected Rating
A22 LT AAA(EXP)sf Expected Rating
A23 LT AAA(EXP)sf Expected Rating
A24 LT AAA(EXP)sf Expected Rating
A25 LT AAA(EXP)sf Expected Rating
AIO1 LT AAA(EXP)sf Expected Rating
AIO2 LT AAA(EXP)sf Expected Rating
AIO3 LT AAA(EXP)sf Expected Rating
AIO4 LT AAA(EXP)sf Expected Rating
AIO5 LT AAA(EXP)sf Expected Rating
AIO6 LT AAA(EXP)sf Expected Rating
AIO7 LT AAA(EXP)sf Expected Rating
AIO8 LT AAA(EXP)sf Expected Rating
AIO9 LT AAA(EXP)sf Expected Rating
AIO10 LT AAA(EXP)sf Expected Rating
AIO11 LT AAA(EXP)sf Expected Rating
AIO12 LT AAA(EXP)sf Expected Rating
AIO13 LT AAA(EXP)sf Expected Rating
AIO14 LT AAA(EXP)sf Expected Rating
AIO15 LT AAA(EXP)sf Expected Rating
AIO16 LT AAA(EXP)sf Expected Rating
AIO17 LT AAA(EXP)sf Expected Rating
AIO18 LT AAA(EXP)sf Expected Rating
AIO19 LT AAA(EXP)sf Expected Rating
AIO20 LT AAA(EXP)sf Expected Rating
AIO21 LT AAA(EXP)sf Expected Rating
AIO22 LT AAA(EXP)sf Expected Rating
AIO23 LT AAA(EXP)sf Expected Rating
AIO24 LT AAA(EXP)sf Expected Rating
AIO25 LT AAA(EXP)sf Expected Rating
AIO26 LT AAA(EXP)sf Expected Rating
B1 LT AA-(EXP)sf Expected Rating
B2 LT A-(EXP)sf Expected Rating
B3 LT BBB-(EXP)sf Expected Rating
B4 LT BB-(EXP)sf Expected Rating
B5 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 443 loans with a total balance of
approximately $515.7 million as of the statistical information at
the cut-off date. The pool consists of prime jumbo fixed-rate
mortgages acquired by Redwood Residential Acquisition Corp. from
various mortgage originators. Distributions of principal and
interest (P&I) and loss allocations are based on a
senior-subordinate, shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
443 loans totaling approximately $515.7 million and seasoned at
approximately four months in aggregate, as determined by Fitch. The
borrowers have a strong credit profile, with a weighted-average
Fitch model FICO score of 781 and 35.3% debt-to-income (DTI) ratio,
and moderate leverage, with an 80.7% sustainable loan-to-value
(sLTV) ratio and 71.9% mark-to-market combined loan-to-value (cLTV)
ratio.
Overall, the pool consists of 93.8% in loans where the borrower
maintains a primary residence, while 6.2% are of a second home;
65.4% of the loans were originated through a retail channel.
Additionally, 100.0% of the loans are designated as qualified
mortgage (QM) loans.
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.5% above a long-term sustainable level (versus
11.1% on a national level as of 4Q23, which remained unchanged from
last quarter). Home prices increased 5.5% yoy nationally as of
February 2024 despite modest regional declines, but are still being
supported by limited inventory.
Shifting-Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure whereby the subordinate classes receive
only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years.
The lockout feature helps to maintain subordination for a longer
period should losses occur later in the life of the transaction.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained. After the credit
support depletion date, principal will be distributed sequentially
to the senior classes, which is more beneficial for the
super-senior classes (A-9, A-12 and A-18).
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent: a stop-advance loan. Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps to limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in high
delinquency scenarios.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20% and 30%, in addition to the
model-projected 41.9% at 'AAAsf'. The analysis indicates there is
some potential rating migration with higher MVDs compared to the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton, AMC and Consolidated Analytics. The
third-party due diligence described in Form 15E focused on credit,
compliance and property valuation. Fitch considered this
information in its analysis and, as a result, Fitch made the
following adjustment to its analysis: a 5% reduction in its loss
analysis. This adjustment resulted in a 15bp reduction to the 'AAA'
expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 94.8% of the pool. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." Clayton, AMC, and Consolidated Analytics were
engaged to perform the review. Loans reviewed under this engagement
were given credit, compliance and valuation grades and assigned
initial grades for each subcategory. Minimal exceptions and waivers
were noted in the due diligence reports. Refer to the Third-Party
Due Diligence section of the presale report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
SEMT 2024-5 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in SEMT 2024-5 and includes strong R&W and transaction due
diligence as well as a strong aggregator, which resulted in a
reduction in the expected losses. This has a positive impact on the
credit profile and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SLM STUDENT 2013-2: Moody's Lowers Rating on Class B Certs to Ba1
-----------------------------------------------------------------
Moody's Ratings has taken action on 16 classes of notes issued by
11 student loan securitizations serviced by Navient Solutions, LLC.
The securitizations are backed by student loans originated under
the Federal Family Education Loan Program (FFELP) that are
guaranteed by the US government for a minimum of 97% of defaulted
principal and accrued interest.
A comprehensive review of all credit ratings for the respective
transaction(s) has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Collegiate Funding Services Education Loan Trust 2005-A
2005A-4, Downgraded to Baa1 (sf); previously on Nov 23, 2022
Downgraded to Aa3 (sf)
2005 B, Downgraded to A2 (sf); previously on Jun 3, 2020 Downgraded
to A1 (sf)
Issuer: SLM Student Loan Trust 2009-1
Class A, Downgraded to A2 (sf); previously on Jun 23, 2023
Downgraded to Aa2 (sf)
Issuer: SLM Student Loan Trust 2009-2
Cl. A, Downgraded to A1 (sf); previously on Sep 16, 2016 Confirmed
at Aaa (sf)
Issuer: SLM Student Loan Trust 2009-3
Cl. A, Downgraded to A3 (sf); previously on Sep 16, 2016 Confirmed
at Aaa (sf)
Issuer: SLM Student Loan Trust 2011-3
Floating Rate Cl. A Note, Downgraded to A1 (sf); previously on May
5, 2014 Affirmed Aaa (sf)
Floating Rate Cl. B Notes, Downgraded to A2 (sf); previously on Sep
16, 2016 Upgraded to Aaa (sf)
Issuer: SLM Student Loan Trust 2012-3
Class A, Downgraded to A1 (sf); previously on May 3, 2017 Upgraded
to Aaa (sf)
Class B, Upgraded to Aaa (sf); previously on Apr 23, 2019 Upgraded
to Aa1 (sf)
Issuer: SLM Student Loan Trust 2012-5
Class B, Upgraded to Aaa (sf); previously on Dec 22, 2016 Affirmed
A1 (sf)
Issuer: SLM Student Loan Trust 2013-1
Class B, Upgraded to Aa1 (sf); previously on Nov 23, 2022 Upgraded
to Aa3 (sf)
Issuer: SLM Student Loan Trust 2013-2
Class A, Downgraded to A1 (sf); previously on Jun 14, 2016
Confirmed at Aaa (sf)
Class B, Downgraded to Ba1 (sf); previously on Nov 23, 2022
Downgraded to A3 (sf)
Issuer: SLM Student Loan Trust 2013-3
Class B, Upgraded to Aaa (sf); previously on Dec 22, 2016 Upgraded
to Aa1 (sf)
Issuer: SLM Student Loan Trust 2013-5
Floating Rate Class A-3 Notes, Downgraded to Aa1 (sf); previously
on Oct 6, 2016 Confirmed at Aaa (sf)
Floating Rate Class B Notes, Downgraded to Ba1 (sf); previously on
Apr 19, 2022 Downgraded to A3 (sf)
RATIONALE
The rating actions are primarily driven by the updated performance
of the transactions and updated expected loss on the tranches
across Moody's cash flow scenarios. Moody's quantitative analysis
derives the expected loss for a tranche using 28 cash flow
scenarios with weights accorded to each scenario.
