/raid1/www/Hosts/bankrupt/TCR_Public/240602.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, June 2, 2024, Vol. 28, No. 153
Headlines
ABPCI DIRECT XVII: S&P Assigns Prelim BB- (sf) Rating on E Notes
AIMCO CLO 21: Fitch Assigns 'BBsf' Rating on Class F Notes
AIMCO CLO 21: Moody's Assigns B3 Rating to $3MM Class F Notes
AMMC CLO 28: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
AMUR EQUIPMENT IX: DBRS Hikes Class F Notes Rating to BB
APIDOS CLO XXII: Moody's Affirms B3 Rating on $10MM Cl. E-R Notes
ARBOR REALTY 2021-FL1: DBRS Confirms B(low) Rating on G Notes
BANK 2018-BNK12: Fitch Affirms 'B-sf' Rating on Two Tranches
BANK5 2024-5YR7: Fitch Assigns 'B-(EXP)sf' Rating on Two Tranches
BANK5 2024-5YR7: Moody's Assigns (P)Ba3 Rating to Cl. CIRA-3 Certs
BARINGS CLO 2019-IV: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
BBCMS MORTGAGE 2024-C26: Fitch Assigns 'B-sf' Rating on G-RR Certs
BENEFIT STREET XIX: S&P Assigns BB- (sf) Rating on Class E Notes
BIRCH GROVE CLO: Moody's Assigns B3 Rating to $1.25MM F-RR Notes
BRAVO RESIDENTIAL 2024-RPL1: Fitch Gives B(EXP) Rating on B-2 Notes
BX 2023-DELC: DBRS Confirms BB(low) Rating on Class F Certs
BX 2024-PALM: S&P Assigns Prelim BB (sf) Rating on Cl. HRR Certs
CAPTREE PARK: S&P Assigns BB- (sf) Rating on Class E Notes
CD 2016-CD1: DBRS Cuts Class D Certs Rating to CCC
CHASE HOME 2019-ATR1: Moody's Hikes Rating on Cl. B-5 Certs to Ba1
CHASE HOME 2024-5: Fitch Assigns Bsf Final Rating on Cl. B-5 Certs
CITIGROUP 2022-GC48: DBRS Confirms BB(low) Rating on YL-C Certs
COLT 2024-3: Fitch Gives 'B(EXP)sf' Rating on Class B2 Certificates
COLUMBIA CENT 33: S&P Assigns BB- (sf) Rating on Class E Notes
COMM 2012-LC4: Moody's Downgrades Rating on 2 Tranches to C
COMM 2016-COR1: Fitch Lowers Rating on Two Tranches to 'B+sf'
COMM 2024-WCL1: Moody's Assigns (P)B1 Rating to Cl. HRR Certs
CSAIL 2015-C4: DBRS Confirms B Rating on Class X-G Certs
DRYDEN 83 CLO: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
EXETER AUTOMOBILE 2024-3: S&P Assigns BB- (sf) Rating on E Notes
GCAT TRUST 2024-INV2: Moody's Assigns (P)B2 Rating to B-5 Certs
GOLDENTREE LOAN 20: S&P Assigns B- (sf) Rating on Class E Notes
GS MORTGAGE 2018-RIVR: S&P Assigns 'B- (sf)' Rating on Cl. D Notes
GS MORTGAGE 2024-RPL3: DBRS Gives B(high) Rating on Class B2 Notes
HALCYON LOAN 2017-1: Moody's Lowers Rating on $16MM D Notes to B1
HAWAII HOTEL 2019-MAUI: DBRS Confirms B Rating on Class HRR Certs
HILDENE TRUPS P16BC: Moody's Assigns B2 Rating to $8MM Cl. B Notes
HILDENE TRUPS P18C: Moody's Assigns (P)Ba3 Rating to $7MM B Notes
HILT COMMERCIAL 2024-ORL: S&P Assigns BB+ (sf) Rating on HRR Certs
JP MORGAN 2017-6: Moody's Hikes Rating on Cl. B-5 Certs From Ba3
JP MORGAN 2018-1: Moody's Hikes Rating on Cl. B-5 Certs from Ba3
JP MORGAN 2018-PTC: S&P Lowers Class E Certs Rating to 'D (sf)'
JP MORGAN 2019-5: Moody's Upgrades Rating on Cl. B-5 Certs From B1
JP MORGAN 2024-HE2: Fitch Assigns B(EXP)sf Rating on Cl. B-2 Certs
JPMBB COMMERCIAL 2014-C22: DBRS Confirms C Rating on 3 Classes
JPMBB COMMERCIAL 2014-C23: Fitch Lowers Rating on 2 Tranches to B
JPMBB COMMERCIAL 2015-C33: DBRS Confirms BB Rating on E Certs
KKR CLO 18: Moody's Upgrades Rating on $35MM Class E Notes to Ba3
LCCM 2021-FL2: DBRS Confirms B(low) Rating on Class G Notes
LODI PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
MADISON PARK LIX: Moody's Assigns B3 Rating to $250,000 Cl. F Notes
MADISON PARK XXIV: S&P Withdraws 'B(sf)' Rating on Class E-R Notes
MELLO MORTGAGE 2024-SD1: DBRS Finalizes BB(high) Rating on M2 Notes
MORGAN STANLEY 2016-BNK2: S&P Affirms 'CCC-' Rating on EFG Certs
MORGAN STANLEY 2018-BOP: S&P Lower X-EXT Certs Rating to 'CCC(sf)'
MORGAN STANLEY 2018-MP: DBRS Confirms BB Rating on Class E Certs
MORGAN STANLEY 2019-PLND: Moody's Cuts Rating on D Certs to Caa2
MOUNTAIN VIEW XV: S&P Assigns BB- (sf) Rating on Class E-R Notes
MPOWER EDUCATION 2024-A: DBRS Gives Prov. BB Rating on C Notes
NEW RESIDENTIAL 2024-RPL1: DBRS Gives Prov. B(high) on B5 Notes
OCP CLO 2024-33: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
OCTAGON 63: Fitch Assigns 'B-sf' Rating on Class F Notes
OHA CREDIT 19: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
OZLM LTD XV: Moody's Hikes Rating on $22MM Class D-R Notes to Ba3
PEAKS CLO 2: Moody's Cuts Rating on $11MM Class E-R Notes to Caa2
PRIME STRUCTURED 2021-1: Moody's Ups Cl. E Certs Rating From Ba1
PRKCM 2024-HOME1: S&P Assigns B (sf) Rating on Class B-2 Notes
PRPM 2024-RCF3: DBRS Gives Prov. BB(low) Rating on Class M-2 Notes
RAD CLO 24: Fitch Assigns 'BB+sf' Rating on Class E Notes
RAMP SERIES 2006-RS5: Moody's Hikes Rating on Cl. A-4 Certs to Ba3
RCKT MORTGAGE 2024-CES4: Fitch Assigns Bsf Rating on Cl. B-2 Notes
READY CAPITAL 2021-FL6: DBRS Confirms B(low) Rating on G Notes
RR 8: S&P Assigns BB- (sf) Rating on $18MM Class D-R Notes
SCF EQUIPMENT 2024-1: Moody's Assigns (P)B3 Rating to Cl. F Notes
SEQUOIA MORTGAGE 2017-1: Moody's Ups Rating on B-4 Certs From Ba3
SEQUOIA MORTGAGE 2018-2: Moody's Ups Rating on B-4 Certs From Ba1
SLM STUDENT 2004-10: Moody's Cuts Rating on Cl. A-8 Certs to Ba1
SOUND POINT III-R: Moody's Affirms B1 Rating on $21MM Cl. E Notes
SREIT TRUST 2021-FLWR: DBRS Confirms B(low) Rating on F Certs
TOWD POINT 2024-CES3: Fitch Assigns 'B-(EXP)sf' Rating on B2 Notes
TRICOLOR AUTO 2024-2: Moody's Assigns B2 Rating to Class F Notes
VERTICAL BRIDGE 2024-1: Fitch Assigns 'BB-sf' Rating on Cl. F Notes
VISTA POINT 2024-CES1: DBRS Gives Prov. B Rating on Class B2 Notes
VOYA CLO 2016-3: S&P Affirms 'B- (sf)' Rating on Class D-R Notes
WELLFLEET CLO 2015-1: Moody's Cuts Rating on E-R3 Notes to Caa1
WELLFLEET CLO 2016-2: Moody's Cuts $19.2MM D-R Notes Rating to B1
WELLS 2024-SVEN: S&P Assigns Prelim BB- (sf) Rating on HRR Certs
WELLS FARGO 2015-C27: DBRS Confirms C Rating on Class F Certs
WELLS FARGO 2019-C50: Fitch Lowers Rating to 'B-sf' on Two Tranches
WESTGATE RESORTS 2022-1: DBRS Hikes D Notes Rating to BB (high)
WESTLAKE AUTOMOBILE 2024-2: S&P Assigns BB (sf) Rating on E Notes
WFRBS COMMERCIAL 2014-C23: Fitch Lowers Rating on Cl. D Certs to B-
WIND RIVER 2020-1: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
WIND RIVER 2024-1: Fitch Assigns 'B-sf' Rating on Class F Notes
[*] DBRS Reviews 205 Classes From 21 US RMBS Transactions
[*] DBRS Reviews 35 Classes in 3 US RMBS Transactions
[*] Moody's Cuts Ratings on $32.5MM of US RMBS Issued 2005
[*] Moody's Takes Action on $612MM of US RMBS Issued 2001-2006
[*] Moody's Takes Action on $94MM of US RMBS Issued 2006-2007
[*] Moody's Upgrades $64.9MM of US RMBS Issued 2005-2006
[*] S&P Takes Various Actions on 102 iShares Fixed-Income ETFs
[*] S&P Takes Various Actions on 54 Classes From 18 US RMBS Deals
*********
ABPCI DIRECT XVII: S&P Assigns Prelim BB- (sf) Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to ABPCI Direct
Lending Fund CLO XVII LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by AB Private Credit Investors LLC.
The preliminary ratings are based on information as of May 28,
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
ABPCI Direct Lending Fund CLO XVII LLC
Class A-1(i), $222.800 million: AAA (sf)
Class A-1L-A(i), $120.000 million: AAA (sf)
Class A-1L-B(i), $40.000 million: AAA (sf)
Class A-2, $19.800 million: AAA (sf)
Class B, $46.200 million: AA (sf)
Class C (deferrable), $52.800 million: A (sf)
Class D (deferrable), $39.600 million: BBB- (sf)
Class E (deferrable), $39.600 million: BB- (sf)
Subordinated notes, $80.375 million: Not rated
(i)The class A-1 notes, class A-1L-A loans, and class A-1L-B loans
will be issued pari passu. The class A-1L-A loans are convertible
into class A-1 notes at any time, while the class A-1L-B loans and
class A-1 notes are not convertible into any other class.
AIMCO CLO 21: Fitch Assigns 'BBsf' Rating on Class F Notes
----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to AIMCO CLO
21, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
AIMCO CLO 21,
Ltd.
A-1 LT NRsf New Rating NR(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AA+sf New Rating AA+(EXP)sf
C LT A+sf New Rating A+(EXP)sf
D-1 LT BBB-sf New Rating BBB-(EXP)sf
D-2 LT BBB-sf New Rating BBB-(EXP)sf
E LT BBsf New Rating BB(EXP)sf
F LT NRsf New Rating NR(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
AIMCO CLO 21, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Allstate Investment Management Company. 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
97.02% first-lien senior secured loans and has a weighted average
recovery assumption of 74.94%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 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
is 12 months less than the WAL covenant to account for structural
and reinvestment conditions after the reinvestment period. In
Fitch's opinion, these conditions would reduce the effective risk
horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D-1,
between less than 'B-sf' and 'BB+sf' for class D-2; and between
less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AA+sf' for class C, 'A+sf' for
class D-1, 'A-sf' for class D-2; and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authorityregistered 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
DATE OF RELEVANT COMMITTEE
14 May 2024
ESG Considerations
Fitch does not provide ESG relevance scores for AIMCO CLO 21, 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.
AIMCO CLO 21: Moody's Assigns B3 Rating to $3MM Class F Notes
-------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of notes issued
by AIMCO CLO 21, Ltd. (the "Issuer" or "AIMCO 21").
Moody's rating action is as follows:
US$256,000,000 Class A-1 Senior Secured Floating Rate Notes due
2037, Definitive Rating Assigned Aaa (sf)
US$3,000,000 Class F Junior 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.
AIMCO 21 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans and bonds. The portfolio is approximately 95%
ramped as of the closing date.
Allstate Investment Management Company (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 May 2024.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2875
Weighted Average Spread (WAS): 3.30%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
AMMC CLO 28: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to AMMC CLO 28
Ltd./AMMC CLO 28 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 American Money Management Corp.
The preliminary ratings are based on information as of May 24,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
AMMC CLO 28 Ltd./AMMC CLO 28 LLC
Class A-1A, $235.50 million: AAA (sf)
Class A-1F, $12.50 million: AAA (sf)
Class A-J, $16.00 million: AAA (sf)
Class B, $40.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D-1 (deferrable), $22.00 million: BBB (sf)
Class D-J (deferrable), $6.00 million: BBB- (sf)
Class E (deferrable), $10.00 million: BB- (sf)
Subordinated notes, $40.70 million: Not rated
AMUR EQUIPMENT IX: DBRS Hikes Class F Notes Rating to BB
--------------------------------------------------------
DBRS, Inc. upgraded 11 credit ratings and confirmed seven credit
ratings on three Amur Equipment Finance transactions.
AMUR Equipment Finance Receivables IX LLC
-- Series 2021-1, Class A-2 Notes AAA (sf) Confirmed
-- Series 2021-1, Class B Notes AAA (sf) Confirmed
-- Series 2021-1, Class C Notes AAA (sf) Upgraded
-- Series 2021-1, Class D Notes A (high) (sf) Upgraded
-- Series 2021-1, Class E Notes BBB (high)(sf) Upgraded
-- Series 2021-1, Class F Notes BB (sf) Upgraded
The credit rating actions are based on the following analytical
considerations:
-- The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios For Rated
Sovereigns March 2024 Update," published on March 27, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse COVID-19 pandemic scenarios, which were first published
in April 2020.
-- The currently available hard credit enhancement in the form of
overcollateralization, subordination (as applicable), and amounts
of deposit in the cash reserve account, as well as the change in
the level of protection afforded by each form of credit enhancement
since the closing of each transaction.
-- The collateral performance on the transactions are within
expectation with low levels of cumulative net loss to date.
-- The relative benefit from obligor and geographic
diversification of collateral pools.
-- The transaction parties' capabilities with regard to
originating, underwriting, and servicing.
APIDOS CLO XXII: Moody's Affirms B3 Rating on $10MM Cl. E-R Notes
-----------------------------------------------------------------
Moody's Ratings has upgraded ratings on the following notes issued
by Apidos CLO XXII:
USD55M Class A-2R Senior Secured Floating Rate Notes, Upgraded to
Aaa (sf); previously on Mar 27, 2023 Upgraded to Aa1 (sf)
USD29.5M Class B-R Mezzanine Secured Deferrable Floating Rate
Notes, Upgraded to Aa3 (sf); previously on Mar 27, 2023 Upgraded to
A1 (sf)
Moody's has also affirmed the ratings on the following notes:
USD325M (current outstanding amount USD244,363,041) Class A-1R
Senior Secured Floating Rate Notes, Affirmed Aaa (sf); previously
on Mar 12, 2020 Assigned Aaa (sf)
USD29M Class C-R Mezzanine Secured Deferrable Floating Rate Notes,
Affirmed Baa3 (sf); previously on Mar 12, 2020 Assigned Baa3 (sf)
USD21.5M Class D-R Mezzanine Secured Deferrable Floating Rate
Notes, Affirmed Ba3 (sf); previously on Mar 12, 2020 Assigned Ba3
(sf)
USD10M Class E-R Mezzanine Secured Deferrable Floating Rate Notes,
Affirmed B3 (sf); previously on Mar 12, 2020 Assigned B3 (sf)
Apidos CLO XXII, originally issued in October 2015 and refinanced
in March 2020 is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The portfolio is managed by CVC
Credit Partners, LLC. The transaction's reinvestment period ended
in April 2023.
RATINGS RATIONALE
The rating upgrades on the Class A-2R and Class B-R notes are
primarily a result of the deleveraging of the Class A-1R notes
following amortisation of the underlying portfolio since the
reinvestment period ended in April 2023.
The affirmations on the ratings on the Class A-1R, Class C-R, Class
D-R and Class E-R notes are primarily a result of the expected
losses on the notes remaining consistent with their current rating
levels, after taking into account the CLO's latest portfolio, its
relevant structural features and its actual over-collateralisation
ratios.
The Class A-1R notes have paid down by approximately USD80.6
million (24.8%) since the end of the reinvestment period in April
2023. As a result of the deleveraging, over-collateralisation (OC)
has increased for the senior notes. According to the trustee report
dated April 2024 [1] the Class A, Class B, Class C and Class D OC
ratios are reported at 131.3%, 121.1%, 112.4% and 106.8% compared
to April 2023 [2] levels of 130.2%, 120.8%, 112.8% and 107.6%,
respectively. Moody's notes that the April 2024 principal payments
are not reflected in the reported OC ratios.
Key model inputs:
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: USD408.2m
Defaulted Securities: USD3.1m
Diversity Score: 69
Weighted Average Rating Factor (WARF): 2848
Weighted Average Life (WAL): 3.5 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.1%
Weighted Average Recovery Rate (WARR): 47.4%
Par haircut in OC tests and interest diversion test: None
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, using the methodology "Moody's Approach to
Assessing Counterparty Risks in Structured Finance" published in
October 2023. Moody's concluded the ratings of the notes are not
constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
-- Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
-- Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's analysed
defaulted recoveries assuming the lower of the market price or the
recovery rate to account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a positive
impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
ARBOR REALTY 2021-FL1: DBRS Confirms B(low) Rating on G Notes
-------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
commercial mortgage-backed notes issued by Arbor Realty Commercial
Real Estate Notes 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 rating confirmations and Stable trends reflect the overall
stable performance of the outstanding collateral in the transaction
and the increased credit enhancement to the bonds as a result of
successful loan repayment. Since the previous Morningstar DBRS
credit rating action in June 2023, there has been a collateral
reduction of 26.6%. This collateral reduction and the $60.8 million
unrated first-loss piece serve as mitigants to the specially
serviced loan concentration, which includes three loans,
representing 5.1% of the current trust balance. Based on
information provided by the servicer, Morningstar DBRS expects
these loans to ultimately be liquidated with any realized losses
expected to be contained to the unrated equity piece.
Additionally, 12 loans, representing 37.0% of the current trust
balance, have scheduled maturity dates throughout 2024. Based on
YE2023 reporting, these loans reported debt yields ranging from
1.1% to 9.3%. Given the current financing and property sale
environments, select borrowers are expected to face difficulties in
executing exit strategies, potentially increasing credit risk on
those loans. 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 and with
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@dbrsmorningstar.com.
The transaction closed in March 2021 with the initial collateral
pool consisting of 37 floating-rate mortgages and senior
participations secured by 64 mostly transitional properties,
totaling $635.2 million. Most of the loans were secured by
cash-flowing assets, with some level of stabilization remaining.
The transaction included a 180-day ramp-up acquisition period,
which was completed in August 2021 when the cumulative loan balance
totaled $785.0 million.
The transaction was structured with a Reinvestment Period that
expired with the September 2023 Payment Date. As of the April 2024
remittance, the pool comprises 29 loans with a cumulative loan
balance of $576.6 million. Since Morningstar DBRS' previous credit
rating action, 16 loans with a former cumulative trust loan balance
of $261.5 million have repaid from the trust while 11 loans
totaling $182.7 million were contributed to the trust prior to the
end of the Reinvestment Period in September 2023.
The transaction is concentrated by property type as all loans are
secured by multifamily properties. The transaction is also
concentrated by loan size, as the largest 10 loans represent 59.5%
of the pool. The loans are primarily secured by properties in
suburban markets as 21 loans, representing 72.7% of the pool, are
secured by properties in suburban markets, as defined by
Morningstar DBRS, with a Morningstar DBRS Market Rank of 3, 4, or
5. An additional five loans, representing 9.5% of the pool, are
secured by properties with a Morningstar DBRS Market Rank of 1 and
2, denoting a rural or tertiary market while one loan, representing
3.5% of the pool, is secured by a property with a DBRS Morningstar
Market Rank of 7, denoting an urban market.
The largest loan in special servicing, Tivoli at Vintage Park
(Prospectus ID#59; 3.2% of the current pool balance) is secured by
a 158-unit, garden-style property built in 1999 in Houston. The
loan transferred to the special servicer in February 2024 for
payment default. According to the April 2024 remittance, the
December 2023 loan payment remains due. After an attempt to sell
the property fell through in July 2023, the borrower exercised a
12-month extension option, pushing the maturity to November 2024 to
aid in efforts to sell the asset. The special servicer is currently
dual tracking the sale of the asset and foreclosure proceedings.
The business plan at origination included the renovation of 118
units budgeted at $494,600; however, after renovating 58 units for
approximately $250,000, the remaining funds were used to pay an
outstanding property tax bill. According to the collateral
manager's December 2023 report, property occupancy, cash flow, and
the debt service coverage ratio (DSCR) had fallen below issuance
levels and were short of projected stabilized levels. In
particular, the in-place occupancy rate and cash flow were 3.2% and
$0.4 million below projected stabilized levels, respectively. Given
the inability of the borrower to complete the business plan and the
current status of the loan, Morningstar DBRS analyzed the loan with
a liquidation scenario for this review with a resulting loss
severity of approximately 15.0%.
Morningstar DBRS also analyzed the second-largest specially
serviced loan with a liquidation scenario for this review. The
loan, Nirvana at Riverdale (Prospectus ID#86; 1.8% of the current
pool balance), is secured by a 165-unit garden-style property
located in the College Park neighborhood of Atlanta. The loan
transferred to special servicing for imminent monetary default in
November 2023 because the borrower was unable to repay the loan at
maturity. The special servicer and borrower are currently working
on a resolution for the loan that may include either the sale of
the property or a loan assumption; however, discussions are
ongoing. The loan is delinquent and the September 2023 payment
remains due. The borrower originally planned to renovate the
property at a total budgeted cost of $1.1 million, which included
the interior renovations for 43 units. As of the December 2023
collateral report, the lender had advanced 97.0% of the renovation
reserves; however, performance had not improved to stabilized
projections. In particular, the occupancy rate was 57.2% compared
with the projected 95.2% figure, while cash flow and DSCR levels
were close to zero. In its liquidation scenario, Morningstar DBRS
concluded a resulting loss severity of 20.0%.
Notes: All figures are in U. S. dollars unless otherwise noted.
BANK 2018-BNK12: Fitch Affirms 'B-sf' Rating on Two Tranches
------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of BANK 2018-BNK11. The
Rating Outlooks for classes E, F and X-E have been revised to
Negative from Stable.
Fitch has also affirmed 15 classes BANK 2018-BNK12. The Rating
Outlook for classes D and X-D have been revised to Negative from
Stable. The Outlook for classes E and X-E remain Negative.
Entity/Debt Rating Prior
----------- ------ -----
BANK 2018-BNK12
A-2 06541KAX6 LT AAAsf Affirmed AAAsf
A-3 06541KAZ1 LT AAAsf Affirmed AAAsf
A-4 06541KBA5 LT AAAsf Affirmed AAAsf
A-S 06541KBD9 LT AAAsf Affirmed AAAsf
A-SB 06541KAY4 LT AAAsf Affirmed AAAsf
B 06541KBE7 LT AA-sf Affirmed AA-sf
C 06541KBF4 LT BBBsf Affirmed BBBsf
D 06541KAJ7 LT BBsf Affirmed BBsf
E 06541KAL2 LT B-sf Affirmed B-sf
F 06541KAN8 LT CCCsf Affirmed CCCsf
X-A 06541KBB3 LT AAAsf Affirmed AAAsf
X-B 06541KBC1 LT AAAsf Affirmed AAAsf
X-D 06541KAA6 LT BBsf Affirmed BBsf
X-E 06541KAC2 LT B-sf Affirmed B-sf
X-F 06541KAE8 LT CCCsf Affirmed CCCsf
BANK 2018-BNK11
A-1 06540TAA8 LT AAAsf Affirmed AAAsf
A-2 06540TAC4 LT AAAsf Affirmed AAAsf
A-3 06540TAD2 LT AAAsf Affirmed AAAsf
A-S 06540TAG5 LT AAAsf Affirmed AAAsf
A-SB 06540TAB6 LT AAAsf Affirmed AAAsf
B 06540TAH3 LT AA-sf Affirmed AA-sf
C 06540TAJ9 LT A-sf Affirmed A-sf
D 06540TAP5 LT BBB-sf Affirmed BBB-sf
E 06540TAR1 LT BB-sf Affirmed BB-sf
F 06540TAT7 LT B-sf Affirmed B-sf
X-A 06540TAE0 LT AAAsf Affirmed AAAsf
X-B 06540TAF7 LT AA-sf Affirmed AA-sf
X-D 06540TAK6 LT BBB-sf Affirmed BBB-sf
X-E 06540TAM2 LT BB-sf Affirmed BB-sf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Transaction-level 'Bsf'
rating case losses are 3.54% in BANK 2018-BNK11 and 5.19% in BANK
2018-BNK12.
The affirmations in the BANK 2018-BNK11 transaction reflect overall
stable loan performance and loss expectations since Fitch's prior
rating action. All loans are current, and there are no loans in
special servicing. The Negative Outlooks for classes E, F and X-E
reflect performance concerns with the only Fitch Loan of Concern
(FLOC) in the pool, One Lincoln Station (4.1% of the pool). Fitch
performed an additional sensitivity scenario that assumed a
potential outsized loss of 50% on this loan, resulting in a 'Bsf'
sensitivity case loss for the pool of 4.1%.
One Lincoln Station is the largest contributor to overall pool loss
expectations in BMARK 2018-BNK11. The loan is secured by a
147,184-sf office property built in 2008 and located in Lone Tree,
CO. Nationwide Mutual Insurance (previously 52.78% of NRA) vacated
in the fourth quarter of 2020, prior to its lease expiration in
January 2023. A $4.7 million termination fee is held in a reserve
escrow account. Occupancy has remained at 44% for the prior two
years as the sponsor looks to backfill the space vacated by
Nationwide. The servicer-reported YE 2023 NOI was negative. Fitch's
'Bsf' rating case loss (prior to concentration add-ons) of 36.7%
reflects a 10% cap rate, 55% stress to the YE 2022 NOI to account
for the loss of Nationwide and factors a higher probability of
default.
In addition to the base case analysis, Fitch performed a
sensitivity scenario that considers a higher stressed loss of 50%
on the loan given the lack of leasing activity, decline in value
and concerns that the loan may transfer to special servicing; this
sensitivity analysis contributed to the Negative Outlook revisions
for classes E, F and X-E.
The affirmations in the BANK 2018-BNK12 transaction reflect
generally stable performance and loss expectations since Fitch's
prior rating action. Fitch has identified six loans (29.7%) as
FLOCs. The Negative Outlooks on classes D, E, X-D and X-E reflect
elevated losses for the Fair Oaks Mall loan (8.5%) as well as
concerns on the ultimate resolution given performance declines and
the prolonged timeline for a proposed redevelopment of the
property.
The Fair Oaks Mall loan is secured by an enclosed regional mall in
Fairfax, VA. Non-collateral anchors at the property include
JCPenney and Macy's Furniture Gallery. A second Macy's store serves
as a collateral anchor (27.7% of collateral NRA; leased through
February 2026). The non-collateral, Seritage-owned former Sears
store has been subdivided and leased to Dick's Sporting Goods and
Dave & Buster's, and the non-collateral Lord & Taylor space has
remained vacant since early 2021.
The loan transferred to special servicing in February 2023 due to
the borrower indicating they would not be able to pay off the loan
at the scheduled maturity in May 2023. Olshan Properties (Olshan)
and the special servicer agreed to a maturity extension through
November 2026, with two, one-year extension options (final extended
maturity in November 2028). Olshan was formerly a partner in the
borrowing entity with Taubman Realty Partners, but is now the
majority equity owner and property manager. According to the
special servicer, the extension would allow Olshan time to execute
on a redevelopment of the property into a residential focused
mixed-use development.
The collateral was 92% occupied as of September 2023, compared to
91% in September 2022, 89% at YE 2021, 91% at YE 2020 and 93.8% at
YE 2019. Local media reports indicate that Apple will vacate the
mall and move to Fairfax Corner, a new open-air development in the
market.
The annualized September 2023 NOI was reported to be $17.9 million,
which is well below the historical servicer-reported NOIs of $21.6
million in 2021 and $22.5 million in 2020. Fitch's 'Bsf' rating
case loss (prior to concentration add-ons) of 28.7% reflects a
12.5% cap rate and 7.5% stress to the annualized September 2023
NOI. While the maturity extension has given the borrower time to
reposition the property and seek refinancing, Fitch has concerns
with the ultimate resolution of the loan given performance declines
amid a possible extensive redevelopment timeframe for project
completion.
Changes in Credit Enhancement (CE): As of the April 2024
distribution date, the aggregate balances of the BANK 2018-BNK11
and BANK 2018-BNK12 transactions have been paid down by 4.5% and
5.5%, respectively, since issuance. The BANK 2018-BNK12 transaction
includes four loans (1.5% of the pool) that have fully defeased.
There are no defeased loans within the BANK 2018-BNK11
transaction.
Cumulative interest shortfalls of approximately $7,000 are
affecting the non-rated class G in BANK 2018-BNK11 and
approximately $243,000 are affecting the non-rated class G in BANK
2018-BNK12.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior and junior '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 in the 'BBBsf', 'BBsf' and 'Bsf' categories 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 FLOCs. Of particular concern in the BANK 2018-BNK11 transaction
include the One Lincoln Station FLOC. Of particular concern in the
BANK 2018-BNK12 transaction include the Cool Springs Galleria, Fair
Oaks Mall, 181 Freemont Street and Hampton & Homewood Memphis
FLOCs.
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 sustained
improved performance on the aforementioned FLOCs.
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 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.
BANK5 2024-5YR7: Fitch Assigns 'B-(EXP)sf' Rating on Two Tranches
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BANK5 2024-5YR7 commercial mortgage pass-through certificates
series 2024-5YR7 as follows:
- $925,000 class A-1 'AAAsf'; Outlook Stable;
- $175,000,000a class A-2 'AAAsf'; Outlook Stable;
- $0bg class A-2-1 'AAAsf'; Outlook Stable;
- $0bg class A-2-X1 'AAAsf'; Outlook Stable;
- $0bg class A-2-2 'AAAsf'; Outlook Stable;
- $0bg class A-2-X2 'AAAsf'; Outlook Stable;
- $586,301,000a class A-3 'AAAsf'; Outlook Stable;
- $0bg class A-3-1 'AAAsf'; Outlook Stable;
- $0bg class A-3-X1 'AAAsf'; Outlook Stable;
- $0bg class A-3-2 'AAAsf'; Outlook Stable;
- $0bg class A-3-X2 'AAAsf'; Outlook Stable
- $762,226,000b class X-A 'AAAsf'; Outlook Stable;
- $110,251,000 class A-S 'AAAsf'; Outlook Stable;
- $0bg class A-S-1 'AAAsf'; Outlook Stable
- $0bg class A-S-X1 'AAAsf'; Outlook Stable
- $0bg class A-S-2 'AAAsf'; Outlook Stable
- $0bg class A-S-X2 'AAAsf'; Outlook Stable
- $53,084,000 class B 'AA-sf'; Outlook Stable;
- $0bg class B-1 'AA-sf'; Outlook Stable
- $0bg class B-X1 'AA-sf'; Outlook Stable
- $0bg class B-2 'AA-sf'; Outlook Stable
- $0bg class B-X2 'AA-sf'; Outlook Stable
- $42,195,000 class C 'A-sf'; Outlook Stable;
- $0bg class C-1 'A-sf'; Outlook Stable
- $0bg class C-X1 'A-sf'; Outlook Stable
- $0bg class C-2 'A-sf'; Outlook Stable
- $0bg class C-X2 'A-sf'; Outlook Stable
- $205,530,000b class X-B 'A-sf'; Outlook Stable;
- $23,139,000c class D 'BBBsf'; Outlook Stable;
- $12,250,000c class E 'BBB-sf'; Outlook Stable;
- $35,389,000bc class X-D 'BBB-sf'; Outlook Stable;
- $23,139,000c class F 'BB-sf'; Outlook Stable;
- $23,139,000bc class X-F 'BB-sf'; Outlook Stable;
- $14,972,000c class G 'B-sf'; Outlook Stable;
- $14,972,000bc class X-G 'B-sf'; Outlook Stable;
The following classes are not expected to be rated by Fitch:
- $47,639,671c class J
- $47,639,671bc class X-J
- $47,532,548d class RR
- $9,777,750d RR Interest
- $5,035,000e CIRA-1
- $15,105,000e CIRA-2
- $22,610,000e CIRA-3
- $2,250,000f CIRA-RR Interest
(a) The initial certificate balances of classes A-2 and A-3 are
unknown and are expected to be $761,301,000 in aggregate, subject
to a 5% variance. The certificate balance will be determined based
on the final pricing of those classes of certificates. The expected
class A-2 balance range is $0 -$350,000,000, and the expected class
A-3 balance range is $411,301,000 - $761,301,000. Fitch's
certificate balances for classes A-2 and A-3 are assumed at the
midpoints of their respective ranges. In the event that the class
A-3 is issued with an initial certificate balance of $761,301,000,
class A-2 will not be issued.