The rating actions consider the change in the collateral weighted
average maturity (WAM) in these transactions and the subsequent
impact on the risk of notes not paying down by their legal final
maturity dates. Due to the significant increases in forbearance
previously and elevated levels of income-based repayment plan
usage, the collateral WAM has remained largely flat or increased.
Specifically, for borrowers under income-based repayment plan,
remaining term increase arises generally from loan maturity terms
that are extended in order to maintain borrowers' monthly payment
following interest capitalization or higher floating rate resets.
This impacts the projected collateral amortization rate and
increases the risk that certain bonds would not paydown entirely
ahead of their legal final maturity dates in certain scenarios. For
example, since mid 2020, the WAM increased from 185 to 200 for SLM
Student Loan Trust 2009-2, from 196 to 209 for SLM Student Loan
Trust 2009-3, from 143 to 180 for SLM Student Loan Trust 2012-3,
from 144 to 183 for SLM Student Loan Trust 2013-2, and from 151 to
190 for SLM Student Loan Trust 2013-5. The rating analysis also
reflects the higher collateral prepayment rates observed since late
2023.
The rating actions on the Class A notes from SLM Student Loan Trust
2009-3 and the Class B notes from SLM Student Loan Trust 2013-2
consider the impact of a data format change introduced by Navient
in 2018. For such bonds with long dated legal final maturities
(more than five years), Moody's makes adjustments to model outputs
to normalize the impact of the collateral data format on modeled
cashflows.
The upgrade actions on the Class B notes of SLM Student Loan Trust
2012-3, SLM Student Loan Trust 2012-5, SLM Student Loan Trust
2013-1, and SLM Student Loan Trust 2013-3 are driven by expected
loss across the various cashflow scenarios and also reflect these
notes' long dated legal final maturity dates of between 2070 to
2076.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features and credit enhancement.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Securities Backed by FFELP Student Loans"
published in April 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings if the paydown speed of the loan
pool increases as a result of borrower usage of deferment,
forbearance and IBR, increasing voluntary prepayment rates, or
prepayments with proceeds from sponsor repurchases of student loan
collateral, or if maturity risk reduces with declining collateral
WAM. Moody's could also upgrade the ratings owing to a build-up in
credit enhancement.
Down
Moody's could downgrade the ratings if the paydown speed of the
loan pool declines as a result of static or increasing collateral
WAM, lower than expected voluntary prepayments, and higher than
expected deferment, forbearance and IBR rates, which would threaten
full repayment of the class by its final maturity date. In
addition, because the US Department of Education guarantees at
least 97% of principal and accrued interest on defaulted loans,
Moody's could downgrade the rating of the notes if it were to
downgrade the rating on the United States government.
TRICOLOR AUTO 2024-2: Moody's Assigns (P)B2 Rating to Cl. F Notes
-----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to the notes to be
issued by Tricolor Auto Securitization Trust 2024-2 (TAST 2024-2).
This is the second auto loan transaction of the year and the fourth
rated by Moody's for Tricolor Auto Acceptance, LLC (Tricolor). The
notes will be backed by a pool of retail automobile loan contracts
originated by affiliates of Tricolor, who is also the servicer and
administrator for the transaction.
The complete rating actions are as follows:
Issuer: Tricolor Auto Securitization Trust 2024-2
Class A Asset Backed Notes, Assigned (P)A1 (sf)
Class B Asset Backed Notes, Assigned (P)A1 (sf)
Class C Asset Backed Notes, Assigned (P)A1 (sf)
Class D Asset Backed Notes, Assigned (P)Baa1 (sf)
Class E Asset Backed Notes, Assigned (P)Ba1 (sf)
Class F Asset Backed Notes, Assigned (P)B2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, the experience and expertise of Tricolor as the servicer
and administrator and the presence of Vervent, Inc. as named backup
servicer.
Moody's median cumulative net loss expectation for the 2024-2 pool
is 22.50%, which is 0.50% higher than 2024-1. The loss at a Aaa
stress is 54.00%, which is 1.00% higher than 2024-1. Moody's based
its cumulative net loss expectation and loss at a Aaa stress on an
analysis of the credit quality of the underlying collateral; the
historical performance of similar collateral, including
securitization performance and managed portfolio performance; the
ability of Tricolor to perform the servicing functions; and current
expectations for the macroeconomic environment during the life of
the transaction.
At closing, the Class A notes, Class B notes, Class C notes, Class
D notes, Class E notes and Class F notes are expected to benefit
from 54.60%, 50.15%, 45.70%, 39.40%, 31.80% and 24.10% of hard
credit enhancement respectively. Hard credit enhancement for the
notes consists of a combination of overcollateralization, a
non-declining reserve account and subordination, except for the
Class F notes which do not benefit from subordination. The notes
may also benefit from excess spread.
This securitization's governance risk is moderate and is higher
than other Auto ABS in the market. The governance risks are
partially mitigated by the transaction structure, documentation and
characteristics of the transaction parties. The sponsor and
servicer is relatively small and financially weak, which lends
additional variability to the pool expected loss and higher
servicing transfer risk.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
November 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the notes if levels of credit enhancement are
higher than necessary to protect investors against current
expectations of portfolio losses. Losses could decline from Moody's
original expectations as a result of a lower number of obligor
defaults or appreciation in the value of the vehicles securing an
obligor's promise of payment. Portfolio losses also depend greatly
on the US job market and the market for used vehicles. Other
reasons for better-than-expected performance include changes to
servicing practices that enhance collections or refinancing
opportunities that result in prepayments.
Down
Moody's could downgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
vehicles securing an obligor's promise of payment. Portfolio losses
also depend greatly on the US job market, the market for used
vehicles, and poor servicing. Other reasons for worse-than-expected
performance include error on the part of transaction parties,
inadequate transaction governance, and fraud.
UBS COMMERCIAL 2018-C10: Fitch Affirms Ratings on 13 Classes
------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of UBS Commercial Mortgage
Trust 2018-C10 (UBS 2018-C10) and 13 classes and of UBS Commercial
Mortgage Trust 2018-C15 (UBS 2018-C15). Fitch has revised the
Rating Outlooks for class F-RR in UBS 2018-C10 and classes E-RR and
F-RR in UBS 2018-C15 to Negative from Stable. The Rating Outlook
for class G-RR in UBS 2018-C15 remains Negative.
Entity/Debt Rating Prior
----------- ------ -----
UBS 2018-C10
A-2 90276FAT1 LT PIFsf Paid In Full AAAsf
A-3 90276FAV6 LT AAAsf Affirmed AAAsf
A-4 90276FAW4 LT AAAsf Affirmed AAAsf
A-S 90276FAZ7 LT AAAsf Affirmed AAAsf
A-SB 90276FAU8 LT AAAsf Affirmed AAAsf
B 90276FBA1 LT AAsf Affirmed AAsf
C 90276FBB9 LT A-sf Affirmed A-sf
D 90276FAC8 LT BBB-sf Affirmed BBB-sf
D-RR 90276FAE4 LT BBB-sf Affirmed BBB-sf
E-RR 90276FAG9 LT BB-sf Affirmed BB-sf
F-RR 90276FAJ3 LT B-sf Affirmed B-sf
X-A 90276FAX2 LT AAAsf Affirmed AAAsf
X-B 90276FAY0 LT AAsf Affirmed AAsf
X-D 90276FAA2 LT BBB-sf Affirmed BBB-sf
UBS 2018-C15
A-3 90278LAX7 LT AAAsf Affirmed AAAsf
A-4 90278LAY5 LT AAAsf Affirmed AAAsf
A-S 90278LBB4 LT AAAsf Affirmed AAAsf
A-SB 90278LAW9 LT AAAsf Affirmed AAAsf
B 90278LBC2 LT AA-sf Affirmed AA-sf
C 90278LBD0 LT A-sf Affirmed A-sf
D 90278LAC3 LT BBB+sf Affirmed BBB+sf
D-RR 90278LAE9 LT BBB-sf Affirmed BBB-sf
E-RR 90278LAG4 LT BB+sf Affirmed BB+sf
F-RR 90278LAJ8 LT B+sf Affirmed B+sf
G-RR 90278LAL3 LT B-sf Affirmed B-sf
X-A 90278LAZ2 LT AAAsf Affirmed AAAsf
X-B 90278LBA6 LT AA-sf Affirmed AA-sf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' rating case
losses are 5.1% for UBS 2018-C10 and 5.5% for UBS 2018-C15. There
are nine Fitch Loans of Concerns (FLOCs; 23.9% of the pool) in UBS
2018-C10, including three specially serviced loans (1.6%), and
three FLOCs (20.2%) in UBS 2018-C15, where no loans in the pool are
currently in special servicing.
The affirmations reflect generally stable pool performance and
overall loss expectations since Fitch's prior rating action. The
affirmations for UBS 2018-C10 also incorporate an additional
sensitivity scenario that assumed an increased probability of
default on the Eastmont Town Center loan, secured by a 527,588-sf
suburban office property located in Oakland, CA., due to
significant upcoming rollover, which includes 31.5% in 2024, 1.7%
in 2025 and 11.2% in 2026.
The Rating Outlook revision to Negative from Stable for class F-RR
in UBS 2018-C10 reflects the high concentration of office (30%) and
FLOCs, which includes five loans (21.6%) in the top 15 such as 175
Park Avenue and Westpark Hudson. The Rating Outlook revisions to
Negative from Stable for classes E-RR and F-RR in UBS 2018- C15
reflect the high FLOC concentration, including performance concerns
on 435 Tasso Street and 16300 Roscoe Blvd Parkway Center.
FLOCs; Largest Loss Contributors: The largest contributor to
overall pool loss expectations and the largest increase in loss
since the prior rating action in UBS 2018-C10, is the Port Atwater
Parking loan (3.1%), secured by a parking structure located in
downtown Detroit, MI. It was flagged as a FLOC due to low DSCR and
continued post-pandemic performance declines. The servicer-reported
NOI DSCR has remained below 1.0x since YE 2020, and it has declined
consistently between YE 2021 and YE 2023. Fitch's 'Bsf' rating case
loss of 44.2% (prior to concentration add-ons) is based on the YE
2023 NOI, an 11% cap rate and an increased probability of default.
The largest increase in loss since the prior rating action in UBS
2018-C15 is the 435 Tasso Street loan (6.6%), secured by a
32,128-sf office property located in Palo Alto, CA. The three
largest tenants are East West Bank (29.6% NRA; lease expiry on Dec.
31, 2025), CSAA Insurance Exchange (10%; Sept. 30, 2026) and Lazard
Group II C (8.7%; June 30, 2024).
In 2022, East West Bank took over the space previously occupied by
Science Exchange at rental rate 6% below the prior tenant. This
FLOC was flagged due to a decline in occupancy and upcoming
rollover concerns. Although there has been leasing progress,
occupancy has declined to 58% as of YE 2023 from 79% the prior year
after two tenants, Qlik and Vulcan (combined, 20% of NRA) vacated
at their 2023 lease expirations in October and November.
Upcoming rollover includes 13.8% of the NRA (25.9% rent) in 2024,
29.6% (50.1%) in 2025 and 10% (15.1%) in 2026. The
servicer-reported NOI DSCR was 1.98x at YE 2023 compared 2.11x the
prior year. Fitch's 'Bsf' rating case loss of 8.8% (prior to
concentration add-ons) reflects a 25% stress to the YE 2023 NOI for
rollover concerns and a 9.5% cap rate.
The largest FLOC in the UBS 2018-C10 transaction, 175 Park Avenue
(5.9%), is secured by a 270,000-sf office building located in
Madison, NJ. It was flagged as a FLOC due to the single tenant
subleasing a significant portion of its space. The non-investment
grade tenant, Anywhere Real Estate (fka Realogy), has a lease
expiration in 2029. Fitch's 'Bsf' rating case loss of 8.9% (prior
to concentration add-ons) reflects a 10% stress to the YE 2022 NOI
and a 10% cap rate.
The largest FLOC and largest contributor to overall pool loss
expectations in the UBS 2018-C15 transaction, Saint Louis Galleria
(9.9%), is secured by a Brookfield-sponsored, super-regional mall
located in St. Louis, MO. It was flagged as FLOC due to lagging
post-pandemic performance and upcoming rollover concerns. The mall
is anchored by Dillard's, Macy's and Nordstrom, which are
non-collateral tenants.
Property-level NOI has declined since issuance, with the most
recent full-year reported YE 2022 NOI remaining approximately 29%
below the issuer's underwritten NOI and 12% below YE 2020 NOI. The
NOI declines are mainly attributed to the lower revenue since the
pandemic, where YE 2022 revenue is 20% below YE 2019. As of
September 2023, the YTD servicer-reported NOI DSCR was 1.60x,
compared with 1.68x at YE 2021. The loan began to amortize in
November 2023.
Collateral occupancy declined to 90.5% as of September 2023 from
96% at YE 2021 as a result of several tenants vacating at or ahead
of their lease expirations. Total mall occupancy was 96.6% as of
the September 2023 rent roll. As of September 2022, reported TTM in
line comparable tenant sales were $536 psf ($419 psf excluding
Apple), compared with $523 psf ($401 psf excluding Apple) as of TTM
September 2021 and $364 psf ($294 psf excluding Apple) at YE 2020.
Fitch requested an updated tenant sales report, but it was not
provided. Fitch's 'Bsf' rating case loss of 15.4% (prior to
concentration add-ons) reflects a 7.5% stress to the YE 2022 NOI
for rollover concerns and an 11.50% cap rate.