(b) Notional amount and interest only
(c) Privately placed and pursuant to Rule 144A.
(d) Collectively represent the "eligible vertical interest"
comprising 5.0% of the pool.
(e) The transaction includes three classes of non-offered,
loan-specific certificates (non-pooled rake classes) related to the
Cira Square companion loan.
(f) Represents the risk retention interest related to the Cira
Square trust subordinate companion loan-specific certificates with
an initial uncertificated principal balance of approximately
$2,250,000.
(g) Exchangeable Certificates. The class A-2, class A-3, class A-S,
class B and class C are exchangeable certificates. Each class of
exchangeable certificates may be exchanges 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-2 may be surrendered (or received) for the received (or
surrendered) classes A-2-1, A-2-X1, A-2-2 and A-2-X2. 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
The expected ratings are based on information provided by the
issuer as of May 24, 2024.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, the primary assets of which are 37 fixed-rate, commercial
mortgage loans with an aggregate principal balance of
$1,146,205,970 as of the cutoff date. The mortgage loans are
secured by the borrowers' fee and leasehold interests in 41
commercial properties. The loans were contributed to the trust by
Wells Fargo Bank, National Association, Bank of America, National
Association, Morgan Stanley Mortgage Capital Holdings, LLC and
JPMorgan Chase Bank, National Association.
The master servicer is expected to be Wells Fargo Bank, National
Association and the special servicer is expected to be KeyBank
National Association. The certificates are expected to follow a
sequential paydown structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch Ratings performed cash flow analysis on
23 loans totaling 87.5% of the pool by balance. Fitch's resulting
net cash flow (NCF) of $187.9 million represents a 14.7% variance
from the issuer's underwritten NCF of $220.3 million.
Higher Fitch Leverage: The pool has higher leverage compared to
recent U.S. private label multiborrower transactions rated by
Fitch. The pool's Fitch loan to value ratio (LTV) of 90.3% is
higher than the YTD 2024 and 2023 averages of 86.6% and 88.3%,
respectively. The pool's Fitch NCF debt yield (DY) of 10.6% is
lower than the YTD 2024 and 2023 averages of 11.2% and 10.9%,
respectively.
Office Concentration: In general, the pool has lower property type
diversity compared to recent Fitch transactions; the pool's
effective property type count of 3.8 is lower than the YTD 2024 and
2023 averages of 4.3 and 4.0, respectively. Additionally, the
largest Fitch property type concentration is office (34.9% of the
pool), which is higher than the YTD 2024 and 2023 office averages
of 15.7% and 27.7%, respectively. In particular, the office
concentration includes two of the top three loans (16.1% of the
pool) and three of the largest 10 loans (21.4% of the pool). Pools
that have a greater concentration by property type are at a greater
risk of losses, all else equal. Therefore, Fitch raises the overall
losses for pools with effective property type counts below five
property types.
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
Reduction in cash flow decreases property value and capacity to
meet its debt service obligations.
The table below indicates the model implied rating sensitivity to
changes to the same one variable, Fitch NCF:
- Original Rating: 'AAAsf'/'AA-sf'/'A-sf'/'BBBsf' /'BBB-sf'
/'BB-sf' /'B-sf';
- 10% NCF Decline: 'AAsf'/'Asf'/'BBBsf'/'BB+sf'/'BBsf'/'Bsf'/less
than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Similarly, improvement in cash flow increases property value and
capacity to meet its debt service obligations.
The list 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 Increase:
'AAAsf'/'AA+sf'/'A+sf'/'BBB+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 Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to 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.
BANK5 2024-5YR7: Moody's Assigns (P)Ba3 Rating to Cl. CIRA-3 Certs
------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to seventeen
classes of pooled CMBS securities, and three classes of
loan-specific CMBS securities to be issued by BANK5 2024-5YR7,
Commercial Mortgage Pass-Through Certificates, Series 2024-5YR7:
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-2-1, Assigned (P)Aaa (sf)
Cl. A-2-2, Assigned (P)Aaa (sf)
Cl. A-3-1, Assigned (P)Aaa (sf)
Cl. A-3-2, Assigned (P)Aaa (sf)
Cl. X-A*, Assigned (P)Aaa (sf)
Cl. A-2-X1*, Assigned (P)Aaa (sf)
Cl. A-2-X2*, Assigned (P)Aaa (sf)
Cl. A-3-X1*, Assigned (P)Aaa (sf)
Cl. A-3-X2*, Assigned (P)Aaa (sf)
Cl. A-S, Assigned (P)Aa2 (sf)
Cl. A-S-1, Assigned (P)Aa2 (sf)
Cl. A-S-2, Assigned (P)Aa2 (sf)
Cl. A-S-X1*, Assigned (P)Aa2 (sf)
Cl. A-S-X2*, Assigned (P)Aa2 (sf)
Cl. CIRA-1**, Assigned (P)Baa1 (sf)
Cl. CIRA-2**, Assigned (P)Baa3 (sf)
Cl. CIRA-3**, Assigned (P)Ba3 (sf)
*Reflects Interest-Only classes
**Reflects loan specific classes
RATINGS RATIONALE
The pooled certificates, which are Class A-1, Class A-2, Class A-3,
Class A-S, Class X-A and the associated exchangeable classes are
collateralized by 37 fixed-rate loans secured by 41 properties. The
rated loan specific ("rake") certificates, which are Class CIRA-1,
Class CIRA-2, and Class CIRA-3, are collateralized by a $45.0
million B-note, which is a junior component of a $90.0 million
fixed-rate mortgage note secured by the borrower's fee simple
interest in Cira Square, a single tenant office building located in
Philadelphia, PA. The rake certificates will be entitled to receive
distributions only from the B-Note, which will not be part of the
pool of mortgage loans backing the pooled certificates. Similarly,
the rake certificates will incur only losses that are allocated to
the B-Note.
Moody's assigned a Structured Credit Assessment ("SCA") of a2
(sca.pd) to the senior pooled component of the Cira Square loan,
which represents approximately 7.9% of the pooled balance. The loan
is secured by the borrower's fee simple interest in a 0.9 million
SF single tenant office building located in Philadelphia, PA.
Moody's assigned a SCA of aa3 (sca.pd) to the Saks Beverly Hills
loan, which represents approximately 5.4% of the pooled balance.
The loan is secured by the borrower's leasehold interest in a 0.1
million SF single tenant retail property located in Los Angeles,
CA.
Moody's assigned a SCA of a1 (sca.pd) to the Kenwood Towne Centre
loan, which represents approximately 2.6% of the pooled balance.
The loan is secured by the borrower's fee simple interest in a 1.0
million SF super-regional mall located in Cincinnati, OH.
Moody's assigned a SCA of a3 (sca.pd) to the Anaheim Desert Inn &
Suites loan, which represents approximately 2.6% of the pooled
balance. The loan is secured by the borrower's fee simple interest
in a 147 key limited service hotel located in Anaheim, CA.
Moody's assigned a SCA of a2 (sca.pd) to the Columbus Business Park
loan, which represents approximately 2.2% of the pooled balance.
The loan is secured by the borrower's fee simple interest in a 2.1
million SF industrial warehouse located in Columbus, OH.
Moody's approach to rating CMBS deals combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers 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 Actual DSCR of 1.43X (1.27X excluding credit assessed
loans) is worse than the average ratio for transactions Moody's
rated during the four quarters ending 1Q 2024 of 1.52X (1.31X
excluding credit assessed loans). The Moody's Stressed DSCR of
1.10X (0.98X excluding credit assessed loans) is worse than the
average ratio for transactions Moody's rated during the four
quarters ending 1Q 2024 of 1.16X (1.05X excluding credit assessed
loans). With respect to the Cira Square mortgage loan, Moody's
mortgage actual DSCR is 2.35x , and Moody's first mortgage stressed
DSCR is 1.74x.
The pooled trust loan balance of $1,146,205,970 represents a
Moody's LTV ratio of 99.1% (106.5% excluding SCAs), which is
similar to the average ratio for transactions Moody's rated during
the four quarters ending 1Q 2024, which showed an average MLTV
ratio of 96.5% (106.2% excluding SCAs). With respect to the Cira
Square mortgage loan, the first-mortgage balance of $90,000,000
represents a Moody's LTV of 66.1%.
The Moody's adjusted LTV is 90.7% (97.3% excluding SCAs) based on
our adjusted Moody's value taking into account the current interest
rate environment. This weighted average adjusted MLTV ratio is
in-line with the average ratio for transactions Moody's rated
during the four quarters ended 1Q 2024, which showed an average
adjusted MLTV ratio of 88.3% (96.7% excluding SCAs). With respect
to the Cira Square mortgage loan, the adjusted Moody's LTV Is also
59.5%.
Moody's also considers both loan level diversity and property level
diversity when selecting a ratings approach. With respect to loan
level diversity, the pool's loan level Herfindahl score is 21.2.
The transaction loan level diversity profile is worse than
Moody's-rated transactions during the prior four quarters ended 1Q
2024, which averaged 19.7. With respect to property level
diversity, the pool's property level Herfindahl score is 21.3.
The following notable strengths of the transaction include: (i)
five loans assigned investment grade SCAs; (ii) collateral quality;
(iii) market composition; and (iv) minimal leverage dispersion.
The following notable concerns of the transaction include: (i) low
pool diversity; (ii) the pool's amortization profile; (iii) high
single tenant share; (iv) high concentration within a single
property type; (v) high weighted average coupon ("WAC"); (v) low
acquisition financing share; and (vi) asset level legal
considerations.
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 weighted
average property quality grade is 2.03 (2.21 excluding credit
assessed loans), which is better than the average ratio for
transactions Moody's rated during the four quarters ending 1Q 2024
of 2.23 (2.47 excluding credit assessed loans).
The principal methodology used in rating all classes except loan
specific classes and interest-only classes was "US and Canadian
Conduit/Fusion Commercial Mortgage-Backed Securitizations
Methodology" published in July 2022.
Moody's analysis of credit enhancement levels for conduit deals is
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate Moody's uses to estimate Moody's value). Moody's fuses the
conduit results with the results of its analysis of
investment-grade structured credit assessed loans and any conduit
loan that represents 10% or greater of the current pool balance.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
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 paydowns 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.
BARINGS CLO 2019-IV: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Barings
CLO Ltd. 2019-IV reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Barings CLO Ltd.
2019-IV
X-R LT NRsf New Rating
A-1 06761VAA5 LT PIFsf Paid In Full AAAsf
A-2 06761VAC1 LT PIFsf Paid In Full AAAsf
A-R LT NRsf New Rating
B-R LT AAsf New Rating
C-R LT Asf New Rating
D-R-1 LT BBBsf New Rating
D-R-2 LT BBB-sf New Rating
E-R LT BB-sf New Rating
TRANSACTION SUMMARY
Barings CLO Ltd. 2019-IV (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by Barings
LLC. The original deal closed in December 2019 with Fitch rating
the class A notes. On May 23, 2024, the secured notes were
refinanced in full. Net proceeds from the issuance of the secured
and existing subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B+/B', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 23.25, versus a maximum covenant, in
accordance with the initial expected matrix point of 25.00. 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
98.41% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.26% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.00%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio 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-R, between 'B+sf'
and 'BBB+sf' for class C-R, between less than 'B-sf' and 'BB+sf'
for class D-R-1, between less than 'B-sf' and 'BB+sf' for class
D-R-2, and between less than 'B-sf' and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, 'A+sf'
for class D-R-1, 'A-sf' for class D-R-2, and 'BBB+sf' for class
E-R.
Key Rating Drivers and Rating Sensitivities are further described
in the new issue report, which is available to investors.
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 Barings CLO Ltd.
2019-IV. 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.
BBCMS MORTGAGE 2024-C26: Fitch Assigns 'B-sf' Rating on G-RR Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
BBCMS Mortgage Trust 2024-C26 commercial mortgage pass-through
certificates, series 2024-C26 as follows:
- $7,000,000 class A-1 'AAAsf'; Outlook Stable;
- $15,000,000 class A-2 'AAAsf'; Outlook Stable;
- $50,000,000 class A-4 'AAAsf'; Outlook Stable;
- $484,700,000 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,c class E-RR 'BBB-sf'; Outlook Stable;
- $15,193,000b,c class F-RR 'BB-sf'; Outlook Stable;
- $10,129,000b,c class G-RR 'B-sf'; Outlook Stable.
Fitch does not rate the following class:
- $36,462,761b,c class H-RR
Notes:
(a)Notional amount and interest only.
(b)Privately placed and pursuant to Rule 144A.
(c)Horizontal Risk Retention Interest classes.
Since Fitch published its expected ratings on May 6, 2024, a change
has occurred. The balances for classes A-4 and A-5 were finalized.
At the time the expected ratings were published, the initial
aggregate certificate balance of the A-4 class was expected to be
in the range of $0-$250,000,000 and the initial aggregate
certificate balance of the A-5 class was expected to be in the
range of $284,700,000 to $534,700,000. The final class balances for
classes A-4 and A-5 are $50,000,000 and $484,700,000,
respectively.
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 will follow a
sequential paydown structure.
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.
Higher Fitch Leverage: The transaction has higher Fitch leverage
compared to recent multiborrower transactions. The pool's Fitch
weighted average (WA) trust loan-to-value ratio (LTV) of 92.7% is
higher than 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.
BENEFIT STREET XIX: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement debt from Benefit Street Partners CLO XIX
Ltd./Benefit Street CLO XIX LLC, a CLO originally issued in 2020
that is managed by BSP CLO Management LLC, a subsidiary of Franklin
Templeton. At the same time, S&P withdrew its ratings on the
original class A, B, C, D, and E debt following payment in full on
the May 23, 2024, refinancing date.
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 through Nov. 23, 2024.
-- 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 23, 2024,
refinancing date, and the target initial par amount remains at $500
million.
-- 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.
-- The transaction has added the ability to purchase bonds up to
5% of the collateral principal amount.
-- The transaction has adopted benchmark replacement language and
was updated to conform to current rating agency methodology.
S&P said, "On a standalone basis, our cash flow analysis indicated
a lower rating on the class E-R debt than the rating action on the
debt reflects. However, we assigned our 'BB- (sf)' rating on the
class E-R debt after considering the margin of failure, the stable
overcollateralization ratio since our last rating action on the
transaction, and that the transaction will soon enter its
amortization phase. Based on the latter, we expect the credit
support available to all rated classes to increase as principal is
collected and the senior debt is paid down."
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $320.00 million: Three-month CME term SOFR + 1.18%
-- Class B-R, $60.00 million: Three-month CME term SOFR + 1.60%
-- Class C-R, $30.00 million: Three-month CME term SOFR + 2.10%
-- Class D-R, $30.00 million: Three-month CME term SOFR + 3.10%
-- Class E-R, $20.00 million: Three-month CME term SOFR + 5.75%
Original debt
-- Class A, $320 million: Three-month CME term SOFR + 1.35% +
CSA(i)
-- Class B, $60.00 million: Three-month CME term SOFR + 2.00% +
CSA(i)
-- Class C, $30.00 million: Three-month CME term SOFR + 2.60% +
CSA(i)
-- Class D, $30.00 million: Three-month CME term SOFR + 3.80% +
CSA(i)
-- Class E, $20.00 million: Three-month CME term SOFR + 7.02% +
CSA(i)
-- Subordinated notes, $48.70 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
Benefit Street Partners CLO XIX Ltd./
Benefit Street Partners CLO XIX LLC
Class A-R, $320.00 million: AAA (sf)
Class B-R, $60.00 million: AA (sf)
Class C-R, $30.00 million: A (sf)
Class D-R, $30.00 million: BBB- (sf)
Class E-R, $20.00 million: BB- (sf)
Ratings Withdrawn
Benefit Street Partners CLO XIX Ltd./
Benefit Street Partners CLO XIX LLC
Class A to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
Other Outstanding Debt
Benefit Street Partners CLO XIX Ltd./
Benefit Street Partners CLO XIX LLC
Subordinated notes, $48.70 million: NR
NR--Not rated.
BIRCH GROVE CLO: Moody's Assigns B3 Rating to $1.25MM F-RR Notes
----------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the "Refinancing Notes") issued by Birch Grove
CLO Ltd. (the "Issuer").
Moody's rating action is as follows:
US$240,000,000 Class A-1-RR Senior Secured Floating Rate Notes due
2037, Assigned Aaa (sf)
US$1,250,000 Class F-RR Junior Secured Deferrable Floating Rate
Notes due 2037, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans, cash, and eligible investments, and up to 10.0% of the
portfolio may consist of second lien loans (including first lien
last out loans), unsecured loans and bonds.
Birch Grove Capital LP (the "Manager") will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, the six other
classes of secured notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test levels
and changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2024.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $399,874,447.68
Defaulted Par: $987,130
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2979
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 45.00%
Weighted Average Life (WAL): 8.16 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
May 2024.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
BRAVO RESIDENTIAL 2024-RPL1: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to BRAVO Residential
Funding Trust 2024-RPL1 (BRAVO 2024-RPL1).
Entity/Debt Rating
----------- ------
BRAVO 2024-RPL1
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT AA(EXP)sf Expected Rating
A-4 LT A(EXP)sf Expected Rating
A-5 LT BBB(EXP)sf Expected Rating
M-1 LT A(EXP)sf Expected Rating
M-2 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
B LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The BRAVO 2024-RPL1 transaction is expected to close on June 6,
2024. The notes are supported by one collateral group that consists
of 2,024 seasoned performing loans (SPLs) and reperforming loans
(RPLs) with a total balance of approximately $404.92 million, which
includes $66.8 million, or 16.5%, of the aggregate pool balance in
noninterest-bearing deferred principal amounts as of the cutoff
date.
Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicer will not be advancing delinquent monthly payments of P&I.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.6% above a long-term sustainable level (vs.
11.1% on a national level as of 4Q23, remained unchanged 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 Loan Credit Quality
(Negative): The collateral consists of 2,024 SPLs and RPLs secured
by first liens on one- to four-family residential properties,
condominiums, planned unit developments, townhouses, manufactured
housing, mobile homes and unimproved land, seasoned at
approximately 210 months in aggregate, as calculated by Fitch. The
pool is 89.0% current and 11.0% delinquent (DQ).
Approximately 32.6% of the loans have been delinquent one or more
times in the past 24 months (defined by Fitch as "dirty current").
Fitch applies a probability of default (PD) penalty to dirty
current loans with the highest penalty applied to those with recent
delinquencies. Additionally, 95.9% of loans have a prior
modification. The borrowers have a weak credit profile with a 653
FICO, as calculated by Fitch, and a 45% debt-to-income ratio (DTI),
as well as moderate leverage with a 74.6% sustainable loan-to-value
ratio (sLTV). The pool consists of 93.1% of loans where the
borrower maintains a primary residence, while 6.9% are investment
properties or second homes or indicated as other/unknown.
No Advancing (Mixed): The servicers 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.
Sequential Payment 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. Losses are allocated in
reverse-sequential order. Furthermore, the provision to reallocate
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.
Additionally, the transaction includes a provision where interest
amounts otherwise allocable to subordinate classes B-3, B-4 and B-5
will prioritize payment of any unpaid net weighted average coupon
(WAC) shortfall amount for the senior class (A-1).
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 42.5% at 'AAA'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC, Digital Risk, Inglet Blair, Recovco, Opus
Capital Markets Consultants and Clayton Services. A third-party due
diligence review was completed on 83% (by loan count) of the pool.
The scope, as described in Form 15E, focused on regulatory
compliance review to ensure loans were originated in accordance
with predatory lending regulations.
Fitch considered this information along with the tax, title and
lien (TTL) search results in its analysis and, as a result, Fitch
adjusted its loss expectation at the 'AAAsf' stress by
approximately 125bps to reflect missing final HUD-1 files and title
and lien issues, loans in which diligence was not performed as well
as to address outstanding liens and taxes that could take priority
over the subject mortgage.
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 2023-DELC: DBRS Confirms BB(low) Rating on Class F Certs
-----------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2023-DELC
issued by BX 2023-DELC Mortgage Trust as follows:
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class HRR at B (high) (sf)
All trends are Stable.
The rating confirmations reflect the limited seasoning of the
transaction, which closed in June 2023. The transaction is
collateralized by the fee-simple and leasehold interests held by
the borrower and the fee-simple interest held by HdC North Beach
Development, LLP in the Hotel del Coronado, a full-service luxury
hotel with 681 guest rooms and 220 third-party condominium owned
keys on Coronado Island in San Diego. At issuance, it was noted
that the sponsor had recently invested approximately $375 million
toward a major capital improvement project to renovate the property
and had plans to complete more than $165 million in renovations,
including the transformation of more than 350 guest rooms, over a
two-year period commencing at the end of 2023. The transaction is
early in its life cycle and as a result there are minimal updates
to the financial reporting available; however, the revenue per
available room (RevPAR) penetration rate for the trailing 12 months
(T-12) ended September 30, 2023, of more than 120% demonstrates
that the property continues to lead its competitive set. In
addition, Morningstar DBRS notes that stabilization of cash flow is
not expected until the completion of the capital improvement
project, as further described below.
The Hotel del Coronado is a landmarked, full-service luxury
beachfront hotel and resort, originally constructed in 1888. The
luxury resort features 901 keys (681 guest rooms and 220
condominium keys owned by third parties) across a 29-acre site that
provides 1,400 feet of direct ocean frontage. The 681 guest rooms
are spread across the Victorian building, The Cabanas, and The
Views. The sponsor, Blackstone Real Estate Partners VIII L.P.,(BREP
VIII), owns all 681 guest rooms and serves as direct collateral for
the loan. The remaining 220 condominium keys are owned by
third-party condominium owners and managed by the sponsor with a
revenue-sharing program. The 220 condominium keys are at the Shore
House and Beach Village. The Hotel del Coronado offers premiere
amenities including three outdoor resort-style pools with backdrops
of the Pacific Ocean, a full-service spa with 18 treatment rooms, a
fitness center that offers both indoor and outdoor class options
for guests, and a private beach with lounge seating, 10 retail
outlets, and a multitude of restaurant options.
The borrower used whole-loan proceeds to repay existing debt, make
an unrelated internal debt repayment for Blackstone, and reinvest
equity in the property. The loan benefits from experienced
institutional sponsorship by BREP VIII, an affiliate of The
Blackstone Group. The interest-only (IO), floating-rate mortgage
loan is structured with an initial two-year loan term and three
successive one-year extension options. To mitigate interest rate
exposure during the loan term, the borrower entered into an
interest rate cap agreement with a strike price equal to 4.75%.
Between acquisition of the property in 2015 and securitization in
2023, the sponsor invested more than $450 million, including about
$375 million toward a planned capital improvement project of nearly
$565 million. The remaining major project, slated to begin in the
second half of 2023, includes renovating the Victorian building and
luxury condominium community known as Beach Village, increasing the
total key count to 404 from 367, and achieving expected average
daily rate (ADR) premiums of $100 per night. The sponsor slated an
allocation of nearly $150 million toward renovation of the
Victorian building's guest rooms and hallways to feature new
furniture, fixtures, and equipment; bigger bathrooms; new flooring;
wall, lighting, and fixture upgrades; and new elevators with a
targeted completion in Spring 2025. Approximately $20 million is
carved out for renovating and restoring meeting spaces with a
targeted completion in Spring 2024.
The occupancy rate for the T-12 ended September 30, 2023, was
65.0%, a de minimis decline of 2.3% from the prior year. Similarly,
RevPAR declined 4.8% over the same period; however, the property is
leading the competitive set by a relatively large margin. The
servicer-reported net cash flow (NCF) of $49.4 million as of YE
2023 represents a decline of nearly 55.0% from the issuer's
stabilized NCF at issuance and a variance of about -40% from the
Morningstar DBRS stabilized NCF at issuance; however, the property
is still undergoing major renovations and stabilization is not
expected to occur until after the renovation projects have been
completed.
Given the anticipated volatility in the cash flows until the
completion of the large scale business plan, Morningstar DBRS has
maintained the issuance as-stabilized value of the portfolio at
approximately $1.2 billion, implying a Morningstar DBRS
loan-to-value ratio (LTV) of 79.4%. The Morningstar DBRS value was
derived using an as-stabilized NCF of $86.7 million and a
capitalization rate of 7.25%. Morningstar DBRS made a total
qualitative adjustment of 8.00% by increasing the LTV thresholds to
account for limited cash flow volatility given the strong barriers
to entry and historical RevPAR penetration rate, strong property
quality as a result of direct ocean frontage and beach
accessibility along with recent significant capital investment from
the sponsor, and superior market fundamentals in an affluent market
with various demand generators.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX 2024-PALM: S&P Assigns Prelim BB (sf) Rating on Cl. HRR Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BX 2024-PALM
Mortgage Trust's commercial mortgage pass-through certificates.
The certificate issuance is a CMBS transaction backed by a
two-year, interest-only, floating-rate commercial mortgage loan
secured by the borrowers' fee simple interests in nine multifamily
properties comprising 3,681 units located in three states: Texas,
California, and Florida.
The preliminary ratings are based on information as of May 29,
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's
historic and projected performance, the sponsor's and the manager's
experience, the trustee-provided liquidity, the loan terms, and the
transaction's structure, among other factors.
Preliminary Ratings Assigned
BX 2024-PALM Mortgage Trust
Class A, $344,670,000(i): AAA (sf)
Class B, $80,300,000(i): AA- (sf)
Class C, $59,700,000(i): A- (sf)
Class D, $61,110,000(i): BBB- (sf)
Class E, $9,910,000(i): BB+ (sf)
Class HRR, $29,310,000(i): BB (sf)
(i)Certificate balances are approximate, subject to a variance of
plus or minus 5.0%. The issuer will issue the certificates to
qualified institutional buyers in line with Rule 144A of the
Securities Act of 1933, to institutional accredited investors under
Regulation D and to non-U.S. persons under Regulation S.
HRR--Horizontal residual interest certificate.
CAPTREE PARK: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------
S&P Global Ratings assigned its ratings to Captree Park CLO
Ltd./Captree Park CLO 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 Blackstone CLO 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
Captree Park CLO Ltd./Captree Park CLO LLC
Class A-1, $522.75 million: AAA (sf)
Class A-2, $46.75 million: Not rated
Class B-1, $59.50 million: AA (sf)
Class B-2, $17.00 million: AA (sf)
Class C (deferrable), $51.00 million: A (sf)
Class D (deferrable), $51.00 million: BBB- (sf)
Class E (deferrable), $34.00 million: BB- (sf)
Subordinated notes, $81.63 million: Not rated
CD 2016-CD1: DBRS Cuts Class D Certs Rating to CCC
--------------------------------------------------
DBRS Limited downgraded the credit ratings on the following classes
of Commercial Mortgage Pass-Through Certificates, Series 2016-CD1
issued by CD 2016-CD1 Mortgage Trust:
-- Class A-M to AA (low) (sf) from AAA (sf)
-- Class X-A to AA (sf) from AAA (sf)
-- Class B to A (low) (sf) from AA (sf)
-- Class X-B to BBB (low) (sf) from A (high) (sf)
-- Class C to BB (high) (sf) from A (sf)
-- Class X-C to CCC (sf) from BBB (sf)
-- Class X-D to C (sf) from B (high) (sf)
-- Class D to CCC (sf) from BBB (low) (sf)
-- Class E to C (sf) from B (sf)
-- Class F to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
The trends on Classes A-M, B, C, X-A, and X-B are Negative. All
other classes carry Stable trends with the exception of Classes D,
E, F, X-C, and X-D, which are assigned credit ratings that do not
typically carry a trend in commercial mortgage-backed securities
(CMBS).
In May 2023, Morningstar DBRS downgraded three classes and placed
Negative trends on four classes because of increased concerns with
several loans, including the Westfield San Francisco Centre loan
(Prospectus ID#3, 10.4% of the pool), which was on the servicer's
watchlist at the time for low performance, and the specially
serviced loan, 401 South State Street (Prospectus ID#15, 2.4% of
the pool), which is backed by an office property in downtown
Chicago. Since the May 2023 credit rating action, the Westfield San
Francisco Centre loan has transferred to special servicing and is
reporting a significant value decline from issuance. In addition,
Prudential Plaza (Prospectus ID#4, 8.1% of the pool), which is also
backed by an office property in downtown Chicago, transferred to
special servicing, bringing the total special servicing
concentration to 20.9% of the pool balance across three loans as of
the April 2024 reporting.
In the analysis for this review, Morningstar DBRS liquidated two of
the three specially serviced loans, resulting in an aggregate loss
of $41.4 million, which would fully erode the balance of Class G
(nonrated), Class F, and the majority of Class E. As such, the
increased loss expectation and credit erosion supports the credit
rating downgrades and Negative trends with this review. Additional
details regarding the specially serviced loans are highlighted
below. It is also worth noting that interest shortfalls have been
accruing, with a cumulative balance of $1.7 million shorted across
Classes D through G as of the April 2024 remittance. Class D has
been accruing interest since the January 2024 remittance and is at
the maximum Morningstar DBRS shortfall tolerance of four months for
the BBB (sf) rating categories, further supporting the downgrade to
CCC (sf) with this review. Lastly, the classes above Class D are
now more susceptible to additional shortfalls, a consideration for
the credit rating downgrades and Negative trends with this rating
action.
The credit rating confirmations and Stable trends are reflective of
the overall stable performance of the majority of loans in the
pool, as exhibited by the healthy weighted-average (WA) debt
service coverage ratio (DSCR) of 2.22 times (x), based on the most
recent year-end financials. As of the April 2024 remittance, 29 of
the original 32 loans remain in the pool, representing a collateral
reduction of 17.9% since issuance. Defeasance collateral represents
7.1% of the pool balance. Three loans are in special servicing and
eight loans are on the servicer's watchlist, representing 20.9% and
27.3% of the pool balance, respectively.
Westfield San Francisco Centre is secured by approximately 553,000
square feet (sf) of retail space and 241,000 sf of office space
within a regional mall in San Francisco. The loan transferred to
special servicing in June 2023 for imminent monetary default and
the loan was last paid through September 2023. Foreclosure was
filed in September 2023 and a receiver was appointed in October
2023. The mall was rebranded as Emporium Centre San Francisco, with
Jones Lang LaSalle acting as the property manager to stabilize the
subject. Occupancy has been depressed with the June 2023 figure at
46.0%, which may be lower considering several news sources have
reported that additional tenants have vacated the subject thus far
in 2024. The non-collateral Nordstrom anchor shuttered its doors in
August 2023, leaving the non-collateral Bloomingdale's as the
remaining anchor. As a result of the depressed occupancy, net cash
flow (NCF) continues to be low with the trailing nine months (T-9)
ended September 30, 2023, financials reporting a DSCR of 0.93x.
The June 2023 asset summary report provided by the special servicer
notes that a $75 million guarantee from the loan sponsor,
Unibail-Rodamco-Westfield (URW), is in place; however, it is
unclear if the guarantee is being pursued. Additional information
has been requested and, as of the date of this press release, the
servicer's response is pending. Based on the December 2023
appraisal, the property was valued at $290.0 million, a drastic
decline from the issuance value of $1.2 billion. In the analysis
for this review, the loan was liquidated from the trust based on a
haircut to the most recent value, resulting in a trust loss
approaching $30.0 million and a loss severity in excess of 45.0%.