Increased Credit Enhancement (CE): As of the March 2024 remittance
report, the aggregate pool balances of UBS 2018- C10 and UBS
2018-C15 have been paid down by 7% and 30.2%, respectively, since
issuance. The UBS 2018-C10 transaction has five defeased loans
(5.7% of the pool) and the UBS 2018-C15 transaction has three
defeased loans (5.5% of the pool). Cumulative interest shortfalls
of $1.2 million are affecting the non-rated class NR-RR in UBS
2018-C10 and $77,000 are affecting the non-rated NR-RR class in UBS
2018-C15.
Loan maturities are concentrated in 2028, with 53 loans comprising
99.7% of the pool in UBS 2018-C10 and 31 loans comprising 89.8% of
the pool in UBS 2018-C15.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to 'AAAsf' rated classes are not expected due to the
position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur.
Downgrades to junior 'AAAsf' rated classes are possible with
continued performance deterioration of the specially serviced loans
or significant increases in exposure, limited to no improvement in
class CE, or if interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs and/or more loans than expected
experience performance deterioration and/or default at or prior to
maturity.
Downgrades to classes rated in the 'BBBsf' category are possible
with higher than expected losses from continued underperformance of
the FLOCs, in particular office loans with deteriorating
performance, and/or with greater certainty of losses on the
specially serviced loans and/or FLOCs. Elevated risk office loans
include 175 Park Avenue and Westpark Hudson in UBS 2018-C10 and 435
Tasso Street and 16300 Roscoe Blvd Parkway Center in UBS 2018-C15.
Downgrades to classes rated in the 'BBsf' and 'Bsf' categories
would occur with greater certainty of losses on the specially
serviced loans or FLOCs, should additional loans transfer to
special servicing or default and as losses are realized or become
more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE, coupled with
stable-to-improved pool-level loss expectations and improved
performance on the FLOCs, including 175 Park Avenue and Westpark
Hudson in UBS 2018-C10 and 435 Tasso Street and 16300 Roscoe Blvd
Parkway Center in UBS 2018-C15.
Upgrades to classes rated in the 'BBBsf' category would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'AA+sf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable, recoveries on the FLOCs and
specially serviced loans are better than expected and there is
sufficient CE to the classes.
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.
VERTICAL BRIDGE 2024-1: Fitch Puts BB-(EXP)sf Rating on Cl. F Notes
-------------------------------------------------------------------
Fitch Ratings has issued a presale report for VB-S1 Issuer, LLC's
Secured Tower Revenue Notes, Series 2024-1.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
- $421,500,000 series 2024-1, class C-2, 'Asf'; Outlook Stable;
- $92,300,000 series 2024-1, class D, 'BBB-sf'; Outlook Stable;
- $111,200,000 series 2024-1, class F, 'BB-sf'; Outlook Stable.
The following class is not expected to be rated:
- $33,948,000 series 2024-1, class R (horizontal credit risk
retention interest with a balance representing 5% of the fair value
of the notes at the time of closing).
In connection with the transaction, it is also expected that the
2022-1, class C-1 variable funding note will be amended. The
ratings on all existing notes are expected to be affirmed
concurrent with the transaction close and the assignment of final
ratings.
TRANSACTION SUMMARY
The transaction is an issuance of notes backed by a pool of
wireless tower sites. The notes are backed by mortgages
representing approximately 92.9% of the annualized run rate net
cash flow (ARRNCF) on the tower sites and guaranteed by the direct
parent of the borrower issuer. This guarantee is secured by a
pledge and first-priority-perfected security interest in 100% of
the equity interest of the borrowers which own or lease 4,498
wireless communication sites including 4,871 towers and other
structures. The new securities will be issued pursuant to the
amended indenture and indenture supplement dated as of the expected
closing of the transaction.
At closing, note proceeds will be used to fund upfront reserves,
refinance existing debt and for general corporate purposes.
The ratings reflect a structured finance analysis of the cash flows
from the ownership interest in cellular sites, not an assessment of
the corporate default risk of the ultimate parent, Vertical Bridge
REIT LLC (Vertical Bridge).
KEY RATING DRIVERS
Net Cash Flow and Trust Leverage: Fitch's net cash flow (NCF) on
the pool is $159.5 million, implying a 5.3% haircut to issuer NCF.
The debt multiple relative to Fitch's NCF on the rated classes is
12.5x, versus the debt/issuer NCF leverage of 12.4x.
Credit Risk Factors: The primary factors informing Fitch's cash
flow assessment and rating-specific MPL include: the large and
diverse collateral pool, creditworthy customer base with limited
historical churn, market position of the operator, capability of
the operator, limited operational requirements, high barriers to
entry and strong transaction structure.
Technology-Dependent Credit: Due to the specialized nature of the
collateral and potential for changes in technology to affect
long-term demand for tower space, similar to most wireless tower
transactions, the senior classes of this transaction do not achieve
ratings above 'Asf'. The securities have a rated final payment date
over 30 years after closing, and the long-term tenor of the
securities increases the risk that an alternative technology will
be developed that renders obsolete the current transmission of
wireless signals through cellular sites. Wireless service providers
(WSPs) currently depend on towers to transmit their signals and
continue to invest in this technology.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow as a result of higher site expenses or lease
churn, and the development of an alternative technology for the
transmission of wireless signal could lead to downgrades.
Fitch's NCF was 5.3% below the issuer's underwritten cash flow. A
further 10% decline in Fitch's NCF indicates the following ratings
based on Fitch's determination of MPL: Class C from 'Asf' to
'BBBsf'; class D from 'BBB-sf' to 'BB+sf'; and class F from 'BB-sf'
to 'Bsf'.
The presale report includes a detailed explanation of additional
stresses and sensitivities on pages 11 and 12.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Increasing cash flow without an increase in corresponding debt,
from contractual lease escalators, new tenant leases, or lease
amendments could lead to upgrades. However, upgrades are unlikely
given the provision to issue additional debt, increasing leverage
without the benefit of additional collateral. Upgrades may also be
limited because the ratings are capped at 'Asf' due to the risk of
technological obsolescence.
Upgrades are further constrained by the variable funding notes,
which will likely offset any improvements in cash flow with a
corresponding increase in debt, keeping leverage levels relatively
flat.
A 10% increase in Fitch's NCF indicates the following ratings based
on Fitch's determination of MPL: class C from 'Asf' to 'Asf'; class
D from 'BBB-sf' to 'BBB+sf'; class F from 'BB-sf' to 'BB+sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on a comparison of certain
characteristics with respect to the portfolio of wireless
communication sites and related tenant leases in the data file.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
Vertical Bridge 2024-1 has an ESG Relevance Score of '4' for
Transaction & Collateral Structure due to several factors including
the issuer's ability to issue additional notes, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
VERUS SECURITIZATION 2024-4: S&P Assigns Prelim B-(sf) on B-2 Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Verus
Securitization Trust 2024-4's mortgage-backed notes.
The note issuance is an RMBS transaction backed by primarily newly
originated first- and second-lien, fixed- and adjustable-rate
residential mortgage loans, including mortgage loans with initial
interest-only periods, to both prime and non-prime borrowers. The
loans are secured by single-family residences, planned-unit
developments, two- to four-family residential properties,
condominiums, condotels, townhouses, mixed-use properties, and
five- to 10-unit multifamily residences. The pool has 1,179 loans
backed by 1,182 properties, which are qualified mortgage
(QM)/non-higher-priced mortgage loans (safe harbor), QM rebuttable
presumption, non-QM/ability-to-repay (ATR)-compliant, and
ATR-exempt loans. Of the 1,179 loans, one is a cross-collateralized
loan backed by four properties.