401 South State Street is secured by a Class B office property in
the Central Loop submarket of Chicago. The loan transferred to
special servicing in June 2020 and is currently real estate owned.
The sole tenant at the subject, Robert Morris University Illinois
(previously 75.0% of the net rentable area (NRA)), vacated the
property in April 2020. The loan is part of a $47.8 million whole
loan, with a non-trust pari passu companion note held in CGCMT
2016-P4 (not rated by Morningstar DBRS). The reporting for the
companion transaction showed a July 2022 value for the collateral
property of $20.0 million, a significant decline from the issuance
value of $76.5 million. Considering the dated appraisal, low
investor appetite for this property type, and soft office
submarket, this loan was analyzed with a stressed haircut to the
most recent value, resulting in an almost full loss to the trust.
Prudential Plaza is secured by two Class A office buildings in the
East Loop submarket of Chicago. The loan transferred to special
servicing in June 2023 for imminent monetary default, but the loan
remains current as of the April 2024 remittance. Occupancy at the
subject has been declining, with the June 2023 figure at 78.0%,
compared to the YE2022 figure of 81.0%. The tenant roster is
granular, with the largest three tenants representing approximately
13.0% of NRA and no single tenant representing more than 5.0% of
NRA. The YE2023 DSCR was 1.20x, compared to the YE2022 DSCR of
1.75x. The decline in NCF was driven by a decrease in revenue and
increase in expenses, specifically real estate taxes.
The loan was modified to interest-only payments starting in January
2024 and the maturity was extended from 2025 to 2027, with an
option to extend through to 2029. It does not appear that the
borrower was required to provide a principal curtailment as part of
the loan modification but, according to a CoStar article published
on January 3, 2024, the sponsor agreed to fund a leasing reserve
and invest approximately $50.0 million to upgrade the property and
stabilize the subject. Morningstar DBRS has requested confirmation
of these plans and the availability of reserves to fund them, and
the servicer's response is pending as of the date of this press
release. The sponsor, Wanxiang America Real Estate, purchased the
property in 2018 for $680.0 million, a slight discount from the
issuance value of $700.0 million. According to Reis, Class A
properties in the East Loop submarket reported a YE2023 vacancy
rate of 11.4%, with asking rents of $37.31 per square foot (psf),
compared to the YE2022 vacancy rate of 15.2% and asking rents of
$36.91 psf. Given the generally challenged office sector
(especially in Chicago's CBD), declining occupancy, and NCFs, the
value of the property has likely fallen from the 2018 figure. As
such, the loan was analyzed with a stressed loan-to-value (LTV)
ratio and probability of default penalty, resulting in an expected
loss that was nearly triple the pool average.
At issuance, Morningstar DBRS shadow rated 10 Hudson Yards
(Prospectus ID#1; 11.3% of the trust balance) and Vertex
Pharmaceuticals HQ (Prospectus ID#9; 5.2% of the trust balance)
investment grade, because of investment-grade tenancy, strong
sponsorship, and high-quality finishes. The 10 Hudson Yards loan,
which is secured by a Class A office property in the Penn Station
submarket of New York, is pari passu to a loan secured in Hudson
Yards 2016-10HY Mortgage Trust, which is also rated by Morningstar
DBRS. Morningstar DBRS recently reviewed that transaction, with the
credit rating actions detailed in a press release dated April 15,
2024. For more information, please see the press release titled
"Morningstar DBRS Takes Rating Actions on North American
Single-Asset/Single Borrower Transactions Back by Office
Properties" on the Morningstar DBRS website. During the April 15,
2024, review, Morningstar DBRS derived an updated Morningstar DBRS
Value for the property and Morningstar DBRS LTV. The updated
approach continued to support the investment-grade shadow rating on
the loan.
Vertex Pharmaceuticals HQ is secured by an office and lab property
in Boston and serves as the global headquarters for Vertex
Pharmaceuticals (Vertex) as it occupies the majority of the space.
According to recent news articles, the tenant is reevaluating its
space and may consider leaving the subject at the end of its lease
in December 2028. However, a mitigating factor is the lease extends
two years beyond the loan's anticipated repayment date (ARD) in
August 2026 and if the borrower does not repay at ARD, the loan
will hyper amortize at a higher interest rate and will remain in
cash management where all excess cash will be used to reduce the
principal balance until the final maturity date in November 2028.
Based on the YE2023 financials, the loan reported a DSCR of 6.57x.
With this review, Morningstar DBRS confirmed that the performance
of the loans remains consistent with investment-grade loan
characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
CHASE HOME 2019-ATR1: Moody's Hikes Rating on Cl. B-5 Certs to Ba1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of three bonds from two US
residential mortgage-backed transactions (RMBS) backed by prime
mortgage loans.
A comprehensive review of all credit ratings for the respective
transactions(s) has/have been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Chase Home Lending Mortgage Trust 2019-ATR1
Cl. B-4, Upgraded to A3 (sf); previously on Feb 10, 2020 Upgraded
to Ba1 (sf)
Cl. B-5, Upgraded to Ba1 (sf); previously on Feb 10, 2020 Upgraded
to B2 (sf)
Issuer: Galton Funding Mortgage Trust 2017-1
Cl. B5, Upgraded to A3 (sf); previously on Jul 26, 2021 Upgraded to
Baa3 (sf)
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.
Each of the transactions Moody's reviewed continue to display
strong collateral performance, with cumulative losses for each
transaction at .16% or lower and a small number of loans in
delinquency. In addition, enhancement levels for the tranches have
grown significantly, as the pools amortize relatively quickly. The
credit enhancement since closing has grown, on average, 7x for the
tranches upgraded.
Moody's analysis also considered the existence of current and
historical interest shortfalls for Chase Home Lending Mortgage
Trust 2019-ATR1 Class B-5. While shortfalls are on the trajectory
of recoupment, the size, and length of the tranche's outstanding
interest shortfalls as well as the potential for recurrence were
analyzed as part of the upgrades.
Moody's analysis on certain bonds also included an assessment of
the existing credit enhancement floor, in place to mitigate the
potential default of a small number of loans at the tail end of a
transaction.
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 upgrades.
No actions were taken on some rated classes in these deals because
their expected losses remain commensurate with their current
ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. No actions were taken on the other
remaining rated classes in these deals as those classes are already
at the highest achievable levels within Moody's rating scale.
Principal Methodologies
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's 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.
CHASE HOME 2024-5: Fitch Assigns Bsf Final Rating on Cl. B-5 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Chase Home Lending
Mortgage Trust 2024-5 (Chase 2024-5).
Entity/Debt Rating Prior
----------- ------ -----
Chase 2024-5
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-X LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-A LT AAAsf New Rating AAA(EXP)sf
A-4-X LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-A LT AAAsf New Rating AAA(EXP)sf
A-5-X LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-A LT AAAsf New Rating AAA(EXP)sf
A-6-X LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-A LT AAAsf New Rating AAA(EXP)sf
A-7-X LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-A LT AAAsf New Rating AAA(EXP)sf
A-8-X LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-A LT AAAsf New Rating AAA(EXP)sf
A-9-X LT AAAsf New Rating AAA(EXP)sf
A-X-1 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has rated the residential mortgage-backed certificates issued
by Chase Home Lending Mortgage Trust 2024-5 (Chase 2024-5) as
indicated above. The certificates are supported by 478 loans with a
total balance of approximately $548.44 million as of the cutoff
date. The scheduled balance as of the cutoff date is $548.18
million.
The pool consists of prime-quality fixed-rate mortgages (FRMs)
solely originated by JPMorgan Chase Bank, National Association
(JPMCB). The loan-level representations and warranties (R&Ws) are
provided by the originator, JPMCB. All the mortgage loans in the
pool will be serviced by JPMCB.
The collateral quality of the pool is extremely strong, with a
large percentage of loans over $1.0 million.
Of the loans, 99.8% qualify as safe-harbor qualified mortgage
(SHQM) average prime offer rate (APOR); the remaining 0.2% qualify
as rebuttable presumption QM (APOR). There is no exposure to Libor
in this transaction. The collateral comprises 100% fixed-rate
loans, and the certificates are fixed rate and capped at the net
weighted average coupon (WAC) or based on the net WAC.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
projection of sustainable home prices, it views the home prices of
this pool as 10.4% above a long-term sustainable level (vs. 11.1%
on a national level as of 4Q23, down 0% since the prior quarter).
Housing affordability is the worst it has been in decades, driven
by both high interest rates and elevated home prices. Home prices
increased 5.5% yoy nationally as of February 2024, despite modest
regional declines, but are still supported by limited inventory.
High-Quality Prime Mortgage Pool (Positive): The pool consists of
high-quality, fixed-rate, fully amortizing loans with maturities of
up to 30 years; 99.8% of the loans qualify as SHQM APOR; the
remaining 0.2% qualify as rebuttable presumption QM (APOR). The
loans were made to borrowers with strong credit profiles,
relatively low leverage and large liquid reserves.
The loans are seasoned at an average of 9.0 months, according to
Fitch. The pool has a WA FICO score of 773, as determined by Fitch
and is based on the original FICO for newly originated loans and
the updated FICO for loans seasoned 12 months or more, which is
indicative of very high credit-quality borrowers. A large
percentage of the loans have a borrower with a Fitch-derived FICO
score equal to or above 750. Fitch determined that 79.5% of the
loans have a borrower with a Fitch-determined FICO score equal to
or above 750. In addition, the original WA combined loan-to-value
(CLTV) ratio of 73.9%, translating to a sustainable LTV (sLTV)
ratio of 78.6%, represents moderate borrower equity in the property
and reduced default risk, compared with a borrower with a CLTV over
80%.
Of the pool, 99.1% of the loans are nonconforming and the remaining
0.9% are conforming loans. All the loans are designated as QM
loans.
Of the pool, 100% comprises loans where the borrower maintains a
primary or secondary residence. Single-family homes and planned
unit developments (PUDs) constitute 93.9% of the pool; condominiums
make up 4.2%; and co-ops make up 1.0%. The remaining 0.9% (three
loans) are two to four family homes.
The pool consists of loans with the following loan purposes, as
determined by Fitch: purchases (94.8%), cashout refinances (0.6%)
and rate-term refinances (4.6%). Fitch views favorably that no
loans are for investment properties and a majority of mortgages are
purchases.
Of the pool loans, 23.1% are concentrated in California, followed
by Texas and Florida. The largest MSA concentration is in the San
Francisco-Oakland-Fremont, CA MSA (8.3%), followed by the
Seattle-Tacoma-Bellevue, WA MSA (7.2%) and the New York-Northern
New Jersey-Long Island, NY-NJ-PA MSA (6.3%). The top three MSAs
account for 21.7% of the pool. As a result, no probability of
default (PD) penalty was applied for geographic concentration.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure, whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps maintain subordination for a
longer period should losses occur later in the life of the
transaction. The applicable credit support percentage feature
redirects subordinate principal to classes of higher seniority if
specified credit enhancement (CE) levels are not maintained.
The servicer, JPMCB, is obligated to advance delinquent principal
and interest (P&I) until deemed nonrecoverable; the servicer is
expected to advance delinquent P&I on loans that enter into a
coronavirus pandemic-related forbearance plan. Although full P&I
advancing will provide liquidity to the certificates, it will also
increase the loan-level loss severity (LS) since the servicer looks
to recoup P&I advances from liquidation proceeds, which results in
less recoveries.
There is no master servicer for this transaction. U.S. Bank Trust
National Association is the trustee that will advance as needed
until a replacement servicer can be found. The trustee is the
ultimate advancing party.
CE Floor (Positive): A CE or senior subordination floor of 1.10%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 0.60% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 41.8% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC. The third-party due diligence described in Form
15E focused on four areas: compliance review, credit review,
valuation review and data integrity. Fitch considered this
information in its analysis and, as a result, Fitch decreased its
loss expectations by 0.11% at the 'AAAsf' stress due to 56.1% due
diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 56.1% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria." AMC
was engaged to perform the review. Loans reviewed under this
engagement were given compliance, credit and valuation grades and
assigned initial grades for each subcategory. Minimal exceptions
and waivers were noted in the due diligence reports. Refer to the
"Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
provided was comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies with
no noted material discrepancies.
ESG CONSIDERATIONS
Chase 2024-5 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in Chase 2024-5, including strong transaction due diligence, the
entirety of the pool is originated by an 'Above Average'
originator, and the entirety of the pool is serviced by an 'RPS1-'
servicer. All of these attributes result in a reduction in expected
losses. This has a positive impact on the transaction's credit
profile and is relevant to the ratings in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CITIGROUP 2022-GC48: DBRS Confirms BB(low) Rating on YL-C Certs
---------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on the Yorkshire &
Lexington Towers Loan-Specific Certificates issued by Citigroup
Commercial Mortgage Trust 2022-GC48 as follows:
-- Class YL-A at A (sf)
-- Class YL-B at BBB (low) (sf)
-- Class YL-C at BB (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the relatively limited
seasoning for this transaction, which closed in June 2022. The
transaction is secured by the borrower's fee-simple interest in two
multifamily properties, totaling 808 units. At issuance, it was
noted that the sponsor had recently completed 57 unit renovations
and had plans to carry out a $6.5 million project, renovating an
additional 311 units over a three-year period. The December 2023
rent roll reflects rental rate increases for the fair market units
and the stabilized units of approximately 15% and 5%, respectively,
since issuance. The in-place cash flows have declined as of the
servicer-reported annualized September 2023 financials, which show
a decline in the collateral portfolio's occupancy rate since
issuance. Morningstar DBRS notes these trends are likely the result
of units being taken offline for renovations as the sponsor
executes the capital improvement project, as further described
below.
The collateral properties are located in Manhattan's Upper East
Side neighborhood. The 21-story Yorkshire Towers property is
significantly larger, with 681 residential units and 63,778 square
feet (sf) of commercial space, as compared with the 15-story
Lexington Towers property, which consists of 127 residential units
and approximately 17,000 sf of commercial space. At issuance, there
were 503 market-rate units (62.3% of the total) and 305
rent-stabilized units (37.7% of the total) across the two
properties.
The $221.5 million subject transaction consists of the two junior B
notes that are part of a larger $714.0 million whole loan. The
whole loan consists of 18 senior A notes totaling $318.0 million,
two junior B notes totaling $221.5 million, and four mezzanine
loans totaling $174.5 million. Whole-loan proceeds were primarily
used to refinance $550.0 million of existing debt, return $55.3
million of borrower equity, fund $20.3 million of various upfront
reserves, and cover closing costs. The fixed-rate loan is interest
only throughout its five-year term and is scheduled to mature in
June 2027, with no extension options available.
As noted, the sponsor is in the process of executing a large-scale
renovation of the properties. More specifically, the business plan
contemplates 283 traditional renovations (estimated at a cost of
$19,382 per unit) and 28 major renovations (estimated at a cost of
$37,143 per unit). The major renovations are more complex,
combining multiple units into a single floorplan or materially
altering floorplans. When the unit size or floorplan is materially
altered, rent stabilization regulations allow for the
rent-stabilized legal rent to be reset to the first rent achieved
following the renovation. Once renovations have been completed, the
combined unit count is expected to decrease to 793 units,
consisting of 492 market-rate and 301 rent-stabilized units. While
Morningstar DBRS considers there to be an inherent risk in the
business plan, it also believes that there are appropriate loan
structures in place to mitigate the risk, including a $6.5 million
upfront unit upgrade reserve and a $5.9 million upfront
supplemental income reserve that will be held to cover any income
lost while units are undergoing renovation. An update on the status
of the renovations was requested from the servicer, but the
response remains outstanding as of the date of this press release.
The servicer's April 2024 reporting for one of the companion
transactions, which holds part of the pari passu senior loan, BMO
2022-C3 Mortgage Trust (not rated by Morningstar DBRS), shows a
balance of $2.98 million remaining in the unit upgrade reserve
(initial deposit of $6.5 million) and the original balances of $1.1
million and $1.0 million in the replacement and rollover reserves,
respectively.
According to the December 2023 rent roll, the residential portion
of the towers had a combined occupancy rate of 87.5%, composed of
433 fair market units with an average rental rate of $5,619 per
unit and 271 stabilized units with an average rental rate of $2,795
per unit. There are 101 vacant units and two employee units;
however, these units are not bifurcated between fair market units
and stabilized units. The occupancy rate declined from 96.4% in
March 2022, likely a result of the ongoing renovations as average
rental rates have improved from $4,930 per unit and $2,636 per unit
for fair market and stabilized units, respectively, as of the same
period in March 2022. According to Reis, the Upper East Side
submarket reported Q4 2023 average asking rental and vacancy rates
of $5,283 per unit and 2.7%, respectively.
The servicer reported an annualized net cash flow (NCF) of $26.9
million and a debt service coverage ratio (DSCR) of 1.61 times (x),
as of the September 30, 2023, reporting. These figures represent
declines from the Morningstar DBRS NCF of $29.4 million and DSCR of
1.77x, derived at issuance. Notably, Morningstar DBRS' NCF figure
does not include any stabilization credit. While the collateral
cash flow has declined and the vacancy rate has increased, the
increase in rental rates demonstrates the sponsor's ability to
achieve rent premiums for the renovated units.
The Morningstar DBRS value of $511.4 million was derived at
issuance, which was based on the Morningstar DBRS NCF of $29.4
million, a 16.9% haircut to the Issuer's figure of $35.4 million,
and a capitalization rate of 5.75%. This results in a Morningstar
DBRS loan-to-value ratios (LTVs) of 105.5% on the secured debt
balance of $539.5 million and 139.6% on the total debt of $714.0
million. The Morningstar DBRS concluded value estimate represents
variances of -46.4% and -51.6% from the appraiser's as-is and
as-stabilized value estimates, respectively. If the sponsor is able
to successfully carry out its business plan, leverage would
considerably improve as the appraiser's stabilized value estimate
of $1.1 billion indicates an LTV of 67.5% on the whole loan of
$714.0 million.
Notes: All figures are in U.S. dollars unless otherwise noted.
COLT 2024-3: Fitch Gives 'B(EXP)sf' Rating on Class B2 Certificates
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates to be issued by COLT 2024-3 Mortgage Loan Trust (COLT
2024-3).
COLT 2024-3 utilizes Fitch's new Interactive RMBS Presale feature.
To access the interactive feature, click the link at the top of the
presale report's first page, log into dv01 and explore Fitch's
loan-level loss expectations.
Entity/Debt Rating
----------- ------
COLT 2024-3
A1 LT AAA(EXP)sf Expected Rating
A2 LT AA(EXP)sf Expected Rating
A3 LT A(EXP)sf Expected Rating
M1 LT BBB(EXP)sf Expected Rating
B1 LT BB(EXP)sf Expected Rating
B2 LT B(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The COLT 2024-3 certificates are supported by 582 nonprime loans
with a total balance of approximately $357.1 million as of the
cutoff date.
Loans in the pool were originated by multiple originators,
including OCMBC, Inc. (dba LoanStream Mortgage), Citadel Servicing
Corporation (dba Acra Lending), The Loan Store, Inc., HomeXpress
Mortgage Corp. and Foundation Mortgage Corporation. The loans were
aggregated by Hudson Americas L.P., and are currently serviced by
Fay Servicing LLC (Fay), Select Portfolio Servicing, Inc. (SPS),
Citadel Servicing Corporation (dba Acra Lending) and Northpointe
Bank.
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 9.8% above a long-term sustainable level (versus
11.1% on a national level as of 4Q23, unchanged since the prior
quarter). Housing affordability is the worst it has been in
decades, driven by both high interest rates and elevated home
prices. Home prices increased 5.5% yoy nationally as of February
2024.
COLT 2024-3 has a combined original LTV (cLTV) of 74.2%, slightly
lower than that of the previous Hudson transaction, COLT 2024-2.
Based on Fitch's updated view of housing market overvaluation, this
pool's sustainable LTV (sLTV) is 82.5%, compared with 82.4% for the
previous transaction.
Non-QM Credit Quality (Negative): The collateral consists of 582
loans totaling $357.1 million and seasoned at approximately three
months in aggregate. The borrowers have a moderate credit profile,
consisting of a 736 model FICO, and moderate leverage with an 82.5%
sLTV and a 74.2% cLTV.
Of the pool, 60.0% of the loans are of a primary residence, while
34.4% comprise an investor property. Additionally, 58.4% are
non-qualified mortgages (non-QMs, or NQMs), 5.7% are safe-harbor
QMs (SHQMs) and 1.5% are high-priced QMs (HPQMs). The QM rule does
not apply to the remainder.
Fitch's expected loss in the 'AAAsf' stress is 22.5%. This is
mainly driven by the NQM collateral and the significant investor
cash flow product (debt service coverage ratio [DSCR])
concentration.
Loan Documentation (Negative): About 90.8% of loans in the pool
were underwritten to less than full documentation and 62.0% 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 (the ATR rule). Its treatment
of alternative loan documentation increased 'AAAsf' expected losses
by 650bps, compared with a deal of 100% fully documented loans.
High Percentage of DSCR Loans (Negative): In the pool, there are 94
DSCR products (12.6% by unpaid principal balance [UPB]). These
business-purpose loans are available to real estate investors that
are qualified on a cash flow basis, rather than debt to income
(DTI), and borrower income and employment are not verified.
Compared with standard investment properties, for DSCR loans, Fitch
converts the DSCR values to a DTI and treats them as low
documentation. Its treatment for DSCR loans results in a higher
Fitch-reported non-zero DTI.
Of the DSCR loans, 3.0% include a default interest rate feature,
whereby the interest rate to the borrower increases upon
delinquency/default. Fitch expects a lower cure rate on loans with
this feature and increases the likely default rate, similar to the
impact of an adjustable-rate mortgage (ARM).
Its average expected losses for DSCR loans is 33.4% in the 'AAAsf'
stress.
Modified Sequential-Payment Structure with Limited 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, delinquency trigger event or credit
enhancement (CE) 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 principal and interest (P&I) will be made on
the mortgage loans serviced by SPS, Fay and Northpointe for the
first 90 days of delinquency, to the extent such advances are
deemed recoverable. If the P&I advancing party fails to make a
required advance, the master servicer and then the securities
administrator will be obligated to make such advance. For the
Citadel-serviced mortgage loans, there will be no advances of
delinquent 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 to this is the additional stress
on the structure, as there is limited liquidity in the event of
large and extended delinquencies.
COLT 2024-3 has a step-up coupon for the senior classes (A-1, A-2
and A-3). After four years, the senior classes pay the lower of a
100-bp increase to the fixed coupon or the net weighted average
coupon (NWAC) rate. Any class B-3 interest distribution amount will
be distributed to class A-1, A-2 and A-3 certificates on and after
the step-up date if the cap carryover amount is greater than zero.
This increases the P&I allocation for the senior classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 41.3% at 'AAA'. 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
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 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 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 Consolidated Analytics, SitusAMC, Clayton, Evolve,
Selene, Clarifii, Opus and Maxwell. 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 to its
analysis: a 5% credit was given at the loan level for each loan
where satisfactory due diligence was completed. This adjustment
resulted in a 52bps reduction to the 'AAA' expected loss.
DATA ADEQUACY
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 data layout format.
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.
COLUMBIA CENT 33: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Columbia Cent CLO 33
Ltd./Columbia Cent CLO 33 Corp.'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 Columbia Cent CLO Advisers LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Columbia Cent CLO 33 Ltd./Columbia Cent CLO 33 Corp.
Class A-1, $240.00 million: AAA (sf)
Class A-J, $16.00 million: AAA (sf)
Class B, $48.00 million: AA (sf)
Class C-1 (deferrable), $14.00 million: A (sf)
Class C-F (deferrable), $10.00 million: A (sf)
Class D-1F (deferrable), $17.00 million: BBB (sf)
Class D-1A (deferrable), $5.00 million: BBB (sf)
Class D-J (deferrable), $6.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $39.10 million: Not rated
COMM 2012-LC4: Moody's Downgrades Rating on 2 Tranches to C
-----------------------------------------------------------
Moody's Ratings has affirmed the ratings on two classes and
downgraded the ratings on four classes in COMM 2012-LC4 Mortgage
Trust, Commercial Mortgage Pass-Through Certificates, Series
2012-LC4 ("COMM 2012-LC4") as follows:
Cl. B, Downgraded to Ba1 (sf); previously on Feb 22, 2023
Downgraded to Baa2 (sf)
Cl. C, Downgraded to Caa2 (sf); previously on Feb 22, 2023
Downgraded to B3 (sf)
Cl. D, Downgraded to C (sf); previously on Feb 22, 2023 Affirmed
Caa3 (sf)
Cl. E, Affirmed C (sf); previously on Feb 22, 2023 Affirmed C (sf)
Cl. F, Affirmed C (sf); previously on Feb 22, 2023 Affirmed C (sf)
Cl. X-B*, Downgraded to C (sf); previously on Feb 22, 2023 Affirmed
Ca (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on three P&I classes were downgraded due to increased
risk of interest shortfalls and the potential for higher expected
losses driven by the significant exposure to delinquent loans in
special servicing. All the remaining loans are either in special
servicing or have passed their original maturity dates. The sole
performing loan, Square One Mall Loan (53% of the pool), has been
previously modified and is secured by a regional mall with
continued declines in performance. The three specially serviced
loans (47% of the pool) are classified as either real estate owned
(REO) or in foreclosure and have been deemed non-recoverable by the
master servicer. As a result of the non-recoverability
determinations, interest shortfalls currently impact up to Cl. D.
and due to the exposure to specially serviced and previously
defaulted loans, the outstanding classes may be at higher risk of
loss and/or increased interest shortfalls if the performance of the
remaining loans deteriorates and certain loans remain delinquent.
The ratings on two P&I classes, Cl. E and Cl. F, were affirmed
because the ratings are consistent with Moody's expected loss.
The rating on one IO class, Cl. X-B, was downgraded due to the
decline in the credit quality of its reference classes resulting
from principal paydowns of higher quality reference classes. Cl.
X-B references all P&I classes including Class G, which is not
rated by Moody's.
Moody's rating action reflects a base expected loss of 62.1% of the
current pooled balance. Moody's base expected loss plus realized
losses is now 11.1% of the original pooled balance.
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 an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in 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 47.0% of the pool is in
special servicing and Moody's recognized an additional 53.0% of the
pool as a troubled loan. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially to the most junior classes and the recovery as a pay
down of principal to the most senior classes.
DEAL PERFORMANCE
As of the May 10, 2024 distribution date, the transaction's
aggregate certificate balance has decreased by 84.4% to $147.2
million from $941.3 million at securitization. The certificates are
collateralized by four mortgage loans, of which three loans, 47% of
the pool, are currently in special servicing. The sole performing
loan (53% of the pool) has been previously modified after failing
to payoff at its loan maturity and was recognized as a troubled
loan.
As of the May 2024 remittance statement cumulative interest
shortfalls were $5.3 million and impacted up to Cl. D. The three
specially serviced loans have been deemed non-recoverable by the
master servicer and Moody's anticipates interest shortfalls will
continue because of the exposure to specially serviced loans.
The largest specially serviced loan is the Alamance Crossing Loan
($41.0 million – 27.9% of the pool), which is secured by the fee
interest in a 457,000 square foot (SF) regional mall/lifestyle
center located in Burlington, North Carolina. The collateral
consists of a portion of the Alamance Crossing East shopping center
and the Alamance Crossing Central shopping center. Alamance
Crossing East is a 649,989 SF open-air lifestyle center anchored by
Dillard's, JC Penney, and Belk, along with a 16-screen Carousel
Cinemas theater. Dillard's (124,683 SF) and JC Penney (102,826 SF)
own their own stores and underlying land and are non-collateral for
the loan. Alamance Crossing Central is a strip retail shopping
center located across an access road and west of Alamance Crossing
East. It contains 32,600 SF of NRA, all of which are part of the
collateral. The loan has been in special servicing since November
2020 and passed its July 2021 maturity date. A receiver took
control of the property in April 2023 and servicer commentary
indicates the Special Servicer is evaluating offers from various
parties to potentially extend and assume the loan. The loan has
amortized by 19% since securitization, however, the most recent
appraisal reported from November 2022 was 38% below the value at
securitization and the loan has been deemed non-recoverable by the
master servicer.
The second largest specially serviced loan is the Susquehanna
Valley Mall loan ($20.6 million – 14.0% of the pool), which is
secured by a 628,063 SF component of a 745,000 SF regional mall
located in Selinsgrove, Pennsylvania. The property is located in a
tertiary market 50 miles north of Harrisburg, Pennsylvania and 40
miles east of State College, Pennsylvania. At securitization, the
property was anchored by a Sears, JCPenney, Bon-Ton, Boscov's and
Carmike Cinemas, however, the Sears, JCPenney, and Bon-Ton have
vacated leaving Boscov's and Carmike Cinemas as the only two
remaining anchors. An outparcel grocery-anchor, Weis Market, also
vacated in October 2018. The former Sears box has been leased to
Family Practice, a medical clinic, through 2049. The mall has faced
competition from a local power center which also offers a robust
mix of national tenants. The loan has been in special servicing
since March 2018 and is now REO. In April 2023, an updated
appraisal valued the property at $7.1 million, which is
significantly below the remaining outstanding loan balance. The
2023 net operating income (NOI) was more than 60% lower than the
NOI in 2012. As of the May remittance this loan was last paid
through March 2024 and the loan has been deemed non-recoverable by
the master servicer.
The remaining specially serviced loan is secured by a senior living
property in Springfield, Illinois (5% of the pool) that has seen a
significant decline in occupancy and financial performance. The
loan became REO in August 2023 and has also been deemed
non-recoverable by the master servicer.
Moody's has also assumed a high default probability on the Square
One Mall Loan, further described below, and estimates an aggregate
$91.4 million loss for the specially serviced and troubled loans
(62% expected loss on average).
The sole performing non-specially serviced loan is the Square One
Mall Loan ($78.1 million – 53.0% of the pool), which is secured
by the fee interest in a 541,000 SF component of a 929,000 SF
super-regional mall located in Saugus, Massachusetts, approximately
10 miles northeast of Boston. The sponsor is Mayflower Realty LLC,
a joint-venture between Simon Properties, TIAA, and the Canada
Pension Plan Investment Board. The property is anchored by a Sears,
Macy's, Dick's Sporting Goods, Best Buy, BD's Furniture, and TJ
Maxx. Macy's and Sears own their own boxes and are non-collateral
for the loan. The loan failed to pay off at its maturity date in
January 2022 and the loan was subsequently modified to include a
loan extension through January 2027, conversion to interest-only
payments, and is now cash managed with hyper amortization of excess
cash flow. The property's NOI has continued to annually decline in
recent years and the 2023 NOI was 4% below 2022 and was 41% lower
than in 2019. As of May remittance this loan was current on debt
service payments and has amortized by 22% since securitization.
However, the most recently reported appraisal from August 2021
valued the property 38% below the outstanding loan balance. Due to
the continued decline in performance, Moody's has identified this
as a troubled loan.
COMM 2016-COR1: Fitch Lowers Rating on Two Tranches to 'B+sf'
-------------------------------------------------------------
Fitch Ratings has downgraded nine and affirmed five class of COMM
2016-COR1 Mortgage Trust. Fitch has also assigned Negative Outlooks
to classes B, C, D, X-B and X-C following their downgrades. The
Rating Outlooks for affirmed classes A-M and X-A were revised to
Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2016-COR1
A-3 12594MBB3 LT AAAsf Affirmed AAAsf
A-4 12594MBC1 LT AAAsf Affirmed AAAsf
A-M 12594MBG2 LT AAAsf Affirmed AAAsf
A-SB 12594MBA5 LT AAAsf Affirmed AAAsf
B 12594MBE7 LT A-sf Downgrade AA-sf
C 12594MBF4 LT BBB-sf Downgrade BBB+sf
D 12594MAL2 LT B+sf Downgrade BB-sf
E 12594MAN8 LT CCsf Downgrade CCCsf
F 12594MAQ1 LT Csf Downgrade CCsf
X-A 12594MBD9 LT AAAsf Affirmed AAAsf
X-B 12594MAA6 LT A-sf Downgrade AA-sf
X-C 12594MAC2 LT B+sf Downgrade BB-sf
X-E 12594MAE8 LT CCsf Downgrade CCCsf
X-F 12594MAG3 LT Csf Downgrade CCsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades to classes B, C, D, E,
F, X-B, X-C, X-E and X-F reflect increased pool loss expectations
since Fitch's last rating action driven by continued performance
deterioration of the office and retail Fitch Loans of Concern
(FLOCs), including Champion Station (10.5% of pool), Prudential
Plaza (4.9%), Comcast Place (3.9%), Redmond Woods (3.5%), Westfield
San Francisco Centre (3.1%), GM Office Building (1.9%) and GSA &
KCI Portfolio (1.3%).
Fitch's current ratings incorporate a 'Bsf' rating case loss of
7.4%. Fitch designated 16 loans as FLOCs, comprising 51.8% of the
pool.
The Rating Outlook revision of classes A-M and X-A to Negative from
Stable and the Negative Outlook assignment to classes B, C, D, X-B
and X-C reflect the high office concentration in the pool (39.7%)
and possible further downgrades should occupancy and cashflow
trends of the aforementioned office and retail FLOCs 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 higher probability of default given
refinanceability concerns on the Champion Station, Comcast Place,
Redmond Woods, GM Office Building and the GSA & KCI Portfolio
loans, as well as a higher stressed loss on the Westfield San
Francisco Centre of 50%
Largest Increases in Loss: The largest contributor to overall loss
expectations and the largest increase in losses since the last
rating action is the Champion Station loan (10.5% of the pool),
which is secured by a 287,271-sf suburban office property located
in San Jose, CA. The loan was identified as a FLOC due to major
tenant Itron (66.6% of NRA) listing their space as available for
sublease. The tenant continues to pay rent in accordance with their
lease agreement, which expires in September 2026 and co-terminous
with the August 2026 loan maturity.
Due to the subleasing of the largest tenant's space, Fitch's 'Bsf'
rating case loss of 11.8% (prior to concentration add-ons) is based
on a 10% cap rate, 10% stress to the YE 2023 NOI and an increased
probability of default due to the loan's heightened maturity
default concerns.
The next largest increase in losses since the last rating action is
the Prudential Plaza loan (4.9%), which is secured by two office
towers totaling 2.2 million-sf located in Chicago, IL, immediately
north of Millennium Park. The loan 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.
A loan modification agreement was executed, which extended the
maturity through August 2027 and included two, one-year extension
options. The loan subsequently returned to the master servicer in
March 2024. 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 servicer, the property was 76% occupied at YE 2023, down
from 82.5% at YE 2022 and 85% at YE 2021. Occupancy will decline
further due to the expected vacancy of tenants accounting for 10%
of the NRA.
Fitch's 'Bsf' rating case loss of 11.9% (prior to concentration
add-ons) is based on a lower stabilized cash flow that is 10.6%
below Fitch's stressed cash flow at issuance to account for
performance declines, increasing operating expenses and softening
market conditions.
The third largest increase in losses since the last rating action
is the Comcast Place loan (3.9%), secured by a 219,631-sf office
property located in Livermore, CA. The building was occupied by a
single tenant, Comcast, which downsized by 33.3% of the NRA in 2019
and renewed its lease through December 2030 for the remaining 66.6%
of the NRA. As of YE 2023, property occupancy remains at 66.6% with
a NOI DSCR of 1.20x.
Fitch's 'Bsf' rating case loss of 15.5% (prior to concentration
add-ons) reflects a 10% cap rate, 10% stress to the YE 2023 NOI and
factors an increased probability of default due to the limited
progress in re-tenanting the property vacancies and heightened
maturity default concerns.
The fourth largest increase in loss since the last rating action is
the Redmond Woods loan (3.5%), which is secured by a 145,221-sf
office building located in Redmond, WA. The subject is tenanted by
Microsoft (25.5% of the NRA leased through June 2025 and 50.5%
through July 2027) and LTI Mindtree (24%; June 2025). The loan was
identified as a FLOC due to approximately 66% of the space at the
property listed as available for sublease as well as tenant lease
expirations coterminous with the loan's August 2026 maturity.
Fitch's 'Bsf' rating case loss of 8.3% (prior to concentration
add-ons) reflects a 10% cap rate, 10% stress to the YE 2023 NOI to
account for the upcoming rollover and an increased probability of
default due to the loan's heightened maturity default concerns.
The fifth largest increase in loss expectations since the last
rating action is the GSA and KSI Portfolio loan (1.4%), which is
secured by a 58,700-sf office building in San Antonio, TX and a
15,193-sf office building located in Indianapolis, IN. Single
tenant, KCI USA, Inc, which occupied the entire San Antonio
building, vacated at their March 2023 lease expiration, resulting
in portfolio occupancy of about 20%. The YE 2023 NOI DSCR declined
to 1.28x.
Fitch's 'Bsf' rating case loss of 22.5% (prior to concentration
add-ons) reflects a 10% cap rate, 20% stress to the YE 2023 NOI and
a higher probability of default to account for the significant
decline in portfolio occupancy.
The sixth largest increase in loss expectations, GM Office Building
(1.9%), is secured by a 200,000-sf office building located in
Warren, MI. The loan was identified as a FLOC due to a cash sweep
being activated after the servicer reported the sole tenant,
General Motors, vacated the building in February 2024. The tenant
has a lease expiration in December 2026 with no termination options
available.
Fitch's 'Bsf' rating case loss of 15.6% (prior to concentration
add-ons) includes a 10% cap rate, 10% stress to the annualized YTD
September 2023 NOI and factors an elevated probability of default
to reflect loss of the single tenant.
Other Top Contributor to Loss Expectations: The second largest
contributor to overall loss expectations is the Westfield San
Francisco Centre loan (3.1%), secured by a 553,366-sf retail and a
241,155-sf office portion of a 1,445,449-sf super regional mall
located in San Francisco Union Square neighborhood. The loan
transferred to special servicing in June 2023 due to imminent
monetary default after the sponsors, Westfield and Brookfield,
disclosed their intentions to return the keys to the lender.
A receiver was appointed in October 2023. The sponsors cited
operating challenges in downtown San Francisco that led to
deteriorating sales, reduced occupancy and decreasing foot traffic.
The servicer noted that the receiver is working with city agencies
to address life safety issues at the property and the neighborhood.
Mall occupancy declined to 23% after anchor tenant, Nordstrom
(21.5% of the mall NRA), vacated at their October 2023 lease
expiration. The loan has maintained a NOI DSCR hovering around
1.00x since YE 2021.
Fitch's 'Bsf' rating case loss of 34.6% (prior to concentration
add-ons) is based on a recent appraisal value, which is
approximately 76% below the issuance appraisal value.
The third largest contributor to overall loss expectations is the
Hagerstown Premium Outlets loan (1.9%), secured by a 484,994-sf
outlet center located in Hagerstown, MD. The loan transferred to
special servicing in September 2023. The servicer is dual-tracking
workout discussions with foreclosure/receivership. The sponsor,
Simon Property Group, has submitted a loan modification request to
convert the loan to an interest-only structure.
Occupancy improved to 53.5% in 2023 after Tim's Furniture Mart
(13.1% of the NRA) took occupancy, but it still remains below
pre-pandemic levels of 78% at YE 2019. The NOI DSCR has remained
near 1.00x since YE 2021.
Fitch's 'Bsf' rating loss of 40.7% (prior to concentration add-ons)
includes an 18% cap rate to the YE 2022 NOI, which equates to a
stressed value of 83 psf.
Increased Credit Enhancement (CE): As of the April 2024
distribution date, the pool's aggregate principal balance has been
reduced by 14.1% to $765 million from $890.7 million. There are
four loans (8.2% of pool) that have fully defeased. Loan maturities
are concentrated in 2026 (35 loans; 94.3% of pool), with the
remainder in 2025 (one loan; 0.8%) and 2027 (one loan; 4.9%).
Cumulative interest shortfalls and realized losses of $373,358 and
$3.87 million, respectively, are impacting the non-rated class G.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the senior 'AAAsf' rated classes are not expected due
to increasing CE and expected continued amortization and loan
repayments, but may occur if deal-level losses increase
significantly and/or interest shortfalls occur.
Downgrades to the junior 'AAAsf' rated classes with Negative
Outlooks are possible with continued performance deterioration of
the FLOCs, increased expected losses and limited to no improvement
in CE, or if interest shortfalls occur. Downgrades are possible
should a large proportion of loans anticipated to be repaid at
maturity fail to secure refinancing, increasing the potential for
prolonged workouts and higher pool losses; these performing FLOCs
at risk of maturity default include the 286 Madison Avenue, Hampton
Inn & Suites Boston Crosstown, Acme Hotel or Birch Run Premium
Outlets loans.
Downgrades to 'A-sf' and 'BBB-sf' rated classes may occur should
the business plan for Prudential Plaza not materialize and/or with
further performance deterioration of the Champion Station, Comcast
Place, Redmond Woods, GM Office Building, GSA & KCI Portfolio or
Westfield San Francisco Centre loans.
Downgrades to classes rated 'B+sf', 'CCsf' and 'Csf' may occur as
losses are incurred and/or with a greater certainty of loss
expectations.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to class rated 'A-' or 'BBB-sf' may occur with
significantly improved CE, coupled with sustained performance
improvement on the FLOCs, including the Prudential Plaza, Champion
Station, Comcast Centre, Redmond Woods, GM Office Building or GSA &
KCI Portfolio, and better valuation and workout progress on
Westfield San Francisco Centre.
Upgrades to classes rated 'B+sf' are unlikely absent greater
clarity on loan refinanceability as well as better than expected
recoveries on the aforementioned FLOCs.
Upgrades to the distressed classes are unlikely without significant
improvement in expected recoveries and greater certainty around
loss expectations.
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 2024-WCL1: Moody's Assigns (P)B1 Rating to Cl. HRR Certs
-------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to six classes of
CMBS securities, to be issued by COMM 2024-WCL1 Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2024-WCL1:
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba2 (sf)
Cl. HRR, Assigned (P)B1 (sf)
RATINGS RATIONALE
The certificates are collateralized by a single loan backed by a
first lien mortgage on the borrower's fee simple interests in in a
portfolio of 41 primarily industrial properties encompassing
approximately 1.9 million BSF and 6.2M LSF. Moody's ratings are
based on the credit quality of the loan and the strength of the
securitization structure.
The collateral portfolio consists of 41 industrial properties
located across eight port-adjacent markets in three states. The
largest concentrations are in Seattle (26.3% of underwritten NOI),
Los Angeles (22.2% of underwritten NOI), and Orange County (20.4%
of underwritten NOI). The portfolio is highly diverse, with no with
no single asset contributing more than 10.8% of underwritten NOI.
The portfolio's property-level Herfindahl score is 25.44 based on
allocated loan amount (the "ALA"). The properties are leased to 50
national and regional tenants, none of which comprises more than
8.1% of underwritten base rent.
The collateral properties contain a total of 1.9M BSF and 6.2M LSF
and includes last mile facility (32.4% of NRA, 37.4% of UW NOI),
regional distribution (23.8% of NRA, 21.5% of underwritten NOI),
and bulk industrial (33.7% of NRA, 16.8% of underwritten NOI)
properties. Property size ranges between 614,541 BSF and 25,749
BSF(2,018,208 LSF and 141,840 LSF) and average approximately
211,987 SF . Clear heights for properties range between 14 feet
and 30 feet, and average approximately 23.1 feet. The properties
were built between 1928 and 2005 with an average year built of
1978.
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 0.74x. Moody's DSCR is based on
Moody's stabilized net cash flow.
The loan first mortgage balance of $493,000,000 represents a
Moody's LTV ratio of 116.6% based on Moody's value. Adjusted
Moody's LTV ratio for the first mortgage balance is 104.9% 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 25.44. The ten largest loans properties
represent 50.3% 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 1.00.
Notable strengths of the transaction include: proximity to global
gateway markets, infill locations, geographic diversity, strong
occupancy, tenant granularity, multiple property pooling and
experienced sponsorship.
Notable concerns of the transaction include: rollover risk,
property age, floating-rate interest-only loan profile, 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.
CSAIL 2015-C4: DBRS Confirms B Rating on Class X-G Certs
--------------------------------------------------------
DBRS Limited confirmed all credit ratings on the classes of
Commercial Mortgage Pass-Through Certificates, Series 2015-C4
issued by CSAIL 2015-C4 Commercial Mortgage Trust as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class 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)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class X-D at BBB (sf)
-- Class X-F at BB (sf)
-- Class X-G at B (sf)
All trends are Stable.
The credit rating confirmations reflect the stable performance of
the transaction, which remains in line with Morningstar DBRS'
expectations. The pool benefits from its low exposure to loans
secured by office collateral, with just seven loans representing
7.6% of the pool as of the April 2024 remittance. Additionally,
there are 26 loans, representing 24.7% of the pool, that are fully
defeased, an increase from 21.3% at the time of the last rating
action in June 2023. As of the April 2024 remittance, there are no
loans in special servicing and eight loans, representing 7.9% of
the pool, being monitored on the servicer's watchlist, of which,
four are being monitored for performance issues. Since Morningstar
DBRS' last review, two loans previously in special servicing were
liquidated with a combined loss of $5.7 million, in line with
Morningstar DBRS' loss expectations.
As of the April 2024 remittance, 82 of the original 87 loans remain
in the pool, representing a collateral reduction of 13.9% as a
result of loan amortization, repayments, and liquidations. All 56
non-defeased loans are scheduled to mature by November 2025. The
maturity profile for a majority of the remaining loans remains
healthy, as evidenced by the pools weighted-average (WA) debt
service coverage ratio (DSCR) of 2.61 times (x) based on the most
recent year-end financials available. For loans that are currently
exhibiting stressed performance and increased refinance risk,
Morningstar DBRS increased the probability of default or
loan-to-value (LTV) ratio to reflect their current risk profile.
The 324 South Service Road loan (Prospectus ID#4, 3.4% of the
pool), secured by a 117,800 square foot (sf) office building in
Long Island, New York, is the largest loan in the pool secured by
office collateral. Although the loan is not currently being
monitored on the servicer's watchlist, Morningstar DBRS is
concerned about the loan's refinance prospects given the lack of
investor appetite for office properties and the decline in cash
flow from issuance. The property's largest tenant, TD Bank (29.3%
of net rentable area (NRA)) extended its lease through January
2030; however, the second and third-largest tenants, collectively
comprising 11.4% of NRA, have lease expirations in Q4 2025,
coinciding with the loan's maturity date. Both occupancy and DSCR
have trended lower each year since 2020, most recently being
reported at 84.0% and 1.26x, respectively, as of YE2023. According
to online leasing brochures, approximately 21.5% of NRA is
currently available for lease with an asking rental rate of $33.95
psf, suggesting occupancy has declined through Q1 2024. Per Reis,
the Western Suffolk office market reports a vacancy rate of 14.2%
and average effective rents of $22.08 psf as of Q1 2024. In the
event that the sponsor is unable to backfill the vacant space or
additional tenants vacate ahead of the loan's November 2025
maturity date, the loan may prove difficult to refinance. To
account for this risk, Morningstar DBRS analyzed the loan using a
stressed LTV by applying an elevated cap rate to the YE2023 net
cash flow, resulting in an expected loss that is over 100.0%
greater than the pool's weighted average.
The largest loan on the servicer's watchlist, Aloft Hotel –
Downtown Denver (Prospectus ID#6, 2.4% of the pool), is secured by
a select-service hotel in downtown Denver. The loan is being
monitored for a low DSCR, most recently being reported at 0.69x for
the trailing 12-month period ended September 30, 2023, as compared
to the YE2022 DSCR of 1.73x. The decline in DSCR is mainly
attributed to property wide renovations that were completed from
May 2023 to August 2023, which resulted in the temporary closure of
the subject property. According to online news articles, the
renovations to the lobby, food and beverage spaces, fitness center,
and social lounge totaled approximately $3.0 million. Morningstar
DBRS expects cash flow to increase closer to the YE2022 level once
operations stabilize. Given that recent performance in 2022 and
2021 significantly lagged behind issuance levels, Morningstar DBRS
opted to analyze this loan with an elevated probability of default,
resulting in an expected loss approximately 80.0% greater than the
pool's weighted average.
Notes: All figures are in U.S. dollars unless otherwise noted.
DRYDEN 83 CLO: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-1-R, B-2-R, C-1-R, C-2-R, D-1-R, D-2-R, and E-R replacement
debt from Dryden 83 CLO Ltd./Dryden 83 CLO LLC, a CLO originally
issued in January 2021 that is managed by PGIM Inc.
The preliminary ratings are based on information as of May 28,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the May 30, 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-R, B-1-R, B-2-R, C-1-R, C-2-R, D-1-R,
D-2-R, and E-R notes are expected to be issued at a floating
spread.
-- The stated maturity and the reinvestment period will be
extended by 5.25 years.
-- A new non-call period will be established, which will end
immediately prior to (and excludes) the payment date in April
2026.
-- Several new features will be added, including but not limited
to amendments to the collateral debt obligation definition and the
conditions to invest additional monies in workout-related assets
(as defined in the document).
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $288.00 million: Three-month CME term SOFR + 1.53%
-- Class B-1-R, $40.50 million: Three-month CME term SOFR + 1.95%
-- Class B-2-R, $13.50 million: Three-month CME term SOFR + 2.15%
-- Class C-1-R (deferrable), $18.00 million: Three-month CME term
SOFR + 2.35%
-- Class C-2-R (deferrable), $9.00 million: Three-month CME term
SOFR + 2.80%
-- Class D-1-R (deferrable), $23.60 million: Three-month CME term
SOFR + 3.70%
-- Class D-2-R (deferrable), $6.75 million: Three-month CME term
SOFR + 5.20%
-- Class E-R (deferrable), $14.65 million: Three-month CME term
SOFR + 6.32%
Original debt
-- Class A, $250.99 million: Three-month CME term SOFR + 1.22% +
CSA(i)
-- Class B, $48.00 million: Three-month CME term SOFR + 1.60% +
CSA(i)
-- Class C (deferrable), $24.00 million: Three-month CME term SOFR
+ 2.15% + CSA(i)
-- Class D (deferrable), $24.00 million: Three-month CME term SOFR
+ 3.50% + CSA(i)
-- Class E (deferrable), $14.00 million: Three-month CME term SOFR
+ 5.55% + 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
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
Dryden 83 CLO Ltd./Dryden 83 CLO LLC
Class A-R, $288.00 million: AAA (sf)
Class B-1-R, $40.50 million: AA+ (sf)
Class B-2-R, $13.50 million: AA (sf)
Class C-1-R (deferrable), $18.00 million: A+ (sf)
Class C-2-R (deferrable), $9.00 million: A (sf)
Class D-1-R (deferrable), $23.60 million: BBB (sf)
Class D-2-R (deferrable), $6.75 million: BBB- (sf)
Class E-R (deferrable), $14.65 million: BB- (sf)
Other Debt
Dryden 83 CLO Ltd./Dryden 83 CLO LLC
Subordinated notes, $57.52 million: Not rated
(i)Includes $40.00 million of subordinated notes issued on the Jan.
6, 2021, closing date
EXETER AUTOMOBILE 2024-3: S&P Assigns BB- (sf) Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Exeter Automobile
Receivables Trust 2024-3's automobile receivables-backed notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The ratings reflect S&P's view of:
-- The availability of approximately 59.56%, 53.06%, 44.17%,
33.10%, and 26.65% credit support--hard credit enhancement and
haircut to excess spread--for the class A (collectively, classes
A-1, A-2, and A-3), B, C, D, and E notes, respectively, based on
stressed cash flow scenarios. These credit support levels provide
at least 2.70x, 2.40x, 2.00x, 1.50x, and 1.20x coverage of S&P's
expected cumulative net loss (ECNL) of 22.00% for classes A, B, C,
D, and E, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.50x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB- (sf)' ratings on
the class A, B, C, D, and E notes, respectively, will be within its
credit stability limits.
-- The timely payment of interest and principal repayment by the
designated legal final maturity dates under S&P's stressed cash
flow modeling scenarios for the assigned ratings.
-- The collateral characteristics of the series' subprime
automobile loans, our view of the collateral's credit risk, S&P's
updated macroeconomic forecast, and forward-looking view of the
auto finance sector.
-- S&P's assessment of the series' bank accounts at Citibank N.A.,
which do not constrain the ratings.
-- S&P's operational risk assessment of Exeter Finance LLC as
servicer, along with its view of the company's underwriting and the
backup servicing arrangement with Citibank.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with its sector benchmark.
-- The transaction's payment and legal structures.
S&P's ECNL for EART 2024-3 is 22.00%, unchanged from EART 2023-4
(the last EART transaction rated by S&P Global Ratings). It
reflects:
-- EART's outstanding rated series' performances, which remain in
line with or better than S&P's initial expectations, except for
EART 2022-1, 2022-2, 2022-3, 2022-4, and 2022-5, the performances
of which are trending worse than its original ECNLs.
-- S&P said, "Our view that EART 2024-3's collateral
characteristics are similar to those of EART 2023-4. Additionally,
the accounts included in the EART 2024-3 collateral pool will have
either made at least one payment or have a post-funding score
greater than or equal to 220, which we view as a credit positive,
and which was a consideration in our analysis."
-- S&P's forward-looking view of the auto finance sector,
including its outlook for a shallower and more attenuated economic
slowdown.
Ratings Assigned
Exeter Automobile Receivables Trust 2024-3
Class A-1, $86.900 million: A-1+ (sf)
Class A-2, $205.000 million: AAA (sf)
Class A-3, $84.295 million: AAA (sf)
Class B, $100.899 million: AA (sf)
Class C, $120.904 million: A (sf)
Class D, $129.603 million: BBB (sf)
Class E, $87.852 million: BB- (sf)
GCAT TRUST 2024-INV2: Moody's Assigns (P)B2 Rating to B-5 Certs
---------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to 35 classes of
residential mortgage-backed securities (RMBS) to be issued by GCAT
2024-INV2 Trust, and sponsored by Blue River Mortgage III LLC.
The securities are backed by a pool of GSE-eligible residential
mortgages aggregated by Blue River Mortgage III LLC, originated by
multiple entities and serviced by NewRez LLC d/b/a Shellpoint
Mortgage Servicing, PennyMac Loan Services, LLC and PennyMac Corp.
(collectively, PennyMac)
The complete rating actions are as follows:
Issuer: GCAT 2024-INV2 Trust
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aa1 (sf)
Cl. A-14, Assigned (P)Aa1 (sf)
Cl. A-15, Assigned (P)Aa1 (sf)
Cl. A-16, Assigned (P)Aa1 (sf)
Cl. A-X-1*, Assigned (P)Aa1 (sf)
Cl. A-X-2*, Assigned (P)Aaa (sf)
Cl. A-X-4*, Assigned (P)Aaa (sf)
Cl. A-X-6*, Assigned (P)Aaa (sf)
Cl. A-X-8*, Assigned (P)Aaa (sf)
Cl. A-X-10*, Assigned (P)Aaa (sf)
Cl. A-X-12*, Assigned (P)Aaa (sf)
Cl. A-X-14*, Assigned (P)Aa1 (sf)
Cl. A-X-16*, Assigned (P)Aa1 (sf)
Cl. B-1-A, Assigned (P)Aa3 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-X-1*, Assigned (P)Aa3 (sf)
Cl. B-2-A, Assigned (P)A2 (sf)
Cl. B-2, Assigned (P)A2 (sf)
Cl. B-X-2*, Assigned (P)A2 (sf)
Cl. B-3, Assigned (P)Baa2 (sf)
Cl. B-4, Assigned (P)Ba2 (sf)
Cl. B-5, Assigned (P)B2 (sf)
Cl. A-1A Loans, 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
0.92%, in a baseline scenario-median is 0.57% and reaches 8.83% 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.
GOLDENTREE LOAN 20: S&P Assigns B- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to GoldenTree Loan
Management US CLO 20 Ltd./GoldenTree Loan Management US CLO 20
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 GLM III L.P.
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
GoldenTree Loan Management US CLO 20 Ltd./
GoldenTree Loan Management US CLO 20 LLC
Class X, $2.50 million: AAA (sf)
Class A, $307.50 million: AAA (sf)
Class B, $72.50 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class D-J (deferrable), $5.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Class F (deferrable), $5.00 million: B- (sf)
Subordinated notes, $32.20 million: Not rated
GS MORTGAGE 2018-RIVR: S&P Assigns 'B- (sf)' Rating on Cl. D Notes
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from GS Mortgage
Securities Corp. Trust 2018-RIVR, a U.S. CMBS transaction. At the
same time, S&P placed the ratings on CreditWatch with negative
implications.
GS Mortgage Securities Corp. Trust 2018-RIVR is a U.S. stand-alone
(single-borrower) CMBS transaction backed by a floating-rate,
interest-only mortgage loan secured by the borrower's fee-simple
interest in River North Point, a 1.7 million sq. ft. mixed-use
(office with a hotel component) property in Chicago.
Rating Actions
The downgrades on the class A, B, C, and D certificates reflect
interest shortfalls affecting these classes due to a significant
revision in the appraisal reduction amount (ARA) that resulted in
appraisal subordinate entitlement reduction (ASER) reported in the
May 15, 2024, trustee remittance report. The master servicer, Wells
Fargo Bank N.A., increased the ARA to $225.9 million from $168.5
million initially reported in March 2024, resulting in an ASER
amount of $1.3 million in May 2024. Consequently, the master
servicer advanced only $439,028 in interest on the underlying
mortgage collateral. Class A received $417,077 or just 68.8% of its
accrued certificate interest and class RR Interest received the
remaining amount, while classes B through H did not receive any
interest payments this month.
The downgrades on classes B, C, and D to 'CCC- (sf)' also reflect
S&P's view that due to current market conditions and their
positions in the waterfall, these classes are at a heightened risk
of default and loss.
S&P said, "Moreover, we placed our ratings on classes A, B, C, and
D on CreditWatch with negative implications because of uncertainty
around the resolution strategy the special servicer takes that may
impact the magnitude and duration of ongoing interest shortfalls as
well as the ultimate liquidation proceeds. Depending on the
resolution, these interest shortfalls may be prolonged in nature,
and additional servicer advances will increase the total loan
exposure, which may lower recovery to the trust.
"It is our understanding from the special servicer, which is also
Wells Fargo, that the revised ARA is based on an updated appraisal
value that it recently obtained." The updated $225.9 million ARA
and total loan exposure of $315.2 million implies a new valuation
point of roughly $100.0 million, a decline of nearly 80.0% from the
issuance appraisal value of $469.0 million. This new $100.0 million
property value is also a decline from the $162.0 million valuation
implied by the $168.5 million ARA from March.
Wells Fargo indicated that the most recent, lower appraised value
reflects the appraiser's view of increases in vacancies, slower
absorption rates, downward pressure on rental rates in the market,
and higher tenant improvement costs to re-tenant spaces. Wells
Fargo also commented that brokers' opinions of values that it had
recently received are in the range of or below the latest appraised
value.
According to the borrower, it has engaged brokers to sell the
property on behalf of the borrower. The special servicer and the
borrower are currently reviewing and assessing the multiple offers
received, none of which have yet been accepted by the borrower or
approved by the special servicer.
S&P said, "As part of the CreditWatch resolution, we will continue
our dialogues with the servicers to assess the magnitude and
duration of the interest shortfalls currently affecting all the
classes as well as monitor for further developments on resolution
strategy and timing. If we believe the accumulated interest
shortfalls will remain outstanding for the foreseeable future
and/or the liquidation proceeds to be around the most recent, lower
appraisal value of approximately $100.0 million, we may take
further rating actions, as appropriate."
Property-Level Analysis
The loan collateral is a 1.7 million sq. ft. mixed-use building in
Chicago comprising approximately 1.3 million sq. ft. of
LEED-certified gold, multi-tenanted office space and approximately
437,000 sq. ft. of hotel space that is leased until June 2050 to
the 535-key Holiday Inn Mart Plaza Hotel, which is located in the
south office tower on floors 14 to 23. The office and hotel
portions represent 74.8% and 25.2% of the total net rentable area
(NRA), respectively. The property was built in 1977 and originally
served as a wholesale buying center for the clothing industry,
adjacent to the Merchandise Center. The current sponsor, Blackstone
Real Estate Partners VIII L.P., acquired the property in 2015 for
$388.9 million.
In S&P's last review, on Dec. 1, 2023, the property's office
component was 72.2% leased. According to the special servicer's
March 2024 asset summary report, the property's occupancy dropped
slightly to 68.6% as of January 2024. Additionally, leases
representing about 40.0% of the NRA at the property expire between
2024 and 2027.
The special servicer reported that the property's net cash flow
(NCF) was $9.6 million in 2021, $13.4 million in 2022, and $10.7
million in 2023. The 2024 NCF was budgeted at $16.2 million. Wells
Fargo noted that while the property generates sufficient cash flow
to pay property-related expenses, it is not sufficient to cover
capital expenditures, tenant improvements and leasing commissions,
and debt service. As of May 1, 2024, there was $1.5 million in the
cash management and $1.7 million in the excess cash flow reserve
accounts.
Transaction Summary
The interest-only mortgage loan had an initial balance of $310.0
million and a current balance of $309.8 million as of the May 2024
trustee remittance report. The small paydown was due to the
servicer applying the remaining upfront leasing holdback reserve
funds to pay down the trust and mezzanine loan balance to $59.9
million from $60.0 million on a pro rata basis in February 2020.
The mortgage loan pays an annual floating interest rate indexed to
one-month term SOFR (prior to July 2023, it referenced LIBOR) plus
a weighted average component spread of 1.495% and matured on July
9, 2023. The borrower had two one-year extension options remaining
with a fully extended maturity on July 9, 2025. However, in May
2023, the loan transferred to special servicing for imminent
maturity default. The borrower did not exercise its extension
option and did not obtain a replacement interest rate cap
agreement, resulting in the floating-rate loan being unhedged and
subject to rising interest rate risk.
GS Mortgage Securities Corp. Trust 2018-RIVR
Class A to 'BB+(sf)/Watch Neg' from 'AA- (sf)'
Class B to 'CCC-(sf)/Watch Neg' from 'BBB+ (sf)'
Class C to 'CCC-(sf)/Watch Neg' from 'BB+ (sf)'
Class D to 'CCC-(sf)/Watch Neg' from 'B- (sf)'
GS MORTGAGE 2024-RPL3: DBRS Gives B(high) Rating on Class B2 Notes
------------------------------------------------------------------
DBRS, Inc. assigned credit ratings to the Mortgaged-Backed
Securities, Series 2024-RPL3 (the Notes) issued by GS
Mortgage-Backed Securities Trust 2024-RPL3 (GSMBS 2024-RPL3 or the
Trust) as follows:
-- $408.5 million Class A-1 at AAA (sf)
-- $41.1 million Class A-2 at AA (high) (sf)
-- $449.6 million Class A-3 at AA (high) (sf)
-- $489.5 million Class A-4 at A (high) (sf)
-- $520.9 million Class A-5 at BBB (high) (sf)
-- $39.9 million Class M-1 at A (high) (sf)
-- $31.4 million Class M-2 at BBB (high) (sf)
-- $21.9 million Class B-1 at BB (high) (sf)
-- $14.9 million Class B-2 at B (high) (sf)
The Class A-3, Class A-4, and Class A-5 Notes are exchangeable.
These classes can be exchanged for combinations of initial
exchangeable notes as specified in the offering documents.
The AAA (sf) credit rating on the Notes reflects 32.95% of credit
enhancement provided by subordinated notes. The AA (high) (sf), A
(high) (sf), BBB (high) (sf), BB (high) (sf), and B (high) credit
ratings reflect 26.20%, 19.65%, 14.50%, 10.90%, and 8.45% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming, first-lien residential mortgages funded by the
issuance the Notes. The Notes are backed by 3,318 loans with a
total principal balance of $641,251,945 as of the Cut-Off Date
(March 31, 2024).
The portfolio is approximately 182 months seasoned and contains
86.4% modified loans. The modifications happened more than two
years ago for 84.8% of the modified loans. Within the pool, 1,508
mortgages have non-interest-bearing deferred amounts, which equate
to approximately 9.8% of the total principal balance. There are no
Government-Sponsored Enterprise Home Affordable Modification
Program or proprietary principal forgiveness amounts included in
the deferred amounts.
As of the Cut-Off Date, 94.6% of the loans in the pool are current.
Approximately 1.5% of the loans are in bankruptcy (all bankruptcy
loans are performing) and 3.9% are 30 days delinquent.
Approximately 34.7% of the mortgage loans have been zero times 30
days delinquent (0 x 30) for at least the past 24 months under the
Mortgage Bankers Association (MBA) delinquency method and 80.0%
have been 0x30 for at least the past 12 months under the MBA
delinquency method.