The preliminary ratings are based on information as of May 8, 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 pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representations and warranties framework, prior credit
events, and geographic concentration;
-- The mortgage aggregator, Invictus Capital Partners; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "On Oct. 13, 2023, we updated our market
outlook as it relates to the 'B' projected archetypal loss level,
and therefore revised and lowered our 'B' foreclosure frequency to
2.50% from 3.25%, which reflects the level prior to April 2020,
preceding the COVID-19 pandemic. The update reflects our benign
view of the mortgage and housing markets as demonstrated through
general national-level home price behavior, unemployment rates,
mortgage performance, and underwriting. Per our latest
macroeconomic update, the U.S. economy continues to outperform
expectations following consecutive quarters of contraction in the
first half of 2022."
Preliminary Ratings Assigned
Verus Securitization Trust 2024-4(i)
Class A-1, $358,008,000: AAA (sf)
Class A-2, $41,985,000: AA (sf)
Class A-3, $73,191,000: A (sf)
Class M-1, $39,148,000: BBB- (sf)
Class B-1, $21,276,000: BB- (sf)
Class B-2, $20,709,000: B- (sf)
Class B-3, $13,049,982: Not rated
Class A-IO-S, notional(ii): Not rated
Class XS, notional(ii): Not rated
Class R, not applicable: Not rated
(i)The collateral and structural information reflect the term sheet
dated May 6, 2024; the preliminary ratings address the ultimate
payment of interest and principal. They do not address the payment
of the cap carryover amounts.
(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.
VOYA CLO 2018-3: S&P Affirms B+ (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1A-R2, B-R2,
and C-R2 replacement debt from Voya CLO 2018-3 Ltd./Voya CLO 2018-3
LLC, a CLO managed by Voya Alternative Asset Management LLC that
was originally issued in October 2018 and underwent a refinancing
in October 2020. At the same time, S&P withdrew its ratings on the
original class A-1A, B, and C debt following payment in full on the
May 7, 2024, refinancing date. S&P also affirmed its ratings on the
class A-1B-R, D, and E debt, which was not refinanced.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- A noncall period ending Oct. 15, 2024, was added for the
refinanced notes.
-- The reinvestment period was not extended.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) were not extended.
-- No additional assets were purchased on the May 7, 2024,
refinancing date. There was no additional effective date or ramp-up
period, and the first payment date following the refinancing is
July 15, 2024.
-- The required minimum overcollateralization and interest
coverage ratios were not amended.
-- No additional subordinated notes were issued on the refinancing
date.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1A-R2, $277.01 million: Three-month CME term SOFR +
1.20%
-- Class A-2-R2, $30.00 million: Three-month CME term SOFR +
1.50%
-- Class B-R2, $66.00 million: Three-month CME term SOFR + 1.80%
-- Class C-R2, $39.00 million: Three-month CME term SOFR + 2.35%
October 2018 debt
-- Class A-1A, $277.01 million: Three-month CME term SOFR + 1.15%
+ CSA(i)
-- Class A-1B-R, $18.47 million: 1.69%
-- Class A-2, $30 million: Three-month CME term SOFR + 1.40% +
CSA(i)
-- Class B, $66 million: Three-month CME term SOFR + 1.65% +
CSA(i)
-- Class C, $39 million: Three-month CME term SOFR + 2.20% +
CSA(i)
-- Class D, $33 million: Three-month CME term SOFR + 3.3% +
CSA(i)
-- Class E, $24 million: Three-month CME term SOFR + 5.75% +
CSA(i)
-- Subordinated notes 1, $32.54 million: Not applicable
-- Subordinated notes 2, $23.16 million: Not applicable
(i)The CSA is 0.26161%.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Voya CLO 2018-3 Ltd./Voya CLO 2018-3 LLC
Class A-1A-R2, $277.01 million: AAA (sf)
Class B-R2, $66.00 million: AA (sf)
Class C-R2, $39.00 million: A (sf)
Ratings Withdrawn
Voya CLO 2018-3 Ltd./Voya CLO 2018-3 LLC
Class A-1A to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Ratings Affirmed
Voya CLO 2018-3 Ltd./Voya CLO 2018-3 LLC
Class A-1B-R: AAA (sf)
Class D: BBB- (sf)
Class E: B+ (sf)
Other Outstanding Debt
Voya CLO 2018-3 Ltd./Voya CLO 2018-3 LLC
Class A-2-R2, $30.00 million: NR
Subordinated notes 1, $32.54 million: NR
Subordinated notes 2, $23.16 million: NR
NR--Not rated.
VOYA CLO 2024-1: Fitch Assigns 'BBsf' Rating on Class E Notes
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Voya CLO
2024-1, Ltd.
Entity/Debt Rating
----------- ------
Voya CLO 2024-1, Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BBsf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Voya CLO 2024-1, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Voya
Alternative Asset Management LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $530 million of primarily first-lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.42, versus a maximum covenant, in accordance with
the initial expected matrix point of 26. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.11% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.22% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.2%.
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 five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the results under these sensitivity scenarios are as
severe as between 'BBBsf' and 'AA+sf' for class A-2 notes, between
'BB+sf' and 'A+sf' for class B notes, between 'Bsf' and 'BBB+sf'
for class C notes, between less than 'B-sf' and 'BB+sf' for class D
notes; and between less than 'B-sf' and 'B+sf' for class E notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B notes, 'AAsf' for class C notes,
'Asf' for class D notes; and 'BBB+sf' for class E notes.
Key Rating Drivers and Rating Sensitivities are further described
in the new issue report.
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 Bridge Street CLO
IV Ltd. In cases where Fitch does not provide ESG relevance scores
in connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
WELLS FARGO 2018-C44: DBRS Cuts Rating on Class G-RR Certs to CCC
-----------------------------------------------------------------
DBRS Limited downgraded its credit ratings on three classes of
Commercial Mortgage Pass-Through Certificates, Series 2018-C44
issued by Wells Fargo Commercial Mortgage Trust 2018-C44 (the
Issuer) as follows:
-- Class E-RR to BB (high) (sf) from BBB (low) (sf)
-- Class F-RR to B (sf) from BB (sf)
-- Class G-RR to CCC (sf) from B (high) (sf)
In addition, Morningstar DBRS confirmed its credit ratings on the
remaining classes as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
Morningstar DBRS changed the trends on Classes X-B, B, C, X-D, and
D to Negative from Stable and maintained the Negative trends on
Classes E-RR and F-RR. All other trends are Stable, with the
exception of Class G-RR, which has a credit rating that typically
does not carry a trend in commercial mortgage-backed securities
(CMBS) credit ratings.
The credit rating downgrades and Negative trends reflect
Morningstar DBRS' increased loss projections for the pool,
attributed to three loans in special servicing, which together
represent 8.5% of the pool balance. With this review, Morningstar
DBRS considered liquidation scenarios for those three loans,
resulting in a total implied loss of nearly $25.0 million. Those
losses would erode the nonrated Class H-RR balance by approximately
70.0%, significantly reducing credit support to the lowest-rated
principal bonds in the transaction, particularly the Class E-RR,
F-RR, and G-RR certificates. Morningstar DBRS is particularly
concerned about the largest specially serviced loan, Dulaney Center
(Prospectus ID#5, 6.2% of the pool), which is the fourth-largest
loan in the pool. This loan is secured by a distressed suburban
office property in Towson, Maryland, that recently transferred to
special servicing for imminent monetary default, details of which
are outlined below. In the analysis for this review, Morningstar
DBRS stressed this loan and several other loans secured by office
and mixed-use properties with elevated probability of default (POD)
penalties and/or increased loan-to-value ratios (LTVs) to reflect
the increased credit risk, resulting in a weighted-average (WA)
expected loss (EL) for these loans that was nearly 160.0% greater
than the pool's WA EL figure. The result of that analysis further
supports the credit rating downgrades and Negative trends with this
review.
As of the April 2024 remittance, 42 of the original 44 loans remain
in the pool with an aggregate principal balance of $723.2 million,
representing a collateral reduction of 5.7% since issuance. Four
loans, representing 5.5% of the pool balance, are fully defeased.
The pool consists primarily of office and retail properties,
representing 30.4% and 24.9% of the pool balance, respectively.
There are seven loans, representing 11.6% of the pool balance, on
the servicer's watchlist and, as noted, four loans, representing
14.7% of the pool balance, in special servicing.
The Dulaney Center loan is secured by two suburban Class A office
buildings totaling 316,348 square feet (sf) in Towson, about 7.5
miles north of the Baltimore central business district. Since
transferring to special servicing in October 2023, the loan has
remained current and the borrower has expressed interest in a loan
modification; however, negotiations are ongoing. Occupancy at the
property drastically declined during 2021 and 2022, falling to
69.0% by YE2022 from nearly 90.0% at issuance, primarily following
the departure of four tenants (Berkley Insurance Company, the
General Services Administration, Maxim Healthcare Services, and
Roadnet Technologies Inc.) that previously represented 19.0% of the
net rentable area (NRA). Since that time, the borrower has been
unable to garner any meaningful leasing momentum, with few to no
prospective tenants in active lease discussions, as reported by the
servicer. According to the December 2023 rent roll, the property
was 66.9% occupied with five tenants, representing 6.7% of the NRA,
with leases scheduled to expire in the next 12 months and only $0.7
million in leasing reserves.
The loan's debt service coverage ratio (DSCR) has fallen
precipitously alongside occupancy, with the YE2023 financials
reporting a figure of 1.00 times (x), slightly below the YE2022
figure of 1.21x and well below the Issuer's DSCR of 1.54x. As of Q4
2023, Reis reported that the Towson/Timonium/Hunt Valley submarket
had an average vacancy rate of 19.1% and an asking rental rate of
$23.81 per sf (psf), well below the subject's in-place rental rate
of $28.70 psf. While the property is well maintained and underwent
renovations in 2016, which included new lobbies and common area
upgrades, it is unlikely the borrower will be able to lease to its
current in-place rate, which is roughly 20.0% above market,
indicating the potential for further downsizing outside of tenant
rollover. Considering the sustained performance along with the
headwinds to backfilling vacancy in a challenging submarket, given
the investor demand for this property type, Morningstar DBRS
analyzed this loan with a stressed LTV ratio and elevated POD
penalty, which was approaching 4x the pool average.
Another loan that transferred to special servicing since the last
review is 3200 North First Street (Prospectus ID#15, 4.8% of the
pool). The loan is secured by an 85,017-sf partial two-story
flex/research and development property in San Jose, California, and
transferred to special servicing in November 2023 for imminent
monetary default after the property's sole tenant, NextEV NIO,
vacated as expected in September 2023. The space is currently being
marketed for lease; however, the servicer has indicated there has
been no leasing activity or prospective tenants. The servicer is
currently pursuing foreclosure and the appointment of a receiver.
To date, there is no updated appraisal for the subject, which was
valued at $30.0 million at issuance; however, Morningstar DBRS
expects the value to have declined significantly given that the
asset is dark with no leasing prospects and the soft market
conditions. Morningstar DBRS' analysis included a liquidation
scenario based on a stress to the issuance appraised value,
resulting in a projected loss severity in excess of 50.0%.
The two remaining specially serviced loans, Prince and Spring
Street Portfolio (Prospectus ID#9, 4.1% of the pool) and 1442
Lexington Avenue (Prospectus ID#25, 1.6% of the pool), have been
with the special servicer since 2020 with foreclosure listed as the
workout strategy. Both loans are secured by multifamily properties
in New York City, which, despite maintaining high occupancy rates
of nearly 95% as of June 2023, have faced significant increases in
expenses, resulting in insufficient funds to cover debt service
payments and property operations. The Prince and Spring Street
Portfolio was reappraised in July 2023 for $50.7 million,
reflecting a 23.0% decline from the issuance value of $66.0
million, while 1442 Lexington Avenue was reappraised in December
2023 for $8.9 million, reflecting a 50.0% decline from the issuance
value of $18.0 million. In its analysis for this review,
Morningstar DBRS maintained its liquidation scenarios for both
loans, resulting in loss severities of approximately 20.0% and
70.0%, respectively.
Notes: All figures are in U.S. dollars unless otherwise noted.
WIND RIVER 2024-1: Fitch Assigns 'B-(EXP)sf' Rating on Cl. F Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
WIND RIVER 2024-1 CLO LTD.
Entity/Debt Rating
----------- ------
WIND RIVER
2024-1 CLO LTD.
A LT NR(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
F LT B-(EXP)sf Expected Rating
Subordinated A LT NR(EXP)sf Expected Rating
Subordinated B LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
WIND RIVER 2024-1 CLO LTD. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by First
Eagle Alternative Credit, LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.37, versus a maximum covenant, in accordance with
the initial expected matrix point of 26. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of 98%
first-lien senior secured loans. The weighted average recovery rate
(WARR) of the indicative portfolio is 74.47% versus a minimum
covenant, in accordance with the initial expected matrix point of
73%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 45% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B, between 'B+sf'
and 'BBB+sf' for class C, between less than 'B-sf' and 'BB+sf' for
class D, between less than 'B-sf' and 'B+sf' for class E, and
between less than 'B-sf' and 'B-sf' for class F.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'Asf' for
class D, 'BBB+sf' for class E, and 'BB+sf' for class F.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assesses the asset portfolio
information. Overall, and together with any assumptions referred to
above, Fitch's assessment of the information relied upon for the
rating agency's rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for WIND RIVER 2024-1
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.
ZAIS CLO 7: Moody's Ups Rating on $30.25MM Class D Notes From Ba1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by ZAIS CLO 7, Limited:
US$33,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2030 (the "Class C Notes"), Upgraded to Aa1 (sf); previously on
July 29, 2021 Upgraded to A2 (sf)
US$30,250,000 Class D Deferrable Mezzanine Floating Rate Notes due
2030 (the "Class D Notes"), Upgraded to Baa3 (sf); previously on
August 6, 2020 Downgraded to Ba1 (sf)
ZAIS CLO 7, Limited, originally issued in October 2017, is a
managed cashflow CLO. The notes are collateralized primarily by a
portfolio of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in April 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 are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since April 2023. The Class A
notes have been paid down by approximately 55% or $137.7 million
since April 2023. Based on the Moody's calculation, the OC ratios
for the Class A/B, Class C and Class D notes are currently at
156.25%, 131.87% and 115.36%, respectively, versus April 2023
calculated level of 131.46%, 120.18% and 111.42%%, respectively.