The majority of the pool (83.3%) is exempt from the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because the loans were originated as investor
property loans or were originated prior to January 10, 2014, the
date on which the rules became applicable. The loans subject to the
ATR rules are designated as non-QM (16.7%).
The Mortgage Loan Sellers, Goldman Sachs Mortgage Company (GSMC),
MCLP Asset Company, Inc., and MTGLQ Investors, L.P., acquired the
mortgage loans in various transactions prior to the Closing Date
from various mortgage loan sellers or from an affiliate. GS
Mortgage Securities Corp. (the Depositor) will contribute the loans
to the Trust. These loans were originated and previously serviced
by various entities through purchases in the secondary market.
The Sponsor, GSMC, or a majority-owned affiliate, will retain an
eligible vertical interest in the transaction consisting of an
uncertificated interest (the Retained Interest) in the Trust
representing the right to receive at least 5.0% of the amounts
collected on the mortgage loans, net of the Trust's fees, expenses,
and reimbursements and paid on the Notes (other than the Class R
Notes) and the Retained Interest to satisfy the credit risk
retention requirements under Section 15G of the Securities Exchange
Act of 1934 and the regulations promulgated thereunder.
The mortgage loans will be serviced by NewRez LLC d/b/a Shellpoint
Mortgage Servicing (44.0%), and Nationstar Mortgage LLC d/b/a
Rushmore Servicing (Rushmore, 56.0%). Approximately 1.0% of the
mortgage loans being serviced by an interim servicer will be
transferred to Rushmore on or about May 14, 2024. The servicing fee
for each servicer is 6.5 basis points.
There will not be any advancing of delinquent principal or interest
on any mortgages by the related Servicer or any other party to the
transaction; however, the related Servicer is obligated to make
advances in respect of the preservation, inspection, restoration,
protection, and repair of a mortgaged property, which includes
delinquent tax and insurance payments, the enforcement of judicial
proceedings associated with a mortgage loan, and the management and
liquidation of properties (to the extent that the related Servicer
deems such advances recoverable).
On the Payment Date on which the aggregate unpaid principal balance
(UPB) of the Mortgage Loans is less than 25% of the Cut-Off Date
UPB, the Controlling Holder will have the option to purchase all
remaining loans and other property of the Issuer at par plus
interest (Optional Clean-Up Call). The Controlling Holder will be
the beneficial owner of more than 50% the Class B-5 Notes (if no
longer outstanding, the next most subordinate class of Notes, other
than Class X).
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on the Class
A-2 Notes and more subordinate bonds will not be paid from
principal proceeds until the more senior classes are retired.
Excess interest can be used to amortize the principal of the notes
after paying transaction parties fees, net weighted-average coupon
(WAC) shortfalls, and making deposits on to the breach reserve
account.
Notes: All figures are in U.S. dollars unless otherwise noted.
HALCYON LOAN 2017-1: Moody's Lowers Rating on $16MM D Notes to B1
-----------------------------------------------------------------
Moody's Ratings has upgraded the rating on the following notes
issued by Halcyon Loan Advisors Funding 2017-1 Ltd.:
US$24,000,000 Class B-R Senior Secured Deferrable Floating Rate
Notes due 2029 (the "Class B-R Notes"), Upgraded to Aa1 (sf);
previously on March 15, 2023 Upgraded to A1 (sf)
Moody's has also downgraded the rating on the following notes:
US$16,000,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2029 (the "Class D Notes"), Downgraded to B1 (sf); previously
on October 1, 2020 Confirmed at Ba3 (sf)
Halcyon Loan Advisors Funding 2017-1 Ltd., originally issued in May
2017 and partially refinanced in April 2021, is a managed cashflow
CLO. The notes are collateralized primarily by a portfolio of
broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in April 2022.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating action on Class B-R notes is 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-1A-R and Class A-1B-R notes have been paid down
collectively by approximately 70.1% or $155.7 million since then.
Based on the trustee's April 2024 report[1], the OC ratios for the
Class A-R and Class B-R notes are reported at 151.83% and 129.80%,
respectively, versus April 2023[2] levels of 130.35% and 119.64%,
respectively. Moody's notes that the April 2024 trustee-reported
OC ratios do not reflect the April 2024[3] payment distribution,
when $28.7 million of principal proceeds and $365,398 of interest
proceeds were used to pay down the Class A-1A-R and Class A-1B-R
notes.
The downgrade rating action on the Class D notes reflects the
specific risks to the junior notes posed by credit deterioration
observed in the underlying CLO portfolio. Trustee-reported weighted
average rating factor (WARF) has been deteriorating and the current
level is at 3329 in April 2024[4], compared to 2897 in April
2023[5]. Furthermore, based on the trustee's April 2024 report[6],
the percentage of Caa rated issuers are currently at 15.7% compared
to 7.6% in April 2023[7].
No actions were taken on the Class A-1A-R, Class A-1B-R, Class
A-2-R, and Class C 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: $187,215,602
Defaulted par: $2,880,122
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3262
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.77%
Weighted Average Recovery Rate (WARR): 46.69%
Weighted Average Life (WAL): 3.15 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, 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 May 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
HAWAII HOTEL 2019-MAUI: DBRS Confirms B Rating on Class HRR Certs
-----------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2019-MAUI
(the Certificates) issued by Hawaii Hotel Trust 2019-MAUI as
follows:
-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class D at A (high) (sf)
-- Class E at BBB (high) (sf)
-- Class F at BB
-- Class G at B (high)
-- Class HRR at B
All trends are Stable.
The credit rating confirmations and Stable trends reflect
Morningstar DBRS' view that, despite the significant impact to the
property's revenue in 2023 related to the wildfires that broke out
on the island of Maui in August 2023 and the effects that had on
tourism, the underlying hotel was not damaged, and is generally
well positioned to capture increased demand as travel begins to
rebound following the reopening of West Maui in November 2023. As
such, Morningstar DBRS did not update the loan-to-value (LTV)
sizing benchmarks as part of this review.
Before the wildfires, the loan had two consecutive years of healthy
performance after rebounding from the COVID-19 pandemic, with a
YE2022 net cash flow (NCF) of $75.3 million, a 71.1% positive
variance over the figure previously derived by Morningstar DBRS in
2020 of $44.0 million, that ultimately resulted in credit rating
upgrades to seven certificates, during the June 2023 review. As
part of that review, Morningstar DBRS performed a stressed cash
flow scenario to test the durability of the ratings, providing
additional support for the credit rating upgrades. While the loans
debt service coverage ratio (DSCR) fell to 0.93 times (x) as of
YE2023, as a result of the business interruptions and rising
interest rates, which resulted in a 98.9% increase in debt service
obligations between YE2022 and YE2023, the borrower has exercised
the loan's fourth maturity extension, extending the loan's maturity
to May 2025. The borrower has one one-year extension option
remaining, which will include a 25 basis-point increase to the
interest rate and the purchase of a replacement rate cap agreement
and be subject to performance hurdles.
The $650.0 million interest-only loan is secured by the borrower's
fee-simple interest in the Four Seasons Resort Maui at Wailea. The
full-service luxury hotel features 383 guest rooms, with four food
and beverage offerings, specialty retail shops, and 38,000 square
feet of meeting space. The hotel operates under the Four Seasons
flag via an agreement that expires in February 2025, and benefits
from its luxury quality, strong brand affiliation, and a wide range
of amenities, including a spa, three outdoor pools, tennis courts,
a games room and a fitness center, and preferred access to the
54-hole Wailea Golf Club directly across Wailea Alanui Drive from
the hotel. Wailea has one of the highest barriers to entry of any
resort market in the world. Available sites are extremely rare or
nonexistent, and zoning is complex and protective.
According to the December 2023 STR report, the property reported
trailing-12 month (T-12) occupancy, average daily rate (ADR), and
revenue per available room (RevPAR) figures at 63.2%, $1,549, and
$979, respectively, with RevPAR falling 16.8% from the previous
year's reporting. Despite the business interruptions, the subject
continued to outperform its competitive set with penetration rates
of 115%, 177%, and 204%, respectively. While the YE2023 NCF fell to
$43.3 million, a 42.4% decline when compared with the YE2022
figure, Morningstar DBRS anticipates performance to rebound, as
tourism returns to Maui, with officials lifting travel warnings in
November 2023 and now actively encouraging tourism in the area.
The subject property has previously suffered from similar declines
in performance, namely the pandemic, which caused the property's
closure from April 2020 to December 2020, resulting in a negative
cash flow at YE2020. Given the property's position in the market,
continued capital expenditures on development, and the return of
tourism, however, operations were quick to stabilize an NCF of
$55.8 million as of YE2021, which exceeded Morningstar DBRS'
expectations as indicated above. While the timeline for recovery is
undetermined, Morningstar DBRS anticipates that updated performance
data would begin to show signs of recovery based on historical
trends.
Notes: All figures are in U.S. dollars unless otherwise noted.
HILDENE TRUPS P16BC: Moody's Assigns B2 Rating to $8MM Cl. B Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of notes issued
by Hildene TruPS Resecuritization P16BC, LLC (the "Issuer").
Moody's rating action is as follows:
US$81,000,000 Class A Notes due 2035, Assigned Baa3 (sf)
US$8,000,000 Class B Notes due 2035, Assigned B2 (sf)
The Class A Notes and Class B Notes listed are referred to herein,
collectively, as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers of the risks associated with the portfolio of Preferred
Term Securities XVI, Ltd. (the "Underlying TruPS CDO") and
structure as described in Moody's methodology.
The Rated Notes are secured by the following securities that were
issued by the Underlying TruPS CDO on December 15, 2004:
US$ 36,773,140 of the $58,904,026 Floating Rate Class B Mezzanine
Notes due March 2035 (the "Underlying Class B Notes")
US$ 72,018,158 of the $72,484,899 Floating Rate Class C Mezzanine
Notes due March 2035 (the "Underlying Class C Notes")
The Underlying Class B Notes and the Underlying Class C 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 interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority. The transaction also includes an
interest diversion feature from and after the April 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™, an econometric
model developed by Moody's Ratings. Moody's evaluation of the
credit risk of the bank obligors in the pool relies on FDIC Q4-2023
financial data. Moody's assumes a fixed recovery rate of 10% for
bank obligations.
Moody's analysis on the Rated Notes took into account stress
scenarios for the banking sector currently on negative outlook.
Furthermore, to address the risk from the deleveraging of the
senior-most Class A note in the Underlying TruPS CDO, in
conjunction with a currently deferring underlying Class D notes,
Moody's modelled different amortization profiles to capture the
spread dynamics within a shrinking collateral pool. These stress
scenarios were important qualitative considerations.
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: $225,335,000
Weighted Average Rating Factor (WARF): 784
Weighted Average Spread (WAS): 2.22%
Weighted Average Life (WAL): 10.47 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
HILDENE TRUPS P18C: Moody's Assigns (P)Ba3 Rating to $7MM B Notes
-----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to two classes of
notes to be issued by Hildene TruPS Resecuritization P18C, LLC (the
"Issuer").
Moody's rating action is as follows:
US$20,000,000 Class A Notes due 2035, Assigned (P)Baa3 (sf)
US$7,000,000 Class B Notes due 2035, Assigned (P)Ba3 (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 Preferred Term Securities
XVIII, 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 June 15, 2005:
US$32,883,565 of the $75,198,959 Class C Mezzanine Notes Due 2035
(the "Class C Notes")
The Class C 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 will issue 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).
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: $251,700,000
Weighted Average Rating Factor (WARF): 1054
Weighted Average Spread (WAS): 1.95%
Weighted Average Recovery Rate (WARR): 10.0%
Weighted Average Life (WAL): 8.44 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 COMMERCIAL 2024-ORL: S&P Assigns BB+ (sf) Rating on HRR Certs
------------------------------------------------------------------
S&P Global Ratings assigned its 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.
Since the preliminary ratings were issued, the loan's spread
declined to 2.25% from 2.50%. As a result, the trust mortgage
loan's debt service coverage (DSC) ratio increased to 1.54x from
1.49x, calculated using a one-month term SOFR of 5.32%, plus the
spread and the S&P Global Ratings' net cash flow (NCF) for the
properties. The DSC based on the 8.30% SOFR cap plus the spread and
our NCF is 1.10x.
The 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.
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.
JP MORGAN 2017-6: Moody's Hikes Rating on Cl. B-5 Certs From Ba3
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 15 bonds from five 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
transaction has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2017-1
Cl. B-3, Upgraded to Aaa (sf); previously on Nov 29, 2021 Upgraded
to Aa1 (sf)
Cl. B-4, Upgraded to Aa1 (sf); previously on Sep 26, 2022 Upgraded
to Aa3 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Mar 5, 2019 Upgraded to
Baa3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2017-2
Cl. B-3, Upgraded to Aaa (sf); previously on Sep 26, 2022 Upgraded
to Aa1 (sf)
Cl. B-4, Upgraded to Aaa (sf); previously on Sep 26, 2022 Upgraded
to Aa3 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Jul 21, 2023 Upgraded
to Baa2 (sf)
Issuer: J.P. Morgan Mortgage Trust 2017-3
Cl. B-3, Upgraded to Aaa (sf); previously on Sep 26, 2022 Upgraded
to Aa1 (sf)
Cl. B-4, Upgraded to Aa1 (sf); previously on Jul 21, 2023 Upgraded
to Aa3 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Nov 29, 2021 Upgraded
to Ba1 (sf)
Issuer: J.P. Morgan Mortgage Trust 2017-4
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 21, 2023 Upgraded
to Aa1 (sf)
Cl. B-4, Upgraded to Aa1 (sf); previously on Jul 21, 2023 Upgraded
to A1 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Jul 21, 2023 Upgraded
to Ba1 (sf)
Issuer: J.P. Morgan Mortgage Trust 2017-6
Cl. B-3, Upgraded to Aaa (sf); previously on Sep 26, 2022 Upgraded
to Aa3 (sf)
Cl. B-4, Upgraded to Aa2 (sf); previously on Sep 26, 2022 Upgraded
to Baa1 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Oct 30, 2019 Upgraded
to Ba3 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's Ratings' 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 0.13% and a small number of loans in delinquency.
In addition, enhancement levels for the tranches have grown
significantly, as the pools amortize relatively quickly. The credit
enhancement since closing has grown, on average, 5.5x for the
tranches upgraded.
Moody's analysis also considered the existence of historical
interest shortfalls for some of the bonds. Two of the bonds
upgraded have experienced historical interest shortfalls (2017-6,
Class B-4 and B-5) and, 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.
Moody's analysis on certain bonds included an assessment of the
existing credit enhancement floor, in place to mitigate the
potential default of a small number of loans at the tail end of a
transaction.
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 upgrades 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 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 2018-1: Moody's Hikes Rating on Cl. B-5 Certs from Ba3
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 18 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
transaction has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2018-1
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 14, 2023 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Baa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Ba3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2018-3
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 14, 2023 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Baa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Ba3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2018-4
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 14, 2023 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to Aa1 (sf); previously on Jul 14, 2023 Upgraded
to Baa1 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Ba2 (sf)
Issuer: J.P. Morgan Mortgage Trust 2018-5
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 14, 2023 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Baa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Ba3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2018-6
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 14, 2023 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to Aa1 (sf); previously on Jul 14, 2023 Upgraded
to Baa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Ba3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2018-8
CL. B-3, Upgraded to Aaa (sf); previously on Jul 14, 2023 Upgraded
to Aa2 (sf)
CL. B-4, Upgraded to Aa1 (sf); previously on Jul 14, 2023 Upgraded
to Baa2 (sf)
CL. B-5, Upgraded to A3 (sf); previously on Jul 14, 2023 Upgraded
to Ba2 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's Ratings' updated loss expectations on the underlying pools.
Each of the transactions we reviewed continue to display strong
collateral performance, with cumulative losses for each transaction
under 0.13% and a small number of loans in delinquency. In
addition, enhancement levels for the tranches have grown
significantly, as the pools amortize relatively quickly. The credit
enhancement since closing has grown, on average, 6.8x for the
tranches upgraded.
Moody's analysis also considered the existence of historical
interest shortfalls for some of the bonds. Eight of the bonds
upgraded have experienced historical interest shortfalls (2018-1,
Class B-4 and Class B-5; 2018-3, Class B-5; 2018-4, Class B-5;
2018-5, Class B-5; 2018-6, Class B-5; 2018-8, Class B-4 and Class
B-5) and, 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.
Moody's analysis on certain bonds also included an assessment of
the existing credit enhancement floor, in place to mitigate the
potential default of a small number of loans at the tail end of a
transaction.
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 upgrades 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 these deals
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 2018-PTC: S&P Lowers Class E Certs Rating to 'D (sf)'
---------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from three U.S. CMBS
transactions.
The downgrades on three classes from three U.S. CMBS transactions
to 'D (sf)' reflect material accumulated interest shortfalls that
we expect to remain outstanding for the foreseeable future as well
as our assessment that these classes may incur principal losses
upon the eventual liquidation of the specially serviced assets in
the respective transactions. These classes have had accumulated
interest shortfalls outstanding for at least three consecutive
months.
The interest shortfalls are primarily due to one or more factors:
-- The appraisal subordinate entitlement reduction (ASER) amounts
in effect for specially serviced assets,
-- The special servicing fees, or
-- The recovery of prior servicing advances.
S&P said, "Our analysis primarily considered ASER amounts based on
appraisal reduction amounts (ARAs) calculated using recent Member
of the Appraisal Institute (MAI) appraisals. We also considered
servicer-nonrecoverable advance determinations and special
servicing fees, which are likely, in our view, to cause recurring
interest shortfalls."
The servicer implements ARAs and resulting ASER amounts according
to each transaction's terms. Typically, these terms call for an ARA
equal to 25% of the loan's stated principal balance to be
implemented when it is 60 days past due and an appraisal or other
valuation is not available within a specified time frame. We
primarily considered ASER amounts based on ARAs calculated from MAI
appraisals when deciding which classes from the affected
transactions to downgrade to 'D (sf)'. This is because ARAs based
on a principal balance haircut are highly subject to change, or
even reversal, once the special servicer obtains the MAI
appraisals.
Servicer-nonrecoverable advance determinations can prompt
shortfalls due to a lack of debt-service advancing, the recovery of
previously made advances after an asset was deemed nonrecoverable,
or the failure to advance trust expenses when nonrecoverability has
been determined. Trust expenses may include, but are not limited
to, property operating expenses, property taxes, insurance
payments, and legal expenses.
COMM 2018-HCLV Mortgage Trust
S&P said, "We lowered our rating to 'D (sf)' on class F from COMM
2018-HCLV Mortgage Trust, a U.S. stand-alone (single-borrower) CMBS
transaction, due to accumulated interest shortfalls that we expect
will remain outstanding for the foreseeable future until the
specially serviced loan's eventual resolution. Based on our
analysis, we also expect this class to incur principal losses upon
the eventual resolution of the specially serviced Hughes Center Las
Vegas loan."
According to the May 15, 2024, trustee remittance report, the
current monthly shortfalls totaled $495,840 due mainly to ASER
amounts based on an ARA of $78.0 million that was implemented in
January 2024. As a result, classes F, G, and VRR Interest have
experienced interest shortfalls for at least three consecutive
months. Classes G and VRR Interest are not rated by S&P Global
Ratings.
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
S&P said, "We lowered our rating to 'D (sf)' on class E from J.P.
Morgan Chase Commercial Mortgage Securities Trust 2018-PTC, a U.S.
stand-alone (single-borrower) CMBS transaction, due to accumulated
interest shortfalls that we expect will remain outstanding for the
foreseeable future until the specially serviced real estate owned
(REO) asset's eventual resolution. Based on our analysis, we also
expect this class to incur principal losses upon the eventual
resolution of the specially serviced Peachtree Center REO asset."
According to the May 15, 2024, trustee remittance report, the trust
experienced current monthly interest shortfalls totaling $101,056
due primarily to special servicing fees of $49,609 and ASER amounts
of $51,447. Classes E and HRR (not rated by S&P Global Ratings)
have experienced interest shortfalls for at least three consecutive
months.
Natixis Commercial Mortgage Securities Trust 2018-FL1
S&P said, "We lowered our rating to 'D (sf)' on class C from
Natixis Commercial Mortgage Securities Trust 2018-FL1, a U.S. CMBS
large loan transaction, due to accumulated interest shortfalls that
we expect will remain outstanding for the foreseeable future until
the two specially serviced assets' eventual resolution. Based on
our analysis, we believe this class may incur principal losses upon
the eventual resolution of the specially serviced Promenade Shops
at Centerra REO asset and The Wanamaker Building loan."
According to the May 15, 2024, trustee remittance report, the trust
experienced current monthly interest shortfalls totaling $578,153
due primarily to special servicing fees of $42,282 and interest
reductions due to a nonrecoverable determination of $536,048 made
by the master servicer, Wells Fargo Bank N.A., in October 2023 on
The Wanamaker Building loan. As a result, classes C, D, WAN1, and
WAN2 have incurred interest shortfalls for at least eight
consecutive months. Classes WAN1 and WAN2 are rated 'D (sf)', while
class D is not rated by S&P Global Ratings.
Ratings Lowered
COMM 2018-HCLV Mortgage Trust
Class F to 'D (sf)' from 'CCC- (sf)'
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
Class E to 'D (sf)' from 'CCC- (sf)'
Natixis Commercial Mortgage Securities Trust 2018-FL1
Class C to 'D (sf') from 'CCC- (sf)'
JP MORGAN 2019-5: Moody's Upgrades Rating on Cl. B-5 Certs From B1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of six bonds from two US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo 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 2019-2
Cl. B-3, Upgraded to Aaa (sf); previously on Jul 6, 2023 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to A3 (sf); previously on Jul 6, 2023 Upgraded to
Baa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Mar 29, 2019 Definitive
Rating Assigned B2 (sf)
Issuer: J.P. Morgan Mortgage Trust 2019-5
Cl. B-3, Upgraded to Aa1 (sf); previously on Jul 6, 2023 Upgraded
to A1 (sf)
Cl. B-4, Upgraded to Aa3 (sf); previously on Jul 6, 2023 Upgraded
to Baa3 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Mar 11, 2020 Upgraded
to B1 (sf)
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 0.8% and a small number of loans in delinquency. In addition,
enhancement levels for the tranches have grown significantly, as
the pools amortize relatively quickly. The credit enhancement since
closing has grown, on average, more than 11x for the tranches
upgraded.
Moody's analysis also considered the existence of historical
interest shortfalls for all except one of the upgraded bonds. The
existence of past shortfalls was a key consideration for two of the
bonds (2019-5, Class B-3 and Class B-4). While all shortfalls for
these two bonds 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.
Moody's analysis on each of the upgraded bonds also included an
assessment of the existing credit enhancement floor, in place to
mitigate the potential default of a small number of loans at the
tail end of a transaction.
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. Information obtained
from loan servicers in recent years has shed light on their current
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 in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
No actions were taken on the remaining rated classes in these deals
as those classes are already at the highest achievable levels
within Moody's rating scale.
Principal Methodologies
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's 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 2024-HE2: Fitch Assigns B(EXP)sf Rating on Cl. B-2 Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to J.P. Morgan Mortgage
Trust 2024-HE2 (JPMMT 2024-HE2).
Entity/Debt Rating
----------- ------
JPMMT 2024-HE2
A-1 LT AAA(EXP)sf Expected Rating
M-1 LT AA(EXP)sf Expected Rating
M-2 LT A(EXP)sf Expected Rating
M-3 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
BX LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
backed by a second lien, prime, open home equity line of credit
(HELOC) on residential properties to be issued by J.P. Morgan
Mortgage Trust 2024-HE2 (JPMMT 2024-HE2), as indicated above. This
is the fifth transaction to be rated by Fitch that includes
prime-quality second lien HELOCs with open draws off the JPMMT
shelf and the fifth second lien HELOC transaction off the JPMMT
shelf.
The loans associated with the draws allocated to the participation
certificate are 4,321 nonseasoned, performing, prime-quality second
lien HELOC loans with a current outstanding balance (as of the
cutoff date) of $379.91 million. The collateral balance based on
the maximum draw amount is $507.24 million, as determined by Fitch.
As of the cutoff date, 100% of the HELOC lines are open or on a
temporary freeze and may be opened in the future. The aggregate
available credit line amount, as of the cutoff date, is expected to
be $70.4 million, per transaction documents. As of the cutoff date,
weighted average (WA) utilization of the HELOCs is 92.2%, per the
transaction documents.
The main originators in the transaction are loanDepot.com, LLC
(19.25% per the transaction docs) and United Wholesale Mortgage
(68.43% per the transaction docs). All other originators make up
less than 10% of the pool. The loans are serviced by NewRez LLC
d/b/a Shellpoint Mortgage Servicing (Shellpoint) (80.75% per the
transaction docs) and loanDepot.com (19.25% per the transaction
docs), LLC.
Distributions of principal are based on a modified sequential
structure, subject to the transaction's performance triggers.
Interest payments are made sequentially to all classes, except B-4,
which is a principal-only class, while losses are allocated reverse
sequentially once excess spread is depleted.
Draws will be funded by JPMorgan Mortgage Acquisitions Corp.
(JPMMAC). This transaction will not use a variable funding note
(VFN) structure; rather, it will use participation certificates.
JPMMT 2024-HE2 is only entitled to cash flows based on the amount
drawn as of the cutoff date. The remaining available draws will be
allocated to the JPMorgan participation certificate (JPM PC) if
they are drawn in the future. See the Highlights section for a
description.
In Fitch's analysis, Fitch assumes 100% of the HELOCs are 100%
drawn on day one. As a result, all Fitch-determined percentages are
based off the maximum HELOC draw amount.
The servicers, Shellpoint and loanDepot.com, LLC, will not be
advancing delinquent (DQ) monthly payments of P&I.
The collateral comprises 100% adjustable-rate loans. These loans
are adjusted based on the prime rate, none of which reference
LIBOR. The class A-1, M-1, M-2, M-3 and B-1 certificates are
floating rate and use SOFR as the index; they are capped at the net
WA coupon (WAC). The annual rate on class B-2 and B-3 certificates
with respect to any distribution date (and the related accrual
period) will be equal to the net WAC for such distribution date.
The B-4 certificates are entitled to distributions of principal
only and will not receive any distributions of interest. There is
no exposure to LIBOR in this transaction.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's view on
sustainable home prices, Fitch views the home price values of this
pool as 10.3% 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 participation
interest is in a fixed pool of draws related to 4,321
prime-quality, performing, adjustable-rate open-ended HELOCs that
have three- five- or 10-year interest-only periods and maturities
of up to 30 years. The open-ended HELOCs are secured by second
liens on primarily one- to four-family residential properties
(including planned unit developments), condominiums and a
townhouse, totaling $507.24 million (includes the maximum HELOC
draw amount). The loans were made to borrowers with strong credit
profiles and relatively low leverage.
The loans are seasoned at an average of seven months, according to
Fitch, and three months, per the transaction documents. The pool
has a WA original FICO score of 743, as determined by Fitch,
indicative of very high credit-quality borrowers. About 44.3% of
the loans, as determined by Fitch, have a borrower with an original
FICO score equal to or above 750. The original WA combined
loan-to-value (CLTV) ratio of 67.8%, as determined by Fitch,
translates to a sustainable LTV (sLTV) ratio of 75.1%.
The transaction documents stated a WA drawn LTV of 18.4% and a WA
drawn CLTV of 66.7%. The LTVs represent moderate borrower equity in
the property and reduced default risk, compared with a borrower
CLTV of over 80%. Of the pool loans, 33.3% were originated by a
retail or correspondent channel with the remaining 66.7% originated
by a broker channel. Of the loans, 100% are underwritten to full
documentation. Based on Fitch's documentation review, it considered
98.5% of the loans to be fully documented.
Of the pool, 96.8% comprise loans where the borrower maintains a
primary or secondary residence, and the remaining 3.2% are investor
loans. Single-family homes, planned unit developments (PUDs), a
townhouse and single-family attached dwellings constitute 93.8% of
the pool (or 93.7%, per the transaction documents). Condominiums
make up 4.1%, while multifamily homes make up 2.1% (2.2% per the
transaction documents).
According to Fitch, the pool consists of loans with the following
loan purposes: 98.8% cashout refinances (loans that have a cashout
amount greater than 2% of the original balance), 1.1% purchases and
0.1% rate-term refinances (loans with a cashout amount less than 2%
of the original balance). The transaction documents show 98.5% of
the pool to be cashouts. Fitch considers a loan to be a rate term
refinance if the cashout amount is less than $5,000, which explains
the difference in the cashout amount percentages.
None of the loans in the pool are over $1.0 million, and the
maximum draw amount is $500,000.
Of the pool loans, 38.5% (38.3% per the transaction documents) are
concentrated in California. The largest MSA concentration is in the
Los Angeles MSA (14.8%), followed by the Miami MSA (6.0%) and the
Riverside MSA (5.8%). The top three MSAs account for 26% of the
pool. As a result, no probability of default (PD) penalty was
applied for geographic concentration.
Second Lien HELOC Collateral (Negative): The entirety of the
collateral pool consists of second lien HELOC loans originated by
loanDepot.com, LLC, United Wholesale Mortgage and other
originators. Fitch assumed no recovery and 100% loss severity (LS)
on second lien loans, based on the historical behavior of the loans
in economic stress scenarios. Fitch assumes second lien loans
default at a rate comparable to first lien loans. After controlling
for credit attributes, no additional penalty was applied.
Modified Sequential Structure with No Advancing of Delinquent P&I
(Mixed): The proposed structure is a modified-sequential structure
in which principal is distributed pro rata to classes A-1, M-1, M-2
and M-3 to the extent the performance triggers are passing. To the
extent the triggers are failing, principal is paid sequentially.
The transaction also benefits from excess spread that can be used
to reimburse for realized and cumulative losses, as well as cap
carryover amounts.
The transaction has a lockout feature benefiting more senior
classes if performance deteriorates. If the applicable credit
support percentage of classes M-1, M-2 or M-3 is less than the sum
of (i) 150% of the original applicable credit support percentage
for that class plus (ii) 50% of the non-performing loan percentage
plus (iii) the charged off loan percentage, then that class is
locked out of receiving principal payments and the principal
payments are redirected toward the most senior class. To the extent
any class of certificates is a locked out class, each class of
certificates subordinate to such locked out class will also be a
locked out class. Due to this lockout feature, the class M will be
locked out starting on day one.
Classes A-1, M-1, M-2, M-3, and B-1 are floating-rate classes based
on the SOFR index and are capped at the net WAC. The annual rate on
the class B-2 and B-3 certificates with respect to any distribution
date (and the related accrual period) will be equal to the net WAC
for such distribution date. Class B-4 is a principal-only class and
is not entitled to receive interest. If no excess spread is
available to absorb losses, losses will be allocated to all classes
reverse sequentially, starting with class B-4. The servicer will
not advance delinquent monthly payments of P&I.
180-Day Chargeoff Feature (Positive): Loans that become 180 days
delinquent based on the Mortgage Bankers Association (MBA)
delinquency method, except for those in a forbearance plan, will be
charged off. The 180-day chargeoff feature will result in losses
being incurred sooner, while a larger amount of excess interest is
available to protect against losses. This compares favorably to a
delayed liquidation scenario, whereby the loss occurs later in the
life of the transaction and less excess is available.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool, as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 41.7% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by 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 decreased its loss expectations by 0.98% at the
'AAAsf' stress due to 100% due diligence with no material
findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC 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
for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
JPMBB COMMERCIAL 2014-C22: DBRS Confirms C Rating on 3 Classes
--------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-C22
issued by JPMBB Commercial Mortgage Securities Trust 2014-C22 as
follows:
-- Class A-3A1 at AAA (sf)
-- Class A-3A2 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at A (high) (sf)
-- Class C at BB (high) (sf)
-- Class EC at BB (high) (sf)
-- Class D at C (sf)
-- Class E at C (sf)
-- Class F at C (sf)
All trends are Stable, with the exception of Classes D, E, and F,
which have ratings that typically do not carry a trend in
commercial mortgage-backed securities (CMBS) transactions.
The credit rating confirmations on the classes rated C (sf) reflect
the overall loss expectations for the three loans in special
servicing, which represent 7.3% of the pool balance. In addition,
the pool is susceptible to adverse selection as the pool enters its
maturity year. Since Morningstar DBRS' last review, Las Catalinas
Mall (Prospectus ID#3, previously 8.3% of the pool balance) and
Junction Plaza (Prospectus ID#73, previously 0.3% of the pool),
were liquidated from the trust at a combined loss of $33.9 million,
compared with the Morningstar DBRS loss projection of $41.3
million. The driver for the loss is Las Catalinas Mall, which
reported a loss of $32.1 million, compared with the Morningstar
DBRS loss estimate of $40.8 million. Despite the better than
expected outcome, the pool is concentrated by property type with
loans backed by office properties (representing nearly 40.0% of the
pool balance). In addition, Morningstar DBRS remains concerned with
several loans in the pool, representing nearly 15.0% of the pool
balance, that have exhibited performance declines, thereby
increasing the risk of near-term default. In the analysis,
Morningstar DBRS applied stressed loan-to-value ratios (LTVs)
and/or probability of default (POD) penalties to these loans.
The credit rating confirmations and Stable trends on the remaining
classes reflect the overall stable performance of the pool as
evidenced by the weighted-average debt service coverage ratio
(DSCR) of 1.53 times (x) based on the most recent year-end
financials. As of the April 2024 remittance, 48 of the original 76
loans remain in the pool, representing a collateral reduction of
40.7% from issuance. There are 28 loans, representing 71.5% of the
pool, on the servicer's watchlist, and are primarily being
monitored for upcoming maturities. Three loans, representing 7.3%
of the pool balance, are in special servicing and, with this
review, these loans were analyzed with a liquidation scenario
resulting in a cumulative projected loss of $37.1 million, which
would fully erode the nonrated Class G and Class F and the majority
of Class E.
The largest loan in special servicing, 10333 Richmond (Prospectus
ID#7, 4.8% of the current pool balance), is secured by a
218,600-square-foot (sf) office building in Houston, Texas. The
loan has been in special servicing since December 2017 following
the loss of several tenants and the related cash flow declines that
created debt service shortfalls not funded by the borrower. As of
the September 2023 reporting, the property was 43.5% occupied and
the last debt service payment received was in April 2023. The
servicer's commentary noted discussions regarding a loan
modification remains ongoing, where the terms may include an A/B
Note split. Based on the September 2023 appraisal, the property was
valued at $12.0 million, a decline from the October 2022 value of
$13.8 million and issuance value of $46.4 million. Morningstar DBRS
liquidated the loan in its analysis, resulting in an implied loss
severity exceeding 85.0%.
The second-largest specially serviced loan, 200 Newport Avenue
(Prospectus ID#21, 2.0% of the pool), is secured by a 143,000-sf
Class B office building, located approximately six miles south of
Boston, in Quincy, Massachusetts. The loan transferred to special
servicing in August 2022 for imminent default following the loss of
the former single tenant, State Street Bank, which vacated the
property at lease expiry in March 2021. The trust took title of the
property in April 2023 and based on the October 2022 appraisal, the
property was valued at $13.8 million, down from the issuance value
of $26.2 million. For this review, Morningstar DBRS liquidated the
loan with a stressed haircut to the most recent value considering
the dated appraisal and challenging submarket, resulting in an
implied loss severity exceeding 45.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMBB COMMERCIAL 2014-C23: Fitch Lowers Rating on 2 Tranches to B
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Fitch Ratings has downgraded two and affirmed 24 classes from three
U.S. CMBS conduit transactions from the 2013 and 2014 vintages,
including JPMCC Commercial Mortgage Securities Trust 2013-C16,
JPMBB Commercial Mortgage Securities Trust 2014-C18 and JPMBB
Commercial Mortgage Securities Trust 2014-C23. The Rating Outlooks
for five classes across the three transactions remain Negative,
while five classes have their Outlooks revised to Negative from
Stable. Two classes were assigned Negative Outlooks following their
downgrades.
Entity/Debt Rating Prior
----------- ------ -----
JPMCC 2013-C16
D 46641BAP8 LT BBsf Affirmed BBsf
E 46641BAR4 LT Bsf Affirmed Bsf
F 46641BAT0 LT CCCsf Affirmed CCCsf
JPMBB 2014-C18
A-5 46641JAW6 LT AAAsf Affirmed AAAsf
A-S 46641JBA3 LT AAAsf Affirmed AAAsf
B 46641JBB1 LT BBBsf Affirmed BBBsf
C 46641JBC9 LT BBsf Affirmed BBsf
D 46641JAE6 LT CCCsf Affirmed CCCsf
E 46641JAG1 LT CCsf Affirmed CCsf
EC 46641JBD7 LT BBsf Affirmed BBsf
F 46641JAJ5 LT Csf Affirmed Csf
X-A 46641JAY2 LT AAAsf Affirmed AAAsf
JPMBB 2014-C23
A-4 46643ABD4 LT AAAsf Affirmed AAAsf
A-5 46643ABE2 LT AAAsf Affirmed AAAsf
A-S 46643ABJ1 LT AAAsf Affirmed AAAsf
A-SB 46643ABF9 LT AAAsf Affirmed AAAsf
B 46643ABK8 LT AAsf Affirmed AAsf
C 46643ABL6 LT Asf Affirmed Asf
D 46643AAG8 LT Bsf Downgrade BBsf
E 46643AAJ2 LT CCCsf Affirmed CCCsf
EC 46643ABM4 LT Asf Affirmed Asf
F 46643AAL7 LT CCsf Affirmed CCsf
X-A 46643ABG7 LT AAAsf Affirmed AAAsf
X-B 46643ABH5 LT Bsf Downgrade BBsf
X-C 46643AAA1 LT CCCsf Affirmed CCCsf
X-D 46643AAC7 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Transaction-level 'Bsf'
rating case losses are 32.1% in JPMCC 2013-C16, 19.6% in JPMBB
2014-C18 and 9.0% in JPMBB 2014-C23.
Transaction-level losses remain elevated due to increasing pool
concentration and adverse selection of the remaining loans. Fitch
Loans of Concerns (FLOCs) comprise all four loans in JPMCC
2013-C16; six loans (64.2%) in JPMBB 2014-C18 including five loans
in special servicing (50.6%); and six loans (33.4%) in JPMBB
2014-C23 including three loans in specially servicing (19.8%).
The Negative Outlooks on classes D and E in JPMCC 2013-C16 reflect
the 100% office concentration in the pool, all of which is
specially serviced, and the potential for downgrade if lack of
progress toward resolution leads to prolonged workouts and
higher-than-expected losses.
The revision of the Outlooks for classes A-S and X-A to Stable from
Negative in JPMBB 2014-C18 is due to better-than-expected
recoveries on loan dispositions since the last rating action and
these classes' reliance for repayment from loans expected to
refinance. The Negative Outlooks on classes B, C and EC reflect the
high office and non-trophy regional mall concentration in the pool,
namely Miami International Mall, Meadows Mall, Two Towne Square and
One Thorn Run Center, and the potential for downgrade with further
deterioration in performance.
The downgrades to classes D and X-B and the Negative Outlooks on
classes A-S, B, C, D, X-A, X-B and EC in JPMBB 2014-C23 reflect
higher pool loss expectations since Fitch's prior rating action,
increasing pool concentration and adverse selection concerns, along
with these classes' reliance for repayment from loans expected to
have refinancing challenges and/or are exhibiting elevated losses,
including 17 State Street, Stevens Center Business Park,
InterMountain Hotel Portfolio, Residence Inn Mountain View, Memphis
Forum and Northville Village. In addition, the Negative Outlooks
reflect uncertainty surrounding ultimate refinanceability and
payoff of the two modified loans, Columbus Square Portfolio and
Beverly Connection.
Near-Term Loan Maturities: Due to the concentration of loan
maturities in 2024, Fitch performed a sensitivity and liquidation
analysis, which grouped the remaining loans based on their current
status and collateral quality, and ranked them by their perceived
likelihood of repayment and/or loss expectation. Fitch's analysis
considered a scenario where the specially serviced loans and office
and regional mall FLOCs remain in the pool. Fitch assumed paydown
of the defeased loans and loans with strong refinance prospect. The
current ratings and Outlooks reflect these scenarios.
Largest Loss Contributors: The four remaining loans in the JPMCC
2013-C16 transaction are all office loans that have transferred to
special servicing, which include Energy Centre (48.3% of the pool),
1615 L Street (29.3%), Riverview Office Tower (14.2%), and 121
Champion Way (8.2%).
The 1615 L Street loan is the largest contributor to loss and the
largest increase in loss since the prior rating action in JPMCC
2013-C16. The loan, secured by a 417,383-sf office building in
downtown Washington DC, transferred to special servicing in August
2023 and subsequently defaulted at the September 2023 maturity
date. Post-maturity debt service payments have been applied, and
the loan is current as of the May remittance.
Fitch's 'Bsf' rating case loss of 65.1% (prior to concentration
add-ons) is based on a discount to a recent appraisal value, which
reflects a stressed recovery of 112 psf.
The JPMBB 2014-C18 transaction has nine loans remaining in the
pool. The largest three loans account for 75% of the pool and
include two regional mall loans, Miami International Mall (35.6% of
the pool) and Meadows Mall (13.6%), and the Marriott Anaheim
(25.2%).
The largest contributor to loss is the Miami International Mall,
which is secured by the 306,855-sf collateral portion of a 1.1
million-sf regional mall located approximately 12 miles northwest
of downtown Miami. Non-collateral anchors include Macy's, JCPenney,
Kohl's, and a vacant Seritage-owned Sears space that closed in
November 2018. Major collateral tenants include H&M (7.4% of NRA;
January 2025), Old Navy (5.5%; January 2025) and Forever 21 (4.2%;
January 2025).
The loan defaulted at maturity in February 2024 and subsequently
transferred to special servicing. A forbearance agreement was
executed that extended the loan term through February 2025 with one
additional 12-month extension option. The sponsor has contributed
$2 million to principal reduction with the extension option
contingent upon an additional $3 million contribution to principal.
A full cash sweep will remain in place during the forbearance
period, with excess cash evenly distributed to an omnibus reserve
and to amortize the loan.
Property occupancy declined to 79% as of December 2022, down from
83% at YE 2020, 99% at YE 2019 and 94% at issuance. YE 2023 NOI
DSCR was 2.42x, in-line with YE 2022 and YE 2021.
Fitch's 'Bsf' rating case loss of 21.0% (prior to concentration
add-ons) is based on a 7.5% stress to the YE 2023 NOI with a 15%
cap rate and a higher probability of default to account for
elevated refinance risk.
The JPMBB 2014-C23 transaction has 35 loans remaining in the pool.
The pool is becoming increasingly concentrated with the largest
five loans accounting for 50.5% of the pool.
The largest contributor to loss expectations in the JPMBB 2014-C23
transaction is the Stevens Center Business Park loan (12.8%), which
is secured by a 468,373-sf office complex comprised of four
single-tenant and two multitenant buildings located in Richland, WA
in the Tri-Cities Research District. As of March 2024, occupancy
was 90% with NOI DSCR of 1.30x in-line with performance at YE 2023.
Occupancy had previously declined due to the downsizing of the
largest tenant Bechtel, which reduced their footprint from 170,000
to 24,000. A new lease signed with WRPS for 90,158 sf (19.4% of the
NRA) in 2022 offset the occupancy decline.
Fitch's 'Bsf' rating case loss of 23.4% (prior to concentration
add-ons) is based on a 10% stress to the YE 2023 NOI with a 10% cap
rate and a higher probability of default to account for elevated
refinance risk as the loan approaches maturity in September 2024.
Change to Credit Enhancement (CE): As of the May 2024 distribution
date, the aggregate balances of the JPMCC 2013-C16, JPMBB 2014-C18
and JPMBB 2014-C23 transactions have been reduced by 89.7%, 71.1%
and 46.3%, respectively, since issuance. The JPMDB 2014-C23
transaction includes 13 loans (17.6% of the pool) that have fully
defeased and there are no defeased loans in JPMCC 2013-C16 and JPMM
2014-C18.
Interest Shortfalls: Interest shortfalls of about $2.15 million are
affecting the non-rated class NR in JPMBB 2014-C23, $63,300 are
affecting class E in JPMBB 2014-C18, and $523,400 are affecting
class D in JPMCC 2013-C16.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades of the senior 'AAAsf' rated classes are not likely due
to their position in the capital structure and expected continued
amortization and loan repayments but may occur if deal-level losses
increase significantly and/or interest shortfalls occur.
A downgrade of the junior 'AAAsf' rated class with a Negative
Outlook in the JPMBB 2014-C23 transaction is possible with
continued performance deterioration of the FLOCs, significant
increases in exposure for the specially serviced loans, and
prolonged workout of loans resulting in higher than expected
losses. Loans with refinance risk in the JPMBB 2014-C23 transaction
include 17 State Street, Stevens Center Business Park,
InterMountain Hotel Portfolio, Residence Inn Mountain View, Memphis
Forum, Northville Village, East Village Flats, Crossroads Center,
and The Grove Shopping Center.
Downgrades of classes rated in the 'AAsf' and 'Asf' categories in
the JPMBB 2014-C23 transaction could occur if deal-level losses
increase significantly from outsized losses on larger
aforementioned FLOCs and/or more loans than expected experience
performance deterioration and/or default at or prior to maturity
and transfer to special servicing.
Downgrades of the 'BBBsf', 'BBsf' and 'Bsf' categories are possible
with higher than expected losses from continued underperformance of
the FLOCs, and/or with greater certainty of losses on the specially
serviced loans and/or FLOCs. Elevated risk loans in JPMBB 2014-C18
include the Miami International Mall, Meadows Mall, Two Towne
Square, Geneva Shopping Center, Town Center at Waretown, and One
Thorn Run Center. Loans of particular concern in the JPMCC 2013-C16
transaction include 1615 L Street, Riverview Office Tower, and 121
Champion Way.
Downgrades to distressed classes would occur should additional
loans transfer to special servicing and/or default, 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.
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 could occur
only if the performance of the remaining pool is stable, recoveries
on the FLOCs are better than expected, and there is sufficient CE
to the classes.
Upgrades to distressed classes are not likely, but may be possible
with better than expected recoveries on specially serviced loans
and/or significantly higher recovery 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.
JPMBB COMMERCIAL 2015-C33: DBRS Confirms BB Rating on E Certs
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DBRS Limited confirmed all credit ratings on the classes of
Commercial Mortgage Pass-Through Certificates, Series 2015-C33
issued by JPMBB Commercial Mortgage Securities Trust 2015-C33 as
follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class X-C at A (high) (sf)
-- Class C at A (sf)
-- Class D-1 at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class D-2 at BBB (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
Morningstar DBRS changed the trends on Classes B, C, D-1, D-2, D,
E, F, G, X-B, X-C, and X-D to Negative from Stable. The Negative
trends are reflective of an increase in Morningstar DBRS' projected
loss expectations for the pool, primarily driven by the largest
loan in the pool, 32 Avenue of the Americas (Prospectus ID#1, 20.7%
of the current pool balance), along with four other loans
Morningstar DBRS identified as being at increased risk of maturity
default, given observed performance declines, concentrated upcoming
tenant roll, and other refinance concerns. All but three small
loans that represent 1.7% of the pool are scheduled to mature
within the next 18 months. In a wind-down scenario where performing
loans successfully repay from the pool, the potential for an
adverse selection is significant given that Morningstar DBRS' loans
of concern represent 36.6% of the pool balance. Should performance
of these loans fail to stabilize or deteriorate further, or should
future defaults occur, classes with Negative trends may be subject
to credit rating downgrades. The trends on Classes A-3, A-4, A-SB,
A-S, and X-A are Stable.
As of the April 2024 remittance, 58 of the original 64 loans
remained in the trust, with an aggregate balance of $603.3 million,
representing a collateral reduction of 20.8% since issuance. There
are 13 fully defeased loans, representing 19.6% of the current pool
balance. There is one loan with the special servicer, Fort Wayne
Retail Portfolio (1.4% of the current pool balance), with
Morningstar DBRS' projected losses well contained in the nonrated
class. There are five loans on the servicer's watchlist that
represent 26.7% of the pool, including the largest loan in the
trust. The loans on the watchlist are being monitored primarily for
occupancy and debt service coverage ratio (DSCR) declines. The pool
is extremely concentrated by loan size, as the largest loan in the
pool accounts for 20.7% of the entire deal balance. By property
type, excluding defeasance, the pool is most concentrated by office
properties, which represent 23.4% of the pool, followed by
multifamily and retail properties which represent 22.7% and 20.3%
of the pool, respectively.
The largest loan in the pool is 32 Avenue of the Americas, which is
secured by a 1.2 million-square-foot (sf) dual office and data
center property in Manhattan's Tribeca district. The 10-year
interest-only (IO) loan is scheduled to mature in November 2025. It
is one of five pari passu pieces of a $425.0 million whole loan,
with other senior portions securitized in JPMCC 2015-JP1 and COMM
2016-CCRE28, which are also rated by Morningstar DBRS. The loan was
added to the servicer's watchlist in April 2023 because of
occupancy decline. Occupancy has trended downward year over year
for the past several years. As per the December 2023 rent roll, the
property was 60.5% occupied, down from 70.0% at YE2022, 75.6% at
YE2021, and 95.0% at issuance. Consequently, the loan's DSCR has
also been declining, with the YE2023 DSCR reported at 1.03 times
(x), compared with the YE2022 DSCR of 1.78x and YE2021 DSCR of
1.96x. The loan is equipped with a cash management account, which
will be activated at a DSCR trigger of 1.15x for two consecutive
quarters. However, given the loan's coverage, it is unlikely that a
meaningful amount of cash can be swept.
The performance declines can be attributed to the downsizing and
departures of prominent tenants at the subject. Former largest
tenant AMFM Operating Inc., part of iHeartMedia, vacated at lease
expiry in December 2022. At issuance, the tenant occupied 14.6% of
the net rentable area (NRA) but had downsized to 8.1% of the NRA
prior to vacating. The current largest tenants are TELX (12.6% of
the NRA, lease expiry in July 2033), Dentsu Holdings USA Inc.
(Dentsu; 6.0% of the NRA, lease expiry in August 2025), and Cedar
Cares Inc. (5.7% of the NRA, lease expiry in August 2027). At
issuance, TELX occupied 22.5% of the NRA, and Dentsu occupied 14.5%
of the NRA. However, both tenants began slowly giving back their
space over the years, eventually downsizing to their current
footprints at the subject. Moreover, as per the servicer
commentary, Cedar Cares Inc. is looking to sublease some space as
it has not grown as expected. There is also approximately 25%
rollover risk prior to loan maturity, which would further
exacerbate the property's performance since issuance and elevate
refinancing risk.
The sponsor, Rudin Management, is currently advertising 41.6% of
the NRA as available for leasing at an average rental rate of
$73.79 per sf (psf), which is slightly higher than the current
average in-place rental rate of $71.74 psf according to the
December 2023 rent roll. As per Reis, office properties in the
South Broadway submarket reported a YE2023 vacancy rate of 14.1%
with an average asking rental rate of $72.52 psf, up from the
YE2022 vacancy rate of 10.7% and average asking rental rate of
$70.10 psf. Although the subject is a prominent telecom building in
Manhattan, with infrastructure that has historically made it a
popular location for data center and telecom tenants, media sources
indicate the sponsor is exploring options to convert some space to
retail use in the hopes of attracting leasing activity. However,
given that the sponsor recently spent approximately $100 million
renovating a nearby asset at 80 Pine Street with little notable
impact on occupancy or value, combined with observed challenges in
the current office landscape, the building's age, consistently
declining occupancy, and a history of tenant departures/downsizing,
Morningstar DBRS remains pessimistic about the property's near-term
leasing prospects. Morningstar DBRS expects the borrower to face
challenges in securing refinancing at loan maturity next year.
Based on these factors, Morningstar DBRS analyzed this loan with an
elevated loan-to-value ratio and a probability of default
adjustment to increase the expected loss to approximately twice the
weighted-average expected loss of the pool. Given the loan size
relative to the pool as a whole, this is the primary driver of
Morningstar DBRS' credit rating action.
Notes: All figures are in U.S. dollars unless otherwise noted.
KKR CLO 18: Moody's Upgrades Rating on $35MM Class E Notes to Ba3
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Moody's Ratings has upgraded the ratings on the following notes
issued by KKR CLO 18 Ltd.:
US$84,000,000 Class B-R Senior Secured Floating Rate Notes due 2030
(the "Class B-R Notes"), Upgraded to Aaa (sf); previously on
October 18, 2021 Assigned Aa1 (sf)
US$35,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2030 (the "Class C-R Notes"), Upgraded to Aa2 (sf);
previously on October 18, 2021 Assigned A2 (sf)
US$42,000,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2030 (the "Class D Notes"), Upgraded to Baa2 (sf); previously
on August 27, 2020 Confirmed at Baa3 (sf)
US$35,000,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2030 (the "Class E Notes"), Upgraded to Ba3 (sf); previously on
August 27, 2020 Downgraded to B1 (sf)
KKR CLO 18 Ltd., originally issued in July 2017 and partially
refinanced in October 2021 is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in July 2022.
A comprehensive review of all credit ratings for the respective
transactions 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 2023. The Class A-R
notes have been paid down by approximately 35.2% or $129.7 million
since then. Based on the trustee's April 2024 report [1], the OC
ratios for the Class A-R/B-R, Class C-R, Class D and Class E notes
are reported at 145.05%, 130.84%, 117.08% and 107.65%,
respectively, versus April 2023 levels [2] of 133.64%, 124.03%,
114.19% and 107.10%, respectively.
No action was taken on the Class A-R notes because its expected
losses remain commensurate with its current rating, after taking
into account the CLO's latest portfolio information, its relevant
structural features and its actual over-collateralization and
interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, 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: $477,603,278
Defaulted par: $2,419,713
Diversity Score: 58
Weighted Average Rating Factor (WARF): 3199
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.63%
Weighted Average Recovery Rate (WARR): 46.44%
Weighted Average Life (WAL): 3.59 years
Par haircut in OC tests and interest diversion test: 2.3%
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, 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
May 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
LCCM 2021-FL2: DBRS Confirms B(low) Rating on Class G Notes
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DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by LCCM 2021-FL2 Trust 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 E, F, and G to
Negative from Stable. The trends on the remaining classes remain
Stable.
The trend changes reflect the increased credit risk to the
transaction as a result of Morningstar DBRS' increased loan-level
expected losses for the majority of the loans in the transaction,
particularly for the four loans secured by office properties, which
represent 25.8% of the current trust balance. An additional seven
loans, representing 36.5% of the current trust balance, are secured
by mixed-use properties with a material office collateral
component. The majority of these 11 loans are sponsored by
borrowers, which have been generally unable to successfully execute
the stated business plans to date.
Throughout 2024, 17 loans, representing 81.9% of the current trust
balance, are scheduled to mature. Seven of these loans,
representing 41.7% of the current trust balance, are secured by
office and mixed-use properties. Given lenders and investors have
been hesitant to finance or own for that property type in 2023,
Morningstar DBRS expects borrowers to face difficulties in
executing exit strategies over the near to medium term. While the
majority of the loans include extension options, the borrowers will
likely need loan modifications as most loans will be unable to
achieve the performance-based extension requirements. The credit
rating confirmations reflect the increased credit support to the
bonds as a result of successful loan repayments, with collateral
reduction of 11.2% since issuance.
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.
At issuance, the initial collateral consisted of 23 floating-rate
mortgages or Pari passu participation interests in mortgage loans
secured by 27 mostly transitional properties, with a cut-off
balance totaling $607.5 million. As of the April 2024 remittance,
the pool comprises 22 loans secured by 22 properties with a
cumulative trust balance of $539.7 million. Most loans are in a
period of transition with plans to stabilize and improve the
asset's value. The transaction had a Reinvestment Period that
expired with the August 2023 payment date. Since the previous
Morningstar DBRS credit rating action in July 2023, five loans with
a current trust balance of $111.0 million have been added into the
transition, while three loans with a former trust balance of $124.0
million were paid in full.
Beyond the office concentration noted above, the transaction also
comprises four loans, representing 12.8% of the current trust
balance, secured by multifamily properties and two loans,
representing 7.1% of the pool, secured by retail properties. In
comparison with June 2023 reporting, office and mixed-use
properties represented 50.6% of the collateral, multifamily
properties represented 27.1% of the collateral, and retail
properties represented 3.3% of the collateral.
The loans are secured primarily by properties in urban and suburban
markets. Seven loans, representing 41.9% of the pool, are secured
by properties in urban markets, as defined by Morningstar DBRS,
with a Morningstar DBRS Market Rank of 6, 7, or 8. Nine loans,
representing 29.4% of the pool, are secured by properties in
suburban markets, as defined by Morningstar DBRS, with a
Morningstar DBRS Market Rank of 3, 4, or 5. The remaining six
loans, representing 28.7% of the pool, are secured by properties
with a Morningstar DBRS Market Rank of 1 or 2, denoting rural and
tertiary markets, respectively. In comparison, as of June 2023,
properties in urban markets represented 38.6% of the collateral,
suburban markets represented 34.5% of the collateral, and
properties in rural and tertiary markets represented 26.9% of the
collateral.
Based on the as-is appraised value, leverage across the pool has
increased slightly from issuance, with a current weighted-average
(WA) loan-to-value ratio (LTV) of 70.1%, up from 65.9% at issuance.
However, the WA stabilized LTV decreased over that same period,
dropping to 63.7% from 64.1% 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) environments. In the
analysis for this review, Morningstar DBRS applied upward LTV
adjustments across 16 loans, representing 85.5% of the current
trust balance.
Through April 2024, the lender has advanced cumulative loan future
funding of $71.8 million to 14 individual borrowers to aid in
property stabilization efforts. The majority of this amount has
been released to the borrowers of the Regions Harbert ($22.6
million) and the Puerto Rico Industrial Portfolio ($18.7 million)
loans. The Regions Harbert loan is secured by an office property in
Birmingham, Alabama. The borrower used the advanced funds to
complete its capital improvement program and finance leasing costs,
with $12.1 million associated with re-leasing the largest tenant.
As of the January 2024 rent roll, the property was 71.3% occupied,
up from 65.4% as of YE2022. Since closing, the loan has been
modified several times, which included extending loan maturity as
the borrower needed more time to complete its business plan. In
exchange for the maturity extensions, the borrower was required to
make two separate principal payments of $1.25 million along with
two separate deposits of $1.0 million into a shortfall reserve. The
most recent modification occurred in March 2024, which extended
loan maturity an additional two months through May 2024. Given the
upcoming maturity risk, Morningstar DBRS applied an upward LTV
adjustment, reflecting an in-place LTV of 100.0%. Morningstar DBRS
also increased the loan's probability of default in its current
analysis to bring the loan's expected loss above the transaction's
expected loss.
The Puerto Rico Industrial Portfolio loan is secured by five
industrial parks totaling 21 properties throughout Puerto Rico. The
borrower used the advanced funds to complete capital improvement
projects and to fund leasing cost across the portfolio. The loan
has no future funding remaining. The portfolio was 88.8% occupied
as of the November 2023 rent roll. The loan has an upcoming final
maturity in June 2024. In its analysis, Morningstar DBRS applied an
upward cap rate adjustment, increasing the loan's LTV and expected
loss.
An additional $69.0 million of loan future funding allocated to 12
individual borrowers remains available. Of this amount, $29.3
million is allocated to the borrower of the Citigroup Center loan,
which is secured by an office tower in downtown Miami. The funds
are available to the borrower to fund costs associated with the
borrower's ongoing capital improvement and lease-up plan. The loan,
which represents the largest loan in the pool at 12.0%, is on the
servicer's watchlist for the upcoming July 2024 maturity date.
While the loan has two 12-month extension options available to the
borrower, loan performance has remained flat in recent years as the
property was 60.4% occupied as of the November 2023 rent roll, down
slightly when compared with the February 2023 occupancy of 62.4%.
However, Morningstar DBRS expects occupancy to improve to 68.8%
after the sponsor executed 12 leases totaling 64,702 square feet
(sf), including 3,584 sf of renewals. In its analysis, Morningstar
DBRS applied an upward LTV adjustment, reflecting 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 be in line with the pool's expected loss.
As of the April 2024 remittance, there are no delinquent loans or
loans in special servicing; however, four loans, representing 27.7%
of the current trust balance, are on the servicer's watchlist for a
variety of reasons, including upcoming loan maturity as well as low
debt service coverage ratios and occupancy rates. All affected
borrowers have outstanding maturity date extension options on the
respective loans. At issuance, Morningstar DBRS expected temporary
declines in property performance in some cases as borrowers worked
toward completing the respective business plans; however, select
borrowers may face additional challenges because of specific
property type and current economic challenges.
Three loans, representing 18.9% of the current trust balance, have
been modified. The modifications have generally allowed borrowers
to exercise loan extension options by amending loan terms in return
for fresh equity deposits and the purchase of a new interest rate
cap agreement. The most common amendments include the removal of
performance-based tests and changes to the required strike price on
the purchase of a new interest rate cap agreement.
Notes: All figures are in U.S. dollars unless otherwise noted.
LODI PARK: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Lodi Park
CLO Ltd./Lodi Park CLO 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 Blackstone CLO Liquid Credit
Strategies LLC.
The preliminary ratings are based on information as of May 24,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Lodi Park CLO Ltd./Lodi Park CLO LLC
Class A-1, $307.50 million: AAA (sf)
Class A-2, $27.50 million: Not rated
Class B-1, $30.00 million: AA (sf)
Class B-2, $15.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D-1 (deferrable), $30.00 million: BBB- (sf)
Class D-2 (deferrable), $5.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $47.50 million: Not rated
MADISON PARK LIX: Moody's Assigns B3 Rating to $250,000 Cl. F Notes
-------------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the "Refinancing Notes") issued by Madison Park
Funding LIX, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$441,000,000 Class A-1 Floating Rate Senior Notes due 2037,
Assigned Aaa (sf)
US$250,000 Class F Deferrable Floating Rate Junior Notes due 2037,
Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans and eligible investments, and up to 10.0% of the portfolio
may consist of non-senior secured loans.
UBS Asset Management (Americas) LLC (the "Manager") will continue
to direct the selection, acquisition and disposition of the assets
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's extended
five year reinvestment period. Thereafter, subject to certain
restrictions, the Manager may reinvest unscheduled principal
payments and proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, seven other
classes of secured notes and additional subordinated notes, a
variety of other changes to transaction features will occur in
connection with the refinancing. These include: reinstatement and
extension of the reinvestment period; extensions of the stated
maturity and non-call period; changes to certain collateral quality
tests; changes to the overcollateralization test levels; and
changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2024.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $699,047,103
Defaulted par: $7,037,531
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3125
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 46.00%
Weighted Average Life (WAL): 8 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
May 2024.
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 Refinancing Notes.
MADISON PARK XXIV: S&P Withdraws 'B(sf)' Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R2, B-R2,
C-R2, D-R2, and E-R2 replacement debt from Madison Park Funding
XXIV Ltd./Madison Park Funding XXIV LLC, a CLO managed by UBS Asset
Management (Americas) LLC that was originally issued in December
2016 and underwent a refinancing on Aug. 15, 2019. At the same
time, S&P withdrew its ratings on the class A-R, B-R, C-R, D-R, and
E-R debt following payment in full on the May 28, 2024, refinancing
date.
The replacement debt was issued via a fourth supplemental
indenture, which outlines the terms of the replacement debt.
According to the supplemental indenture, the non-call period was
extended to Nov. 28, 2024.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R2, $357.747 million: Three-month CME term SOFR +
1.12%
-- Class B-R2, $87.500 million: Three-month CME term SOFR + 1.55%
-- Class C-R2, $56.500 million: Three-month CME term SOFR + 2.05%
-- Class D-R2, $31.500 million: Three-month CME term SOFR + 2.95%
-- Class E-R2, $36.000 million: Three-month CME term SOFR + 7.05%
Original debt
-- Class A-R, $357.747 million: Three-month CME term SOFR + 1.16%
+ CSA(i)
-- Class B-R, $87.500 million: Three-month CME term SOFR + 1.75% +
CSA(i)
-- Class C-R, $56.500 million: Three-month CME term SOFR + 2.40% +
CSA(i)
-- Class D-R, $31.500 million: Three-month CME term SOFR + 3.85% +
CSA(i)
-- Class E-R, $36.000 million: Three-month CME term SOFR + 7.20% +
CSA(i)
-- Subordinated notes, $71.375 million: Not applicable
(i)The credit spread adjustment is 0.26161%.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Withdrawn
Madison Park Funding XXIV Ltd./Madison Park Funding XXIV LLC
Class A-R to NR from 'AAA (sf)'
Class B-R to NR from 'AA (sf)'
Class C-R to NR from 'A (sf)'
Class D-R to NR from 'BBB- (sf)'
Class E-R to NR from 'B (sf)'
Other Debt
Madison Park Funding XXIV Ltd./Madison Park Funding XXIV LLC
Subordinated notes, $71.375 million: NR
NR--Not rated.