No actions were taken on the Class A, Class B and Class E notes
because their expected losses remain commensurate with their
current ratings, after taking into account the CLO's latest
portfolio information, its relevant structural features and its
actual over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $277,596,870
Defaulted par: $6,943,781
Diversity Score: 57
Weighted Average Rating Factor (WARF): 3012
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.98%
Weighted Average Recovery Rate (WARR): 46.49%
Weighted Average Life (WAL): 3.0 years
Par haircut in OC tests and interest diversion test: 3.64%
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income and lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
[*] DBRS Takes Actions on NA Ofc Assets-Backed Single Asset Deals
-----------------------------------------------------------------
DBRS Inc. has concluded its review of transactions secured by
office properties within its North American Commercial Mortgage
Backed Securities Single-Asset/Single-Borrower (NA CMBS SASB)
portfolio that were placed Under Review with Negative Implications
on January 9, 2024. The review was prompted by Morningstar DBRS'
view that a shift in the use and demand for office space has been
observed in the last few years, with tenants placing even more
emphasis on the quality of the buildings they are leasing, the
amenities offered, and the overall desirability of their locations,
with greater preference for proximity to highly coveted
transportation nodes and vibrant neighborhoods with many food and
retail options. These trends are expected to be sustained as the
need for and use of office space have shifted for many industries
amid a greater preference and allowance for remote/hybrid work
schedules, as outlined in the Morningstar DBRS commentary,
"Differentiating North American Office Properties Amid
Sector-Specific Pressures," released in conjunction with the
January 2024 rating action. While these shifts are expected to
affect the office market as a whole, it is Morningstar DBRS' view
that there is incremental risk within these shifts, which
highlights the need for greater differentiation between buildings
and across markets to reflect both the cyclical and secular risk of
the asset class to properly assess the permanent implications for
property values and other determinants of credit risk.
The Affected Ratings are available at the DBRS site at
https://tinyurl.com/23xy5fcb
https://tinyurl.com/mpd92xmu
https://dbrs.morningstar.com/research/431215/morningstar-dbrs-takes-rating-actions-on-north-american-single-assetsingle-borrower-transactions-backed-by-office-properties
The Issuers are:
- Morgan Stanley Bank of America Merrill Lynch Trust 2014-C18
- Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21
- Albert & Lyon Equities Inc., Albert & Lyon Properties LP
and Canderel CSQ Ottawa LP - Constitution Square
- TMSQ 2014-1500 Mortgage Trust
- ASQ Building
- CSMC 2021-GATE
- BGME Trust 2021-VR
- SOHO Trust 2021-SOHO
- SLG Office Trust 2021-OVA
- CSWF Trust 2018-TOP
- MOFT Trust 2020-ABC
- GSCG Trust 2019-600C
- VNDO Trust 2016-350P
- BX Trust 2022-CLS
- AOA 2021-1177 Mortgage Trust
- DBGS 2021-W52 Mortgage Trust
- CAMB 2021-CX2 Mortgage Trust
- 1166 Alberni Street
- CRSNT Trust 2021-MOON
- BSST 2022-1700 Mortgage Trust
- COMM 2021-2400 Mortgage Trust
- COLEM 2022-HLNE Mortgage Trust
- DC Office Trust 2019-MTC
- VASA Trust 2021-VASA
- SFO Commercial Mortgage Trust 2021-555
- BXP Trust 2017-CC
- BXHPP Trust 2021-FILM
- COMM 2020-CX Mortgage Trust
- MOFT 2020-B6 Mortgage Trust
- COMM 2022-HC Mortgage Trust
- BBCMS Mortgage Trust 2020-C6
- MAD Mortgage Trust 2017-330M
- LCCM 2013-GCP Mortgage Trust
- COMM 2020-SBX Mortgage Trust
- MKT 2020-525M Mortgage Trust
- DROP Mortgage Trust 2021-FILE
- COMM 2013-300P Mortgage Trust
- COMM 2016-787S Mortgage Trust
- COMM 2019-521F Mortgage Trust
- CORE 2019-CORE Mortgage Trust
- DBGS 2018-BIOD Mortgage Trust
- DBGS 2019-1735 Mortgage Trust
- BBCMS Trust 2015-SRCH
- BBCMS 2021-AGW Mortgage Trust
- COMM 2016-667M Mortgage Trust
- BWAY 2021-1450 Mortgage Trust
- BSST 2021-1818 Mortgage Trust
- BBCMS 2018-TALL Mortgage Trust
- DBUBS 2017-BRBK Mortgage Trust
- Manhattan West 2020-1MW Mortgage Trust
- MFTII 2019-B3B4 Mortgage Trust
- SUMIT 2022-BVUE Mortgage Trust
- Benchmark 2020-IG2 Mortgage Trust
- Morgan Stanley Capital I Trust 2018-BOP
- CSAIL 2017-C8 Commercial Mortgage Trust
- Morgan Stanley Capital I Trust 2021-PLZA
- 225 Liberty Street Trust 2016-225L
- BWAY Commercial Mortgage Trust 2022-26BW
- CAMB Commercial Mortgage Trust 2019-LIFE
- Morgan Stanley Capital I Trust 2014-150E
- LIFE 2021-BMR Mortgage Trust
- Worldwide Plaza Trust 2017-WWP
- Hudson Yards 2016-10HY Mortgage Trust
- GS Mortgage Securities Corporation Trust 2017-FARM
- GS Mortgage Securities Corporation Trust 2020-UPTN
- GS Mortgage Securities Corporation Trust 2017-375H
- SG Commercial Mortgage Securities Trust 2019-787E
- Natixis Commercial Mortgage Securities Trust 2017-75B
- NYC Commercial Mortgage Trust 2021-909, Series 2021-909
- NYT 2019-NYT Mortgage Trust
- Benchmark 2020-IG3 Mortgage Trust
- Hudson Yards 2019-30HY Mortgage Trust
- A10 Single Asset Commercial Mortgage 2023-GTWY
- KREST Commercial Mortgage Securities Trust 2021-CHIP
- BAMLL Commercial Mortgage Securities Trust 2016-ISQR
- Natixis Commercial Mortgage Securities Trust 2020-2PAC
- Natixis Commercial Mortgage Securities Trust 2019-MILE
- Natixis Commercial Mortgage Securities Trust 2018-ALXA
- COMM 2015-3BP Mortgage Trust
- BBCMS 2020-BID Mortgage Trust
- J.P. Morgan Chase Commercial Mortgage Securities Trust
2019-OSB
- J.P. Morgan Chase Commercial Mortgage Securities Trust
2018-WPT
- BWAY Commercial Mortgage Securities Trust 2013-1515
- J.P. Morgan Chase Commercial Mortgage Securities Trust
2021-1MEM
- BMO 2022-C1 Mortgage Trust 360 Rosemary Loan-Specific
Certificates
- BAMLL Commercial Mortgage Securities Trust 2016-SS1
- Benchmark 2021-B25 Mortgage Trust Amazon Seattle
Loan-Specific Certificates
Morningstar DBRS takes a longer-term, rating-through-the-cycle view
that assesses the performance of an asset class in the longer run
and avoids changing ratings with each phase of an economic cycle;
therefore, there is generally less reaction to cyclical movements,
such as increases in the cost of capital or changes in
unemployment. However, as previously noted, the factors driving the
subject rating actions include a reflection of a secular shift in
the factors that determine the credit risks for the office sector
as a whole. Morningstar DBRS considers these types of secular
shifts, when observed, during the surveillance process and may
update its credit ratings in accordance with its rating
methodology, as warranted.