MELLO MORTGAGE 2024-SD1: DBRS Finalizes BB(high) Rating on M2 Notes
-------------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
Mortgage-Backed Notes, Series 2024-SD1 (the Notes) issued by Mello
Mortgage Capital Acceptance 2024-SD1 (Mello 2024-SD1 or the Trust)
as follows:
-- $79.4 million Class A-1 at AAA (sf)
-- $10.1 million Class A-2 at AA (high) (sf)
-- $10.4 million Class A-3 at A (sf)
-- $8.8 million Class M-1 at BBB (sf)
-- $6.3 million Class M-2 at BB (high) (sf)
The AAA (sf) rating on the Class A-1 Notes reflects 47.05% of
credit enhancement provided by subordinated notes. The AA (high)
(sf), A (sf), BBB (sf), and BB (high) (sf) ratings reflect 40.35%,
33.45%, 27.60%, and 23.40% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The transaction is a securitization of a portfolio of newly
originated and seasoned, first-lien residential mortgages, to be
funded by the issuance of mortgage-backed notes (the Notes). The
Notes are backed by 436 loans with a total principal balance of
approximately $150,047,122 as of the Cut-Off Date (March 31,
2024).
loanDepot.com, LLC, is the Originator, Seller, Servicer and Asset
Manager for the transaction. This transaction represents the first
scratch & dent RMBS securitization issued from the MELLO shelf by
the Sponsor, Mello Credit Strategies LLC. Since 2018, 11 prime and
investor agency were previously issued from the MELLO shelf.
Morningstar DBRS calculated the portfolio to be approximately 26
months seasoned on average, though the ages of the loans are quite
dispersed, ranging from three months to 108 months. All of the
loans had origination guideline or document deficiencies, which
prevented these loans from being sold to Fannie Mae, Freddie Mac,
or another purchaser, and the loans were subsequently put back to
the sellers for repurchase by Loan Depot. In its analysis,
Morningstar DBRS assessed such defects and applied certain
penalties, consequently increasing expected losses on the mortgage
pool.
In the portfolio, 7.6% of the loans are modified. The modifications
happened less than two years ago for 64.4% of the modified loans.
Within the portfolio, 11 mortgages have non-interest-bearing
deferred amounts, equating to 0.1% of the total unpaid principal
balance (UPB). Unless specified otherwise, all statistics on the
mortgage loans in this report are based on the current UPB,
including the applicable non-interest-bearing deferred amounts.
Based on Issuer-provided information, certain loans in the pool
(7.2%) are not subject to or exempt from the Consumer Financial
Protection Bureau's (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because of seasoning or because they are
business-purpose loans. The loans subject to the ATR rules are
designated as QM Safe Harbor (83.6%), QM Rebuttable Presumption
(6.6%), and Non-QM (2.6%) by UPB.
Mello Credit Strategies LLC (the Sponsor) will select the mortgage
loans prior to the up-coming Closing Date. Upon the selection of
the mortgage loans, a transfer will be initiated by the Sponsor to
the Depositor and subsequently from the Depositor to the Issuer. As
the Sponsor, or one of its majority-owned affiliates will acquire
and retain a portion of the Class B Notes and the trust certificate
representing the initial overcollateralization amount to satisfy
the credit risk retention requirements.
The Servicer will have the option, but not the obligation, to sell
any mortgage loan that becomes 60 or more days delinquent under the
Mortgage Bankers Association (MBA) method to maximize proceeds to
the Issuer, provided that such sales to the Sponsor, Seller,
Depositor, or any of their related subsidiaries in aggregate do not
exceed 10% of the unpaid principal balance as of the Cut-Off Date
and the Servicer has obtained at least two additional independent
bids.
The Servicer will not advance any delinquent principal and interest
(P&I) on the mortgages; however, the Servicers are obligated to
make advances in respect of prior liens, insurance, real estate
taxes, and assessments as well as reasonable costs and expenses
incurred in the course of servicing and disposing of properties.
The Issuer has the option to redeem the Notes in full at a price
equal to the sum of (1) the remaining aggregate Note Amount; (2)
any accrued and unpaid interest due on the Notes through the
redemption date (including any Cap Carryover); and (3) any fees and
expenses of the transaction parties, including any unreimbursed
servicing advances (Redemption Price). Such Optional Redemption may
be exercised on or after the payment date in April 2028.
Additionally, the Issuer, at the direction of the Trust Certificate
holder, has an Optional Redemption right on the payment date on or
after April 2026.
The Issuer, at the direction of the Asset Manager, has the option
to sell the mortgage loans to unaffiliated third parties at any
price if the aggregate proceeds of all related sale(s) are
sufficient to pay the Redemption Price. Such Bulk Sale may occur on
or after the payment date in April 2026.
Additionally, a failure to pay the Notes in full by the Payment
Date in April 2029 will trigger a mandatory auction of the
underlying mortgage loans. If the auction fails to elicit
sufficient proceeds to make-whole the Rated Notes, another auction
will follow every four months for the first year and subsequently
auctions will be carried out every six months. If the Asset Manager
fails to conduct the auction, holders of more than 50% of the Class
M-2 Notes will have the right to appoint an auction agent to
conduct the auction.
The transaction employs a sequential-pay cash flow structure with a
bullet feature to Class A-2 and more subordinate notes on the
Redemption Date. P&I collections are commingled and are first used
to pay interest and any Cap Carryover amount to the Notes
sequentially and then to pay Class A-1 until its balance is reduced
to zero, which may provide for timely payment of interest on
certain rated Notes. Class A-2 and below are not entitled to any
payments of principal until the Redemption Date or upon the
occurrence of a Credit Event, except for remaining available funds
representing net sales proceeds of the mortgage loans. Prior to the
Redemption Date or an Event of Default, any available funds
remaining after Class A-1 is paid in full will be deposited into a
Redemption Account. Beginning on the Payment Date in May 2028, the
Class A-1 and the other offered Notes will be entitled to its
initial Note Rate plus the step-up note rate of 1.00% per annum. If
the Issuer does not redeem the rated Notes in full by the payment
date in April 2031 or an Event of Default occurs and is continuing,
a Credit Event will have occurred. After a Credit Event, the Notes
will be entitled to receive a Step-Up Note Rate of 3.000% from the
initial Note Rate. Upon the occurrence of a Credit Event, accrued
interest on Class A-2 and the other offered Notes will be paid as
principal to Class A-1 or the succeeding senior Notes until it has
been paid in full. The redirected amounts will accrue on the
balances of the respective Notes and will later be paid as
principal payments.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2016-BNK2: S&P Affirms 'CCC-' Rating on EFG Certs
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on 10 classes of commercial
mortgage pass-through certificates, including its 'AAA (sf)' rating
on the class A-S certificates, from Morgan Stanley Capital I Trust
2016-BNK2, a U.S. CMBS conduit transaction. At the same time, S&P
affirmed its ratings on 11 classes from the transaction.
Rating Actions
The downgrades on classes A-S, B, C, D, E-1, E-2, and F-1 primarily
reflect:
-- The lack of meaningful improvement in the performance of four
loans totaling 32.7% of the pooled trust balance: 101 Hudson Street
(11.8% ), Harlem USA (11.1%), Briarwood Mall (4.9%), and
International Square (4.9%). In our last reviews in August and
November 2022, S&P revised and lowered its underlying net cash flow
(NCF) and valuation assumptions on these loans.
-- S&P's higher loss severity assumption on the specially serviced
Marriott Albany loan (6.4%).
-- S&P's view that the transaction may face adverse selection in
2026 if the borrowers of these four loans are unable to refinance
at the loans' maturity dates. These four loans would support
subordinated classes, including class A-S, if the other remaining
loans in the pool are paid off.
The downgrades on classes E-1, E-2, and F-1, and the affirmations
on classes F-2, G-1, and G-2, reflect S&P's view that these classes
are susceptible to reduced liquidity support, and the risk of
default and loss is elevated based on the current market
conditions.
The downgrades on the class X-B and X-D interest-only (IO)
certificates and the affirmation on the class X-A IO certificates
are based on our criteria for rating IO securities, which states
that the ratings on the IO securities would not be higher than that
of the lowest-rated reference class. The notional amount of class
X-A references classes A-1, A-2, A-SB, A-3, and A-4, while class
X-B references classes A-S and B, and class X-D references class
D.
The downgrade on the class E exchangeable combined certificates and
the affirmations our ratings on the class F, G, EF, and EFG
exchangeable combined certificates reflect the ratings on the
certificates for which they can be exchanged:
-- The class E exchangeable combined certificates can be exchanged
for a combination of the class E-1 and E-2 exchangeable
certificates.
-- The class F exchangeable combined certificates can be exchanged
for a combination of the class F-1 and F-2 exchangeable
certificates.
-- The class EF exchangeable combined certificates can be
exchanged for a combination of the class E-1, E-2, F-1, and F-2
exchangeable certificates.
-- The class G exchangeable combined certificates can be exchanged
for a combination of the class G-1 and G-2 exchangeable
certificates.
-- The class EFG exchangeable combined certificates can be
exchanged for a combination of the class E-1, E-2, F-1, F-2, G-1,
and G-2 exchangeable certificates.
-- The affirmations on classes A-SB, A-3, and A-4 reflect that the
current ratings were in line with the model-indicated ratings.
S&P said, "We will continue to monitor the performance of the
transaction and the collateral loans, including any developments
around the four loans mentioned above and the resolution of the
specially serviced Marriott Albany loan. To the extent future
developments differ meaningfully from our underlying assumptions,
we may take further rating actions as we determine necessary."
Loan Details
Below S&P provides additional details on the five loans mentioned
above. Three of these loans are on the master servicer's watchlist,
and one is a specially serviced loan.
101 Hudson Street ($72.5 million; 11.8% of the pooled trust
balance)
The loan is the largest loan in the pool. It is secured by the
borrower's fee simple interest in a 42-story, 1.3 million-sq.-ft.
class A office tower in Jersey City, N.J. The property, built in
1992 and renovated in 2015, features views of New York City, 17-ft.
ceiling heights, ground floor retail, a courtyard, and an attached
900-space parking garage.
The trust loan represents a pari passu portion within a larger
whole loan. As of the May 2024 trustee remittance report, the trust
and whole loan balances totaled $72.5 million and $250.0 million,
respectively--the same as in our last review. The whole loan is IO,
pays an annual fixed interest rate of 3.117%, and matures on Oct.
11, 2026. The property was sold in October 2022, and the whole loan
was assumed by the Birch Group for a purchase price of $346.0
million ($271 per sq. ft.).
The loan is currently on the master servicer's watchlist because of
a low reported occupancy. Since S&P's last review in November 2022,
the servicer reported occupancy and NCF of 74.0% and $18.6 million,
respectively, in 2022, and 69.8% and $25.0 million in 2023. The
increase in NCF reported in 2023, despite lower occupancy, was
mainly due to higher other income and expense reimbursements
revenue that the borrower does not expect to continue. The borrower
projected that net operating income (NOI) will fall to only $18.5
million in 2024. The servicer reported a debt service coverage
(DSC) of 3.17x in 2023 and 2.35x in 2022.
In addition, the Hudson Waterfront office submarket, where the
collateral property is located, continues to exhibit elevated
vacancy and availability rates due to lower demand from companies
continuing to adopt work-from-home or hybrid work arrangements. As
of year-to-date May 2024, CoStar reported a 25.6% vacancy rate,
33.9% availability rate, and $43.35 per sq. ft. asking rent for
four- and five-star office properties in the submarket. CoStar
projects vacancy rising to 30.4% in 2025, 30.6% in 2026, and 31.2%
in 2027; and market rent decreasing to $42.12 per sq. ft. in 2025,
$41.73 per sq. ft. in 2026, and $41.85 per sq. ft. in 2027. In our
current analysis, we maintained the S&P Global Ratings' NCF of
$20.1 million (based on a 75.8% occupancy rate), S&P Global
Ratings' capitalization rate of 7.25%, and S&P Global Ratings'
expected-case value of $277.5 million ($207 per sq. ft.) that S&P
derived in its last review. S&P's expected-case value is 42.5%
below the appraised value at issuance and yielded a loan-to-value
(LTV) ratio of 90.1%.
Harlem USA ($68.0 million; 11.1% of the pooled trust balance)
The loan is the second-largest loan in the pool. It is secured by
the borrower's leasehold interest in a five-story, 245,849-sq.-ft.
retail building, built in 1998 and renovated in 2004, located on
West 125th Street in the Harlem neighborhood of upper Manhattan.
The collateral property is anchored by an AMC Theatre (27.7% of net
rentable area [NRA]; June 2030 lease expiration).
The property is subject to a 124-year ground lease that expires May
20, 2122. The ground rent is $300,000 per year through the lease
expiration. The borrower also needs to pay a supplemental ground
rent of $300,000 per year, which increased on Jan. 1, 2023, and
will escalate by $50,000 every five years.
The trust loan represents a pari passu portion within a larger
whole loan. As of the May 2024 trustee remittance report, the trust
and whole loan balances totaled $68.0 million and $108.0 million,
respectively, the same as in S&P's last review. The whole loan is
IO, pays a fixed interest rate of 3.31% per year, and matures on
Oct. 1, 2026.
The loan is currently on the master servicer's watchlist due to low
reported occupancy and NCF. Since our last review, the servicer
reported occupancy and NCF of 73.9% and $5.9 million, respectively,
in 2022; and 68.4% and $5.6 million in 2023. The further decline in
occupancy in 2023 was predominantly due to the vacancy of two
tenants in early 2023: Dollar Tree (4.6% of total NRA) and T-Mobile
(1.0%). The servicer reported a DSC of 1.54x in 2023 and 1.63x in
2022.
CoStar noted that general retail properties in the Harlem/North
Manhattan retail submarket had reported vacancy and availability
rates that are below 10.0%: 4.9% vacancy rate, 7.6% availability
rate, and $75.05 per sq. ft. asking rent as of year-to-date May
2024. CoStar projects vacancy to remain low at 4.9% in 2025, 5.4%
in 2026, and 5.2% in 2027 and asking rent to increase slightly to
$77.69 per sq. ft. in 2025, $79.17 per sq. ft. in 2026, and $80.43
per sq. ft. in 2027. The underlying collateral continues to
underperform the submarket and our expectations. S&P said, "In our
current analysis, we maintained the S&P Global Ratings' NCF of $4.2
million (based on a 74.6% occupancy rate), S&P Global Ratings'
capitalization rate of 8.00%, and S&P Global Ratings expected-case
value of $48.9 million ($199 per sq. ft.) that we derived in our
last review. The revised value is 74.9% lower than the appraisal
value at issuance and yielded a LTV ratio that is significantly
above 100%."
Marriott Albany ($39.0 million; 6.4% of the pooled trust balance)
The loan is the third-largest loan in the pool. It is secured by
the borrower's fee simple and leasehold interests in an
eight-story, 359-guestroom, full-service hotel in Albany, N.Y. The
property, built in 1985 and renovated in 2007, includes 667 parking
spaces in a two-level garage, a full-service restaurant, a lounge,
a gift shop, a fitness center, an outdoor pool and an indoor pool,
a business center, and seven meeting rooms totaling 15,556 sq. ft.
A 1.2-acre land parcel that is used for additional parking is
subject to a ground lease between National Grid as the lessor and
the borrower as the lessee. The ground lease expires April 30,
2034, has a 10-year extension option, and stipulates that the
current annual ground rent amount is $15,000. There is a 20-year
franchise agreement with Marriott International Inc. that expires
on Jan. 27, 2026, with no extension options. According to the
special servicer, the property has no outstanding
performance-improvement-plan (PIP) work or planned renovations
currently.
The loan has a trust balance of $39.0 million (down from $40.6
million in our last review) and a total exposure of $41.1 million
as of the May 2024 trustee remittance report. It amortizes on a
30-year schedule, pays fixed interest rate of 4.2%, and matures on
Nov. 1, 2026. The loan, which has a reported 90-plus days
delinquent payment status, was transferred to the special servicer
on April 13, 2020, due to imminent monetary default. The special
servicer, Greystone Servicing Co. LLC, stated that it is currently
evaluating various disposition strategies, including a potential
note sale.
The servicer reported that occupancy and NCF had improved slightly
to 44.4% and $2.8 million, respectively, in 2022; and 50.9% and
$3.4 million in 2023. The borrower budgeted that the 2024 NCF would
increase slightly to about $3.6 million.
According to the March 2024 STR report, the property had an average
occupancy of 51.9%, ADR of $147.37, revenue per available room
(RevPAR) of $76.44, and RevPAR penetration rate of 78.4%.
S&P said, "In our current analysis, we assumed an 83.5% occupancy
rate, a $205.00 ADR, a $171.18 RevPAR (compared with $181.54 in
2023), and a 31.1% NCF margin to arrive at an S&P Global Ratings'
long-term sustainable NCF of $4.0 million, which is 20.2% lower
than our NCF from last review. Using the same S&P Global Ratings
capitalization rate of 10.00% as in our last review, we derived an
S&P Global Ratings expected-case value of $39.6 million, or
$110,390 per guestroom. Our revised expected case value is 26.9%
lower than the most recent available appraisal value of $54.2
million ($150,974 per guestroom). The updated December 2023
appraisal value that was released by the special servicer in the
Feb. 16, 2024, trustee remittance report is 16.6% lower than the
appraisal value at issuance.
"Based on our revised expected-case value, we expect a minimal loss
(less than 25.0%), upon the eventual resolution of the loan."
Briarwood Mall ($30.0 million; 4.9% of the pooled trust balance)
The loan is the seventh-largest loan in the pool. It is secured by
the borrower's fee simple interest in 369,916 sq. ft. of an 808,320
sq. ft., single-level, regional mall in Ann Arbor, Mich. The mall,
built in 1973 and renovated in 2015, includes noncollateral
anchors: Macy's (186,969 sq. ft.), JCPenney (153,807 sq. ft.), and
Von Maur (101,065 sq. ft.). There is also an empty, noncollateral
anchor space totaling 166,277 sq. ft. that Sears vacated in 2018.
In early 2023, the sponsors, Simon Properties Group and GM Pension
Trust, announced a redevelopment plan to demolish the anchor space
and replace it with a 354-unit apartment building, as well as a
grocery store (58,000 sq. ft.) and a two-level retail building
(100,000 sq. ft.). The plan, which was approved in December 2023 by
the city of Ann Arbor, also included an outdoor plaza, interior
courtyards, multi-level parking garage, and bicycle parking.
The trust loan represents a pari passu portion within a larger
whole loan. As of the May 2024 trustee remittance report, the trust
and whole loan balances totaled $30.0 million and $165.0 million,
respectively, the same as in S&P's last review. The whole loan is
IO, pays a fixed interest rate of 3.292% per year, and matures on
Sept. 1, 2026.
Since S&P's last review, the servicer reported occupancy and NCF of
70.0% and $10.3 million, respectively, in 2022, and 71.0% and $9.8
million in 2023. The servicer noted that there is material tenant
rollover of about 41.0% of NRA over the next two years. The
reported DSC was 1.77x in 2023 and 1.87x in 2022.
S&P said, "In our current analysis, we maintained the S&P Global
Ratings' long-term sustainable NCF of $10.4 million, S&P Global
Ratings' capitalization rate of 9.00%, and S&P Global Ratings'
expected-case value of $115.3 million ($312 per sq. ft.) that we
derived in our last review. Our expected-case value is 65.7% lower
than the appraised value at issuance and yielded an LTV ratio of
143.1%."
International Square ($30.0 million; 4.9% of the pooled trust
balance)
The loan is the eighth-largest loan in the pool. It is secured by
the borrower's fee simple interest in three interconnected,
12-story, class A office buildings, with ground-floor retail space
totaling 1.16 million sq. ft. in downtown Washington, D.C. The
buildings were built from 1979 to 1982 and the entire property
occupies almost a full city block between K and I (Eye) Street, and
18th and 19th Street NW in the city's central business district
(CBD).
The IO mortgage whole loan had an initial and current balance of
$450.0 million, pays an annual fixed rate of 3.615%, and matures on
Aug. 10, 2026. The whole loan is split into three senior A notes
totaling $246.7 million (the $30.0 million trust balance represents
12.2% of the A note component as of the May 2024 trustee remittance
report) and subordinate B notes totaling $203.3 million. The senior
A notes are pari passu to each other and senior to the B note. In
addition, the transaction documents permit the borrower to obtain
up to $100.0 million in mezzanine financing, subject to certain
performance hurdles, such as an LTV ratio of 56.5% or less on the
total debt, a debt yield of no less than 8.6% on the total debt,
and a total DSC of 2.35x. It is S&P's understanding that no
mezzanine debt has been incurred to date.
The loan is currently on the master servicer's watchlist due to a
low reported occupancy and DSC. Since S&P's last review, the
servicer reported occupancy and NCF of 69.0% and $12.4 million,
respectively, in 2022, and 73.0% and $18.5 million in 2023. The
reported DSC was 1.12x in 2023 and 0.75x in 2022.
In addition, the CBD office submarket where the collateral property
is located continues to exhibit elevate vacancy and availability
rates. As of year-to-date May 2024, CoStar reported that a 19.6%
vacancy rate, 23.8% availability rate, and $59.58 per sq. ft.
asking rent for four- and five-star office properties in the
submarket. CoStar projects vacancy rising to 22.4% in 2025, 24.4%
in 2026, and 26.2% in 2027; and market rent decreasing to $55.81
per sq. ft. in 2025, $53.39 per sq. ft. in 2026, and $51.14 per sq.
ft. in 2027. S&P said, "In our current analysis, we maintained the
S&P Global Ratings' NCF of $29.6 million (based on a 73.6%
occupancy rate), S&P Global Ratings' capitalization rate of 6.75%,
and S&P Global Ratings' expected-case value of $450.8 million ($390
per sq. ft.) that we derived in our last review. Our expected-case
value is 40.4% below the appraised value at issuance and yielded a
LTV ratio of 99.8% on the whole loan balance."
Transaction Summary
As of the May 17, 2024, trustee remittance report, the collateral
pool balance was $613.3 million, which is 84.5% of the pool balance
at issuance. The pool currently includes 37 fixed-rate loans, down
from 40 loans at issuance. One loan ($39.0 million; 6.4% of the
pooled trust balance) is with the special servicer, six loans
($187.0 million; 30.5%) are on the master servicer's watchlist, and
three loans ($11.3 million; 1.8%) are defeased.
Excluding the specially serviced and three defeased loans, and
adjusting the servicer-reported numbers, S&P calculated an S&P
Global Ratings weighted average DSC of 1.69x and an S&P Global
Ratings weighted average loan-to-value ratio of 102.9% using a
7.78% S&P Global Ratings weighted average capitalization rate.
According to the May 2024 trustee remittance report, the trust
incurred monthly interest shortfalls totaling $10,242 primarily
from special servicing fees of $8,152 and workout fees of $2,090.
The current shortfalls affected the interest on classes H-2 and RR,
which are not rated by S&P Global Ratings. The trust has not
experienced any principal losses to date. S&P expects losses to
reach approximately 0.8% of the original pool trust balance upon
the eventual resolution of the specially serviced Marriott Albany
loan.
Ratings Lowered
Morgan Stanley Capital I Trust 2016-BNK2
Class A-S to 'AA (sf)' from 'AAA (sf)'
Class B to 'A- (sf) from 'A+ (sf)'
Class C to 'BB+ (sf)' from 'BBB (sf)'
Class D to 'B- (sf)' from 'BB- (sf)'
Class E-1 to 'CCC (sf)' from 'B+ (sf)'
Class E-2 to 'CCC (sf)' from 'B (sf)'
Class F-1 to 'CCC (sf)' from 'B- (sf)'
Class X-B: to 'A- (sf)' from 'A+ (sf)'
Class X-D to 'B- (sf)' from 'BB- (sf)'
Class E to 'CCC (sf)' from 'B (sf)'
Ratings Affirmed
Morgan Stanley Capital I Trust 2016-BNK2
Class A-SB: AAA (sf)
Class A-3: AAA (sf)
Class A-4: AAA (sf)
Class F-2: CCC (sf)
Class G-1: CCC (sf)
Class G-2: CCC- (sf)
Class X-A: AAA (sf)
Class F: CCC (sf)
Class G: CCC- (sf)
Class EF: CCC (sf)
Class EFG: CCC- (sf)
MORGAN STANLEY 2018-BOP: S&P Lower X-EXT Certs Rating to 'CCC(sf)'
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S&P Global Ratings lowered its ratings on five classes of
commercial mortgage pass-through certificates from Morgan Stanley
Capital I Trust 2018-BOP, a U.S. CMBS transaction.
This U.S. CMBS transaction is backed by a floating-rate,
interest-only (IO) mortgage loan currently secured by the
borrowers' fee simple interests in nine suburban office properties
totaling 1.4 million sq. ft. located in Florida, Georgia, Maryland,
and Virginia.
Rating Actions
The downgrades on classes A, B, C, and D reflect:
-- S&P's revised expected-case value, which is 19.8% lower than
the valuation it derived in its last review in November 2023, due
primarily to further decreases in occupancy and base rental income
at the remaining properties.
-- The potential for lower recovery because the specially serviced
loan, which had a reported current or performing matured balloon
payment status in 2023, is now delinquent. According to the May
2024 trustee remittance report, the master servicer has advanced
$2.8 million for interest and other expenses.
-- S&P's concerns that the servicer's willingness to continue to
advance interest payments could be challenged by increases in the
advancing amount, and/or an updated appraisal value, which S&P's
anticipate may be lower than the August 2023 appraised value of
$166.9 million.
S&P said, "In our June 2, 2023 review, we noted that the loan had
transferred to the special servicer, KeyBank Real Estate Capital
(KeyBank), in March 2023 due to monetary default on the mezzanine
loans. At that time, we revised our expected-case value lower based
on the collateral properties' declining performance and to account
for the release of three properties. In our Nov. 6, 2023, review,
we further lowered our expected-case value following the revision
of our baseline capitalization rate assumptions for class B office
assets as detailed in the updated criteria guidance article
"Guidance: CMBS Global Property Evaluation Methodology," originally
published March 13, 2019. As a result, our revised expected-case
value of $139.5 million is an approximate 32.2% decline from our
issuance value for the nine remaining collateral properties."
Since that time, the borrowers have defaulted on the trust loan;
KeyBank is currently pursuing foreclosure of the properties; and an
updated appraisal value, dated August 2023, of $166.9 million was
released at the end of 2023, a 44.1% decline from the 2018 issuance
appraisal value for the nine remaining properties. Meanwhile, the
collateral properties' occupancy and net cash flow (NCF) continued
to decline. Based on year-end rent rolls and servicer-reported
financials, the weighted-average occupancy (by net rentable area
[NRA]) and NCF for the remaining office portfolio were 62.4% and
$19.0 million, respectively, in 2021; 59.2% and $12.2 million in
2022; and 56.5% and $10.4 million in 2023. As a result, assuming an
in-place 56.5% occupancy rate, $33.74 per sq. ft. gross rent, as
calculated by S&P Global Ratings, and a 48.2% operating expense
ratio, S&P arrived at a long-term sustainable NCF of $10.7 million,
19.8% lower than the NCF derived in its last review and on par with
the borrowers' reported 2023 NCF. Using a weighted-average S&P
Global Ratings' 9.59% capitalization rate, unchanged from our last
review, S&P arrived at an S&P Global Ratings' expected-case value
of $111.9 million, or $81 per sq. ft., 19.8% lower than its last
review value of $139.5 million, and a 32.9% decline from the August
2023 appraisal value of $166.9 million. This yielded an S&P Global
Ratings' loan to value (LTV) ratio of 144.2% on the trust balance.
The downgrade on the class X-EXT IO certificates reflects our
criteria for rating IO securities, in which the rating on the IO
securities would not be higher than that of the lowest-rated
reference class. The notional amount of the class X-EXT
certificates references classes B, C, and D.
S&P said, "We will continue to monitor the performance of the
office properties and loan, including the resolution and ultimate
liquidation of the loan and properties. Because there is no
interest rate cap agreement currently in place, the floating-rate
debt service obligation is fully exposed to changes in one-month
SOFR during this period of elevated interest rates. The elevated
interest rate environment exacerbates the risk of servicer advances
building up, in our view. If we receive information that differs
materially from our expectations, such as an updated appraisal
value from the special servicer that is substantially below our
revised expected-case value, property performance that is below our
expectations, or a workout strategy that negatively impacts the
transaction's liquidity and recovery, we may revisit our analysis
and take additional rating actions as we deem appropriate."
Property-Level Analysis
At origination, the Brookfield Office Portfolio loan collateral
consisted of 12 suburban office properties totaling 1.8 million sq.
ft. in four U.S. states. The nine remaining class A and class B
suburban office properties total 1.4 million sq. ft. and are in
Florida, Georgia, Maryland, and Virginia. Seven properties
(representing 95.9% of the remaining trust balance) are located in
the Washington-Arlington-Alexandria, DC-VA-MD-WV metropolitan
statistical area (MSA;) one (2.1%) is in the
Orlando-Kissimmee-Sanford, Fla. MSA; and one (2.0%) is in the
Atlanta-Sandy Springs-Roswell, Ga. MSA. The remaining properties
were built between 1970 and 2007 and last renovated between 1994
and 2018. The sponsor, Brookfield Strategic Real Estate Partners
II, acquired the properties in 2016 and 2017.
According to the December 2023 rent roll, the five largest tenants
comprised 16.1% of NRA and included:
-- Eating Recovery Center (7.5% of NRA, 8.0% of gross rent as
calculated by S&P Global Ratings, October 2038 lease expiration);
-- Montgomery County, Maryland (3.0%, 5.1%, March 2029 and
February 2031);
-- State of Maryland (2.0%, 3.2%, December 2024);
-- American Kidney Fund (1.9%, 3.6%, August 2025); and
-- The George Washington University (1.6%, 2.8%, July 2025).
According to CoStar, the office submarkets where the properties are
located have elevated vacancies that are projected to increase over
the next five years. As of year-to-date May 2024, submarket
vacancies range from 18.6% to 24.4%, with the availability rates
between 20.6% and 38.3%. Submarket rents range from $24.92 per sq.
ft. to $39.40 per sq. ft. for the same period. Submarket vacancies
are projected to increase to a range of 21.8%-27.9% in 2025. This
compares with the portfolio's current in-place vacancy of 43.5% and
S&P Global Ratings' gross rent of $33.74 per sq. ft. While the
sponsor was able to sign new leases for 10 tenants totaling 128,038
sq. ft., or 9.2% of NRA, at an average gross rent of $22.70 per sq.
ft. in 2023 (per the December 2023 rent roll), tenants vacating
outpaced the new additions at the properties. As a result, the
portfolio has continued to underperform relative to its component
submarkets.
Table 1
Reported collateral performance by servicer
2023(I) 2022(I) 2021(I)
Occupancy rate (%) 56.5(ii) 59.2(ii) 62.4(ii)
Net cash flow (mil. $) 10.4 12.2 19.0
Debt service coverage (x) 0.69 1.47 3.10
Appraisal value (mil. $) 166.9 298.7 298.7
(i)Reporting period for the remaining nine properties.
(ii)Weighted-averages by net rentable area, based on the
borrower-provided rent rolls for each period.
Table 2
S&P Global Ratings' key assumptions
CURRENT LAST REVIEW ISSUANCE
(MAY 2024) (NOV. 2023) (AUG. 2018)
(I) (I) (I)
Occupancy rate (%) 56.5 59.5 74.2
Net cash flow (mil. $) 10.7 13.4 18.4
Capitalization rate (%) 9.59 9.59 9.14
Value (mil. $) 111.9 139.5 205.7
Value per sq. ft. ($) 81 101 149
Loan-to-value ratio (%)(ii) 144.2 115.7 89.7
(i)Review period for the nine remaining properties.
(ii)On the current trust loan balance.
Transaction Summary
As of the May 15, 2024, trustee remittance report, the IO mortgage
loan has a $161.4 million balance, down from $223.4 million at
issuance, and pays interest at a per annum floating rate indexed to
one-month SOFR plus a 1.69% gross margin. The loan had an initial
maturity date of Aug. 9, 2020, and a fully extended maturity date
of Aug. 9, 2023, after the borrower exercised three one-year
extension options. In addition, there are two mezzanine loans
outstanding totaling $55.0 million. Including the mezzanine loans,
the S&P Global Ratings' LTV ratio increases to 193.3%. The trust
has not incurred any principal losses to date.