As part of its review, Morningstar DBRS reviewed its approach to
deriving the Morningstar DBRS value for the underlying office
properties, with an evaluation of the capitalization (cap) rates
and the performance of property cash flows relative to the most
recently derived Morningstar DBRS net cash flow (NCF). In addition,
any qualitative adjustments applied in the analysis to account for
property quality, market fundamentals and/or cash flow stability,
were also assessed. The analysis considered how each factor applied
relative to the collateral office property or office portfolio's
position within the market. Where market conditions are expected to
remain the most stressed compared with pre-pandemic levels, the
qualitative adjustments for market fundamentals were typically
moved downward to reduce the benefit in the loan-to-value (LTV)
sizing. Similarly, where investor demand is expected to remain the
most depressed and/or the collateral building's quality and/or
location was deemed a disadvantage amid the secular shifts
described above, the cap rates were moved wider and qualitative
adjustments for property quality were dampened. Qualitative
adjustments for cash flow volatility were evaluated by looking at
the scheduled rollover for the collateral properties, as well as
the demand dynamics in the market—if these factors suggested
increased credit risks, those adjustments were moved downward to
again reduce the benefit in the LTV sizing.
The credit rating actions following this review include 288 credit
rating confirmations and 230 credit rating downgrades across 87
transactions. The credit rating actions taken by Morningstar DBRS
consider the analysis as outlined above and the credit support of
each class within the structure of the specific transaction. Of the
classes downgraded, 133 were downgraded by one or two notches; in
general, these downgrades reflected relatively moderate changes in
the cap rates and qualitative factors, particularly market
fundamentals and property quality, or a combination of those
changes coupled with a relatively moderate deterioration in the
performance of the underlying asset that is expected to be
sustained for the longer term. In instances where downgrades
exceeded two notches (in total, 78 classes were downgraded between
three and six notches), there was a trend of more pronounced
declines in property performance, typically combined with more
significant upward adjustments to cap rates and/or the
consideration of a stressed DBRS Morningstar NCF as compared with
the figures previously derived. In addition, these transactions
typically had less benefit applied in the qualitative adjustments
for property quality, market fundamentals, and/or cash flow
volatility.
Nineteen classes across four transactions were downgraded between
seven and 10 notches; in the case of two of those transactions, the
underlying loans are currently in default and with the special
servicers. In the remaining two transactions, the collateral
properties are located in less desirable submarkets, and suffer
from older construction ages and limited recent capital investment.
Five classes within one transaction were upgraded based on
significantly improved, sustained performance. Additionally, a
subset of 15 transactions comprising 88 classes remains Under
Review with Negative Implications following this review as more
information is yet to be received and/or additional reviews are
expected to be incorporated into the analysis. In some cases,
sufficient information was available to resolve the Under Review
with Negative Implications status, but concerns about evolving or
emerging risks remain. In those cases, Morningstar DBRS placed
Negative trends on the classes (60 classes in 16 transactions)
deemed to have exposure to those risks.
As part of the analysis for these credit rating actions,
Morningstar DBRS reviewed quarterly broker and investor surveys of
cap rates to gain an understanding of the market's view on both the
incremental and market specific risk. Overall, these surveys
revealed that cap rates have increased an average of 1.0% to 1.25%.
It should be noted that Morningstar DBRS cap rates in the past 10
years have traditionally been significantly higher than the
prevailing market cap rates used by the appraiser or observed in
acquisition financing. However, as interest rates rose dramatically
over the last year, it was Morningstar DBRS' expectation that the
delta between those values would shrink. In addition, Morningstar
DBRS believes that some of that increase in cap rates across broker
and investor surveys is a direct reflection of the cyclical
increase in interest rates.
With this review, Morningstar DBRS generally applied a 25 to 50
basis point premium to its existing cap rates as a baseline
reflection of the secular shift that view office loans as a riskier
property type compared with previous cycles. As a result, there may
be a limit to future cash flow growth in the sector. Additionally,
Morningstar DBRS looked at each property, considering its age,
build-out, its current leasing and vacancy rates, upcoming tenant
rollover, and its position within the market to determine if an
additional cap rate adjustment was warranted. Particularly
noteworthy factors such as the stickiness of current tenancy (long
term leases); current vacancy at the property compared with market
vacancy; concentration of upcoming lease expiries; proximity to
employment centers and primary transportation nodes; quality of the
building, including year built and/or extent of last renovation;
and market dynamics (net absorption) were considered. Where
warranted, those considerations resulted in increased cap rates
that ranged from 0.25% to 1.75% on certain assets, with the average
overall change to cap rates of approximately 0.70%.
The Morningstar DBRS North American Single-Asset/Single-Borrower
Ratings Methodology outlines the consideration of qualitative
adjustments related to an asset and the asset's location. As
previously noted, these adjustments allow Morningstar DBRS to
adjust for the property's net cash flow volatility, property
quality, and market fundamentals. These adjustments are considered
in addition to the stabilized cap rate that Morningstar DBRS
assigns as part of the determination of the Morningstar DBRS Value
for the collateral property and serve to further differentiate
assets. In evaluating the market fundamentals for each of the
prevalent markets represented in the subject transactions, data
from market providers such as Reis, CBRE, and Cushman & Wakefield
were reviewed. In addition, Morningstar DBRS held calls with
leasing brokers, visited many of the markets and properties,
including a walking tour of New York City that included nearly
every property in the city that backs an underlying loan in
outstanding NA CMBS SASB transactions. Morningstar DBRS also
reviewed data and information from the CREFC Investor Reporting
Package and from the servicers in response to questions posed
throughout this process.
Notes: The principal methodology is North American CMBS
Surveillance Methodology.
[*] S&P Takes Various Actions on 51 Classes From Six US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 51 ratings from six U.S.
RMBS transactions issued between 2003 and 2008. The review yielded
five upgrades, one downgrade, 12 withdrawals, and 33 affirmations.
A list of Affected Ratings can be viewed at:
https://rb.gy/hrfmv5
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- Increase or decrease in available credit support;
-- Assessment of reduced interest payments due to loan
modifications and other credit-related events;
-- A small loan count; and
-- Payment priority.
Rating Actions
S&P said, "The rating changes reflect our view regarding the
associated transaction-specific collateral performance, structural
characteristics, and/or the application of specific criteria
applicable to these classes. See the ratings list below for the
specific rationales associated with each of the classes with rating
transitions.
"The affirmations reflect our view that our projected credit
support, collateral performance, and credit-related reductions in
interest on these classes have remained relatively consistent with
our prior projections.
"We withdrew our ratings on 10 classes from three transactions due
to the small number of loans remaining in the related group. Once a
pool has declined to a de minimis amount, its future performance
becomes more difficult to project. As such, we believe there is a
high degree of credit instability that is incompatible with any
rating level. Additionally, as a result, we applied our
principal-only criteria, "Methodology For Surveilling U. S. RMBS
Principal-Only Strip Securities For Pre-2009 Originations,"
published Oct. 11, 2016, which resulted in the withdrawal of two
additional ratings from two transactions."
*********
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