As previously discussed, the trust loan is currently with the
special servicer due to imminent monetary default and KeyBank is
pursuing foreclosure. The master servicer, also KeyBank, reported a
0.69x debt service coverage on the trust loan for year-end 2023.
Ratings Lowered
Morgan Stanley Capital I Trust 2018-BOP
Class A to 'A- (sf)' from 'AA (sf)'
Class B to 'BB (sf)' from 'BBB+ (sf)'
Class C to 'B (sf)' from 'BB+ (sf)'
Class D to 'CCC (sf)' from 'B+ (sf)'
Class X-EXT to 'CCC (sf)' from 'B+ (sf)'
MORGAN STANLEY 2018-MP: DBRS Confirms BB Rating on Class E Certs
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DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2018-MP
issued by Morgan Stanley Capital I Trust 2018-MP as follows:
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BB (sf)
All trends are Stable.
The credit rating confirmations reflect the consistent performance
of the underlying collateral, which remains in line with
Morningstar DBRS' expectations. The underlying loan continues to
benefit from the collateral portfolio's geographic diversity and
consistent occupancy and strong sponsorship in Millennium Partners,
which owns and operates a commercial real estate portfolio valued
in excess of $5 billion, according to the company's website.
The loan is securitized by the fee-simple and leasehold interests
in the Millennium Partners Portfolio, which includes eight
properties with both office and retail components across four
states and Washington, D.C. The properties are in the central hubs
of New York; Boston; San Francisco; Washington, D.C.; and Miami.
The collateral consists of approximately 1.55 million square feet
of commercial space at the Millennium Tower Boston, the Lincoln
Square Retail portfolio, the Four Seasons San Francisco, the Four
Seasons Miami, the Ritz-Carlton Georgetown, and the Ritz-Carlton
Washington, D.C. The subject properties are in dense, urban
locations, with little room for additional developments.
The subject whole loan is interest only for the full 10-year loan
term with a $710.0 million first mortgage and $280.2 million of
mezzanine debt held outside the trust. Of the first mortgage
amount, $225.9 million consists of non-pooled pari passu notes that
were securitized in the following Morningstar DBRS-rated commercial
mortgage-backed securities (CMBS) transactions: BANK 2019-BNK16,
MSC 2018-L1, and BANK 2018-BNK14. The loan is also securitized in
the non-Morningstar DBRS-rated transaction BANK 2018-BNK15. The
borrower is permitted to release properties subject to certain
conditions, including payment of a release amount that is 115% of
the allocated loan amount for the released property.
According to the financial statement for the trailing nine-month
period ended September 30, 2023, the collateral portfolio had an
annualized net cash flow (NCF) of $55.2 million and a debt service
coverage ratio (DSCR) of 1.79 times (x), a slight increase from the
annualized trailing nine-month NCF and DSCR of $50.4 million and
1.63x, respectively, in September 2022, trending back in line with
the Morningstar DBRS NCF of $55.9 million. The cash flow increase
in 2023 was largely driven by the increased occupancy rate from the
prior year. As of September 2023, the collateral was 97.8% occupied
compared with the September 2022 occupancy of 93.4% and remains
above the issuance figure of 95.6%. However, rollover risk is a
concern for 2024, as tenants representing approximately 15% of the
net rentable area (NRA) are scheduled to roll. The largest tenant
set to expire in November 2024 is Havas North America, Inc., which
currently occupies approximately 33.6% of NRA at the Millennium
Tower property, approximately 8.0% of the portfolio NRA. Per the
most recent servicer commentary, Havas North America, Inc. is
expected to vacate at the lease expiry date.
Given the current environment with increased pressure on office
properties and mixed-use properties with office components,
Morningstar DBRS increased the capitalization rate (cap rate) to
6.97% in the analysis for this review, up from the issuance cap
rate of 6.79%, resulting in an updated Morningstar DBRS value of
$801.6 million, down from the previous Morningstar DBRS value of
$822.7 million. The whole-loan loan-to-value (LTV), inclusive of
the mezzanine debt of $280.2 million, increased to 124.1%, and the
LTV based on the total mortgage debt increased to 89.0%.
Morningstar DBRS maintained its qualitative adjustments, totaling
1.50% for cash flow volatility because of stable occupancy, 2.50%
for property quality because of the concentration of high-end
hotels and well-positioned commercial properties benefiting from
high traffic, and 2.0% for market fundamentals because of the
concentrations in strong submarkets.
Per the most recent financial reporting, the lowest reported
occupancy as of September 2023 was 90.1% at the Four Seasons San
Francisco. All other properties reported occupancies above 93.8%,
with multiple properties being 100% occupied. Given the sponsor's
ability to maintain high occupancy rates through the loan term thus
far, as well as the stable cash flows for 2023, which returned
closer to the Morningstar DBRS NCF derived at issuance, Morningstar
DBRS expects the transaction to continue performing in line with
issuance expectations.
The Morningstar DBRS credit rating assigned to Class B is higher
than the result implied by the LTV sizing benchmarks by three or
more notches. Despite the decrease in Morningstar DBRS value as a
result of the increased cap rate, the variance is warranted given
the increase in NCF and high occupancy across the well-positioned
portfolio.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2019-PLND: Moody's Cuts Rating on D Certs to Caa2
----------------------------------------------------------------
Moody's Ratings has downgraded ratings on four classes of Morgan
Stanley Capital I Trust 2019-PLND, Commercial Mortgage Pass-Through
Certificates, Series 2019-PLND as follows:
Cl. A, Downgraded to Baa1 (sf); previously on Aug 25, 2023
Downgraded to Aa2 (sf)
Cl. B, Downgraded to Ba1 (sf); previously on Aug 25, 2023
Downgraded to A2 (sf)
Cl. C, Downgraded to B1 (sf); previously on Aug 25, 2023 Downgraded
to Baa3 (sf)
Cl. D, Downgraded to Caa2 (sf); previously on Aug 25, 2023
Downgraded to B1 (sf)
RATINGS RATIONALE
The ratings on the principal and interest (P&I) Classes were
downgraded primarily due to the current and expected future
interest shortfalls caused by the non-recoverable determinations
made by the master servicer for the asset, an increase in Moody's
LTV as a result of slow recovery in the property's net cash flow
(NCF), and the uncertainty around future cash flow recovery and
resolution timing of the REO collateral. As of the May 2024
remittance statement, the master servicer made a non-recoverability
determination on the PoHo Portfolio loan and as a result no
interest was distributed to any of the outstanding classes. The
downgrades also reflect the accumulation of loan advances due to
the loan's inability to fulfill its debt service and potentially
higher losses due to the uncertainty around the timing and proceeds
from the ultimate resolution.
The portfolio's performance continues to marginally improve year
over year but is not currently generating enough net cash flow to
cover its floating rate debt service and the portfolio's most
recent NCF remained well below the NCF in 2019. Furthermore, the
most recent reported appraised value was $204.5 million as of the
May 2024 remittance statement which represented a 20% decline from
the 2023 value and 40% decline from securitization. The most recent
appraisal value is now below the outstanding loan balance of $240
million and well below the total loan exposure of $285 million when
accounting for the total outstanding advances and accrued unpaid
advance interest amounts. Servicing advances are senior in the
transaction waterfall and are paid back prior to any principal
recoveries which may result in lower recovery to the total trust
balance. The P&I classes Moody's rate, particularly Cl. A and Cl.
B, benefit from credit support in the form of subordinate mortgage
debt balance and also could withstand further declines in market
value prior to a risk of principal loss.
As of the current distribution date, the loan was last paid through
its May 2021 payment date and the aggregate outstanding servicer
advances, cumulative accrued unpaid advance interest and other
expenses increased to $45.4 million from $35.2 million at Moody's
last review.
In this credit rating action Moody's considered qualitative and
quantitative factors in relation to the senior-sequential structure
and quality of the asset, and Moody's analyzed multiple scenarios
to reflect various levels of stress in property values could impact
loan proceeds at each rating level.
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 a significant improvement
in the loan's performance.
Factors that could lead to a downgrade of the ratings include a
further decline in actual or expected performance of the loan, an
increase in realized and expected losses or increased interest
shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published in July 2022.
DEAL PERFORMANCE
As of the May 15, 2024 distribution date, the transaction's
aggregate certificate balance remains unchanged at $240 million
from securitization. The 5-year (including three one-year
extensions), interest only, floating rate loan is secured by the
borrowers' fee simple interests in two, full-service hotels
totaling 782-guestrooms known as The Hilton Portland Downtown (455
guestrooms) and The Duniway (327 guestrooms), located in Portland,
Oregon. The two properties are adjacently located and hotel guests
benefit from access to the amenities at both of the hotels.
The loan has been in special servicing since June 2020 due to
monetary default triggered by the coronavirus outbreak. While
property performance has since improved, the recovery has slowed in
recent years. Furthermore, despite signs of improvement in recent
years, the Downtown Portland hotel market has been unable to return
to its pre-pandemic levels. According to CBRE EA, Downtown
Portland's Revenue per Available Room (RevPAR) reached $89.63 in
2023, a 6.3% increase compared to 2022. However, that was still
31.5% lower than its RevPAR of $130.84 in 2019. The trust was the
high bidder at the January 2023 foreclosure sale and the collateral
became REO as of that date.
The portfolio's NCF for 2019 was approximately $16.9 million in
line with the historical NCF that have ranged between $13.3 in 2014
and $19.4 million in 2018. The portfolio did not generate positive
NCF till 2022 at $6.8 million. The year-to-date 2023 compared to
the same period on 2022 exhibit continued positive trends, however,
at a slower pace. Due to the loan's floating interest rate in
excess of 8%, the DSCR remains below 0.40X.
There are outstanding total advances totaling approximately $45.4
million. Moody's NCF was $12.4 million and the first mortgage
balance represents a Moody's stabilized LTV of 202%. Moody's cash
flow assumes two or more years of improvement in the property
performance, however, due to the slower than anticipated recovery
Moody's NCF was lower than previously assumed Moody's NCF levels.
There are outstanding interest shortfalls totaling $4.37 million
affecting all of the outstanding classes and there are no
cumulative losses as of the current distribution date. Interest
shortfalls are expected to continue and impact all outstanding
classes due the non-recoverable determination by the master
servicer.
MOUNTAIN VIEW XV: S&P Assigns BB- (sf) Rating on Class E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-1-R, A-2-R, B-1-R, B-2-R, C-R, D-R and E-R debt, as well as the
new class X debt from Mountain View CLO XV Ltd./Mountain View CLO
XV LLC, a CLO originally issued in January 2020 that is managed by
Seix Investment Advisors. At the same time, S&P withdrew its
ratings on the original class A-1, A-2, B-1, B-2, C, D, and E debt
following payment in full on the May 29, 2024, refinancing date.
The replacement debt was 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-2-R, B-1-R, and C-R debt was
issued at a lower spread over three-month SOFR than the original
debt.
-- The replacement class D-R and E-R debt was issued at a higher
spread over three-month SOFR than the original debt.
-- The replacement class B-2-R debt was issued at a higher fixed
coupon than the original class B-2 debt.
-- Class X debt was issued in connection with this refinancing.
These notes will be paid down using interest proceeds during the
first 10 payment dates, beginning with the payment date in period
two.
-- The stated maturity and reinvestment period was extended 4.5
years.
-- An additional $2.75 million in subordinated notes are being
issued.
-- The non-call period was extended to May 29, 2026.
In connection with the refinancing, the issuer added provisions
related to workout assets, restructured obligations, uptier priming
debt, and ESG prohibited obligations. Additionally, the transaction
now has the ability to purchase certain types of bonds and notes.
Replacement And Original Debt Issuances
Replacement debt
-- Class X, $5.00 million: Three-month CME term SOFR + 1.05%
-- Class A-1-R, $240.00 million: Three-month CME term SOFR +
1.67%
-- Class A-2-R, $16.00 million: Three-month CME term SOFR + 1.85%
-- Class B-1-R, $40.00 million: Three-month CME term SOFR + 2.15%
-- Class B-2-R, $8.00 million: 6.278%
-- Class C-R (deferrable), $24.00 million: Three-month CME term
SOFR + 2.90%
-- Class D-R (deferrable), $22.00 million: Three-month CME term
SOFR + 4.60%
-- Class E-R (deferrable), $17.30 million: Three-month CME term
SOFR + 8.07%
Subordinated notes, $41.15 million: Not applicable
Original debt
-- Class A-1, $244.00 million: Three-month CME term SOFR + 1.40% +
CSA(i)
-- Class A-2, $12.00 million: Three-month CME term SOFR + 1.90% +
CSA(i)
-- Class B-1, $34.00 million: Three-month CME term SOFR + 2.15% +
CSA(i)
-- Class B-2, $14.00 million: 3.91%
-- Class C (deferrable), $20.00 million: Three-month CME term SOFR
+ 3.10% + CSA(i)
-- Class D (deferrable), $23.80 million: Three-month CME term SOFR
+ 4.37% + CSA(i)
-- Class E (deferrable), $20.20 million: Three-month CME term SOFR
+ 7.88% + CSA(i)
-- Subordinated notes, $38.40 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 notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Mountain View CLO XV Ltd./Mountain View CLO XV LLC
Class X, $5.0 million: AAA (sf)
Class A-1-R, $240.0 million: AAA (sf)
Class A-2-R, $16.0 million: AAA (sf)
Class B-1-R, $40.0 million: AA (sf)
Class B-2-R, $8.0 million: AA (sf)
Class C-R (deferrable), $24.0 million: A (sf)
Class D-R (deferrable), $22.0 million: BBB- (sf)
Class E-R (deferrable), $17.3 million: BB- (sf)
Ratings Withdrawn
Mountain View CLO XV Ltd./Mountain View CLO XV LLC
Class A-1 to not rated from 'AAA (sf)'
Class A-2 to not rated from 'AAA (sf)'
Class B-1 to not rated from 'AA (sf)'
Class B-2 to not rated from 'AA (sf)'
Class C to not rated from 'A (sf)'
Class D to not rated from 'BBB- (sf)'
Class E to not rated from 'BB- (sf)'
Other Debt
Mountain View CLO XV Ltd./Mountain View CLO XV LLC
Subordinated notes, $41.15 million: Not rated
MPOWER EDUCATION 2024-A: DBRS Gives Prov. BB Rating on C Notes
--------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the notes to be
issued by MPOWER Education Trust 2024-A (MPOWER 2024-A) as
follows:
-- $145,500,000 Class A Notes rated A (sf)
-- $40,300,000 Class B Notes rated BBB (sf)
-- $12,300,000 Class C Notes rated BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The Morningstar DBRS provisional credit ratings on the notes are
based upon a review by Morningstar DBRS of the following
considerations:
-- The transaction's capital structure and the form and
sufficiency of available credit enhancement. Overcollateralization,
subordination, a reserve account and excess spread create credit
enhancement levels that are commensurate with the proposed
ratings.
-- Transaction cash flows are sufficient to repay investors under
all rating stress scenarios in accordance with the terms of the
MPOWER 2024-A transaction documents.
-- The quality and credit characteristics of the student loan
borrowers.
-- Structural features of the transaction that increase
overcollateralization targets and/or floors if performance
deteriorates.
-- The experience, origination and underwriting capabilities of
MPOWER and its bank partner. Morningstar DBRS has performed an
operational assessment of MPOWER and considers MPOWER via its bank
partnership with Bank of Lake Mills an acceptable originator of
private student loans.
-- The ability of the subservicer to perform collections on the
collateral pool and other required activities. Morningstar DBRS has
performed an operational assessment of Launch Servicing, LLC and
considers the entity an acceptable subservicer of private student
loans.
-- The legal structure and expected legal opinions that will
address the true sale of the student loans, the nonconsolidation of
the trust, that the indenture trustee has a valid and perfected
security interest in the assets and the consistency with the
"Morningstar DBRS Legal Criteria for US Structured Finance."
-- The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary, "Baseline Macroeconomic Scenarios for Rated
Sovereigns: March 2024 Update" published on March 27, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse COVID-19 pandemic scenarios, which were first published
in April 2020.
Morningstar DBRS' credit rating on the securities referenced herein
addresses the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
The associated financial obligations are the related Noteholders'
Interest Distribution Amount and the related Outstanding Principal
Amount.
Morningstar DBRS' credit rating does not address nonpayment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. For example, the associated contractual payment
obligation that is not a financial obligation for each of the rated
notes is the related interest on any unpaid Noteholders' Interest
Distribution Amount.
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.
NEW RESIDENTIAL 2024-RPL1: DBRS Gives Prov. B(high) on B5 Notes
---------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the
Mortgage-Backed Notes, Series 2024-RPL1 (the Notes) to be issued by
New Residential Mortgage Loan Trust 2024-RPL1 (NRMLT 2024-RPL1 or
the Trust) as follows:
-- $155.2 million Class A at AAA (sf)
-- $13.8 million Class B-1 at AA (high) (sf)
-- $12.4 million Class B-2 at A (high) (sf)
-- $10.5 million Class B-3 at BBB (high) (sf)
-- $6.7 million Class B-4 at BB (high) (sf)
-- $5.3 million Class B-5 at B (high) (sf)
The AAA (sf) credit rating on the Notes reflects 31.00% of credit
enhancement provided by subordinated notes. The AA (high) (sf), A
(high) (sf), BBB (high) (sf), BB (high) (sf), and B (high) (sf)
credit ratings reflect 24.85%, 19.35%, 14.70%, 11.70%, and 9.35% of
credit enhancement, respectively.
Other than the specified classes of Notes above, Morningstar DBRS
does not rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming, first- and second-lien residential mortgages,
funded by the issuance of the Notes. The Notes are backed by 1,212
loans with a total principal balance of $224,949,945 as of the
Cut-Off Date (March 31, 2024).
The portfolio is approximately 156 months seasoned on average,
though the loan ages are quite dispersed, ranging from 11 to 383
months. In the portfolio, 71.5% of the loans are modified. The
modifications happened more than two years ago for 89.5% of the
modified loans. Within the pool, 345 mortgages have
non-interest-bearing deferred amounts, which equates to 6.9% of the
total principal balance. Unless specified otherwise, all statistics
on the mortgage loans in the report are based on the current
balance, including the applicable non-interest-bearing deferred
amounts.
As of the Cut-Off Date, 78.4% of the loans in the pool are current.
Approximately 0.4% are in bankruptcy (all bankruptcy loans are
current), 18.2% are 30 days delinquent, and 3.4% are 60 days
delinquent. Approximately 34.3% of the mortgage loans have been
zero times 30 days delinquent (0 x 30) for at least the past 24
months under the Mortgage Bankers Association (MBA) delinquency
method and 51.2% have been 0x30 for at least the past 12 months
under the MBA delinquency method.
The majority of the pool (75.0%) is exempt from the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because the loans were originated prior to
January 10, 2014, the date on which the rules became applicable, or
originated as investor property loans. The loans subject to the ATR
rules are designated as non-QM (9.5%).
The Sponsor, Rithm Capital Corp, (Rithm), acquired 72.9% of the
Mortgage Loans prior to the Cut-Off Date in connection with the
termination of various securitization trusts. Rithm or one of its
majority-owned affiliates will acquire and retain a 5% eligible
horizontal residual interest in the Notes, consisting of 100% of
the Class B-6 Notes and Class XS Notes, in the aggregate, to
satisfy the credit risk retention requirements.
Since May 2014, 29 seasoned securitizations have been issued from
the NRMLT core shelf. These securitizations contained highly
seasoned loans sourced from prior deal collapses. Historical
performance for prior NRMLT deals has been generally satisfactory
with relatively low realized losses.
As of the Closing Date, the mortgage loans will be serviced by
NewRez LLC doing business as Shellpoint Mortgage Servicing (SMS;
99.0%) and Fay Servicing, LLC (1.0%). Approximately 66.0% of the
pool is currently serviced by another servicer and will transfer to
SMS prior to the first Payment Date. Nationstar Mortgage LLC will
serve as the Master Servicer, and Citibank, N.A. (rated AA (low)
with a Stable trend by Morningstar DBRS) will serve as the Paying
Agent.
There will not be any advancing of delinquent principal or interest
on any mortgages by the related Servicer or any other party to the
transaction; however, the related Servicer is obligated to make
advances in respect to the preservation, inspection, restoration,
protection, and repair of a mortgaged property, which includes
delinquent tax and insurance payments, the enforcement of judicial
proceedings associated with a mortgage loan, and the management and
liquidation of properties (to the extent that the related Servicer
deems such advances recoverable).
Each Servicer has the right to sell mortgage loans that become 60
or more days delinquent in the secondary market in an arms-length
transaction at fair market value to maximize proceeds to the
Issuer.
The Seller will have the option, but not the obligation, to
repurchase any mortgage loan that becomes 60 or more days
delinquent under the MBA method or any real estate owned property
acquired in respect of a mortgage loan at a price equal to the
unpaid principal balance of such loan (Optional Repurchase Price),
provided that such repurchases in aggregate do not exceed 10% of
the total principal balance as of the Cut-off Date.
On the earlier of (1) the Payment Date occurring in April 2027 or
(2) the Payment Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related
collection period, is less than or equal to 25% of the aggregate
Stated Principal Balance of the Mortgage Loans as of the Cut-Off
Date, the Depositor or its assignee has the option to purchase all
the outstanding notes at par plus interest.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest carryforward
amounts on the Notes, but such interest carryforward amounts on
Class B-1 and more subordinate bonds will not be paid from
principal proceeds until Class A is retired.
Notes: All figures are in U.S. dollars unless otherwise noted.
OCP CLO 2024-33: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
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S&P Global Ratings assigned its preliminary ratings to OCP CLO
2024-33 Ltd./OCP CLO 2024-33 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Onex Credit Partners LLC.
The preliminary ratings are based on information as of May 29,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
OCP CLO 2024-33 Ltd. /OCP CLO 2024-33 LLC
Class A-1, $384.00 million: AAA (sf)
Class A-2, $12.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $36.00 million: A (sf)
Class D-1 (deferrable), $36.00 million: BBB (sf)
Class D-2 (deferrable), $6.00 million: BBB- (sf)
Class E (deferrable), $18.00 million: BB- (sf)
Subordinated notes, $57.50 million: Not rated
OCTAGON 63: Fitch Assigns 'B-sf' Rating on Class F Notes
--------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Octagon
63, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Octagon 63, Ltd.
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
F LT B-sf New Rating B-(EXP)sf
Subordinated A LT NRsf New Rating NR(EXP)sf
Subordinated B LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Octagon 63, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) 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 23.97, 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
96.43% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 72.9% versus a
minimum covenant, in accordance with the initial expected matrix
point of 69.5%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 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 (Neutral): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'BBB+sf' and 'AA+sf' for class A-2, between 'BB+sf' and 'A+sf' for
class B, between '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, '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 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.
OHA CREDIT 19: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
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S&P Global Ratings assigned its preliminary ratings to OHA Credit
Funding 19 Ltd./OHA Credit Funding 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 Oak Hill Advisors L.P.
The preliminary ratings are based on information as of May 23,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
OHA Credit Funding 19 Ltd./OHA Credit Funding 19 LLC
Class A-1, $276.75 million: AAA (sf)
Class A-2, $24.75 million: Not rated
Class B-1, $30.50 million: AA (sf)
Class B-2, $10.00 million: AA (sf)
Class C (deferrable), $27.00 million: A (sf)
Class D-1 (deferrable), $27.00 million: BBB- (sf)
Class D-2 (deferrable), $4.50 million: BBB- (sf)
Class E (deferrable), $13.50 million: BB- (sf)
Subordinated notes, $38.70 million: Not rated
OZLM LTD XV: Moody's Hikes Rating on $22MM Class D-R Notes to Ba3
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Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes (the "Refinancing Notes") issued by OZLM XV, Ltd.
(the "Issuer").
Moody's rating action is as follows:
US$188,000,000 Class A-1a-RR Senior Secured Floating Rate Notes due
2033 (the "Class A-1a-RR Notes"), Assigned Aaa (sf)
US$26,500,000 Class A-2a-RR Senior Secured Floating Rate Notes due
2033 (the "Class A-2a-RR Notes"), Assigned Aa1 (sf)
US$19,000,000 Class B-RR Senior Secured Deferrable Floating Rate
Notes due 2033 (the "Class B-RR Notes"), Assigned A1 (sf)
Additionally, Moody's has taken rating actions on the following
outstanding notes originally issued by the Issuer on March 2020
(the "First Refinancing Date"):
US$23,500,000 Class A-2b-R Senior Secured Fixed Rate Notes due 2033
(the "Class A-2b-R Notes"), Upgraded to Aa1 (sf); previously on
March 6, 2020 Assigned Aa2 (sf)
US$25,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2033 (the "Class C-R Notes"), Upgraded to Baa2 (sf);
previously on September 25, 2020 Confirmed at Baa3 (sf)
US$22,000,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2033 (the "Class D-R Notes"), Upgraded to Ba3 (sf);
previously on September 25, 2020 Downgraded to B1 (sf)
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
Sculptor Loan Management LP (the "Manager") will continue to direct
the selection, acquisition and disposition of the assets on behalf
of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's remaining
reinvestment period.
The Issuer previously issued four other classes of secured notes
and one class of subordinated notes, which will remain
outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the stated non-call
period; changes to the definition of "Moody's Default Probability
Rating".
Moody's rating actions on the Class A-2b-R Notes, Class C-R Notes,
and Class D-R Notes are primarily a result of the refinancing,
which increases excess spread available as credit enhancement to
the rated notes. Additionally, the Notes benefited from a
shortening of the weighted average life (WAL).
No action was taken on the Class A-1b-R notes because its expected
loss remain commensurate with its current rating, after taking into
account the CLO's latest portfolio information, its relevant
structural features and its actual over-collateralization and
interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, 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: $387,864,123
Defaulted par: $1,849,298
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2891
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.53%
Weighted Average Recovery Rate (WARR): 46.41%
Weighted Average Life (WAL): 5.0 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, 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
May 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
PEAKS CLO 2: Moody's Cuts Rating on $11MM Class E-R Notes to Caa2
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Peaks CLO 2, Ltd.:
US$18,000,000 Class B-R Senior Secured Floating Rate Notes Due 2031
(the "Class B-R Notes"), Upgraded to Aaa (sf); previously on August
9, 2019 Assigned Aa2 (sf)
US$9,000,000 Class C-R Secured Deferrable Floating Rate Notes Due
2031 (the "Class C-R Notes"), Upgraded to A1 (sf); previously on
August 7, 2020 Downgraded to A3 (sf)
Moody's has also downgraded the rating on the following notes:
US$11,000,000 Class E-R Secured Deferrable Floating Rate Notes Due
2031 (the "Class E-R Notes"), Downgraded to Caa2 (sf); previously
on April 11, 2022 Upgraded to B3 (sf)
Peaks CLO 2, Ltd., originally issued in May 2017 and refinanced in
August 2019, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in July 2023.
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-1a-R notes have been paid down by approximately 43.2% or $18.9
million since then. Based on the trustee's April 2024 report [1],
the OC ratios for the Class A/B and Class C notes are reported at
140.51% and 127.06%, respectively, versus April 2023 [2] levels of
136.55% and 125.54%, respectively. Moody's notes that the April
2024 trustee-reported OC ratios do not reflect the April 2024
payment distribution, when $7.65 million of principal proceeds were
used to pay down the Class A-1a-R Notes.
The downgrade rating action on the Class E-R notes reflects the
specific risks to the junior notes posed by decrease in OCs and
resulting cashflow diversions. Based on the trustee's April 2024
report [3], the Class D-R OC is currently at 113.74% and breaching
the trigger level of 115.30%, diverting cashflows to pay down the
senior notes instead of making the Class E-R notes current interest
payments. The Class E-R notes are currently deferring interest
payments and carry the cumulative deferred interest balance of
approximately $760,980.
No actions were taken on the Class A-1a-R and Class D-R notes
because their expected losses remain commensurate with their
current ratings, after taking into account the CLO's latest
portfolio information, its relevant structural features and its
actual over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $110,017,996
Defaulted par: $5,020,228
Diversity Score: 51
Weighted Average Rating Factor (WARF): 3421
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 4.49%
Weighted Average Recovery Rate (WARR): 43.82%
Weighted Average Life (WAL): 3.61 years
Par haircut in OC tests and interest diversion test: 2.2%
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, 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
May 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
PRIME STRUCTURED 2021-1: Moody's Ups Cl. E Certs Rating From Ba1
----------------------------------------------------------------
Moody's Ratings has upgraded five classes of notes issued by Prime
Structured Mortgage (PriSM) Trust, Mortgage-Backed Certificates,
Series 2020-1 and Series 2021-1. The transactions are
securitizations of prime fixed rate mortgage loans originated and
serviced by multiple parties, with TD Securities Inc. acting as the
Master Servicer.
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: Prime Structured Mortgage (PriSM) Trust, Mortgage-Backed
Certificates, Series 2020-1
Cl. E, Upgraded to Aa3 (sf); previously on Jul 28, 2023 Upgraded to
A1 (sf)
Cl. F, Upgraded to Baa3 (sf); previously on Jul 28, 2023 Upgraded
to Ba2 (sf)
Issuer: Prime Structured Mortgage Trust, Series 2021-1
Cl. C, Upgraded to Aa2 (sf); previously on Jul 28, 2023 Upgraded to
A1 (sf)
Cl. D, Upgraded to A2 (sf); previously on Jul 28, 2023 Upgraded to
Baa1 (sf)
Cl. E, Upgraded to Baa3 (sf); previously on Dec 9, 2021 Definitive
Rating Assigned Ba1 (sf)
RATING RATIONALE
The upgrades were prompted by the stable and consistent performance
of the collateral underlying the transaction as well as the
build-up of credit enhancement as the pools have amortized.
Collateral performance remains stable with zero loans currently
delinquent and cumulative net losses for the transactions also at
zero. The rating actions also reflects the further seasoning of the
collateral.
In three cases, no actions were taken on 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 these deals as they are
already at the highest achievable levels within Moody's rating
scale.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Residential
Mortgage-Backed Securitizations" methodology published in October
2023.
This methodology was calibrated based on settings specific for
Canada.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the
ratings include (1) performance of the underlying collateral that
is better than Moody's expected, (2) an increase in available
credit enhancement and (3) improvements in the credit quality of
the transaction counterparties.
Factors or circumstances that could lead to a downgrade of the
ratings include (1) an increase in sovereign risk, (2) performance
of the underlying collateral that is worse than Moody's expected,
(3) deterioration in the notes' available credit enhancement and
(4) deterioration in the credit quality of the transaction
counterparties.
PRKCM 2024-HOME1: S&P Assigns B (sf) Rating on Class B-2 Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to PRKCM 2024-HOME1 Trust's
mortgage-backed notes.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable-rate, fully amortizing residential mortgage
loans (some with interest-only periods) to both prime and nonprime
borrowers. The loans are secured by single-family residential
properties, planned unit developments, condominiums, townhomes, and
two- to four-family residential properties. The pool consists of
757 loans, which are qualified mortgage (QM) safe harbor (average
prime offer rate [APOR]), QM rebuttable presumption (APOR),
ability-to-repay (ATR)-exempt loans and non-QM/ATR-compliant
loans.
S&P said, "After we assigned preliminary ratings on May 16, 2024,
the class B-1 note rate was priced at the net weighted average
coupon rate. In addition, the current loan balance was updated for
one loan resulting in a minimal change to the class B-3 note
balance. After analyzing the final coupons and balance change, we
assigned final ratings that are unchanged from the preliminary
ratings we assigned for all classes."
The ratings reflect:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representation and warranty framework, and geographic
concentration;
-- The mortgage originator, AmWest Funding Corp.; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "Per our latest macroeconomic update, the U.S.
economy appears on track for 2.5% average growth in 2024 (up from
1.5% in our November 2023 forecast), spurred by a sturdy labor
market--repeating last year's outperformance versus peers. We
continue to expect the economy to transition to below-potential
growth as the year progresses. We apply our current market outlook
as it relates to the 'B' projected archetypal foreclosure frequency
(which we updated to 2.50% from 3.25% in October 2023), reflecting
our benign view of the mortgage and housing market as demonstrated
through general national-level home price behavior, unemployment
rates, mortgage performance, and underwriting."
Ratings Assigned
PRKCM 2024-HOME1 Trust
Class A-1, $231,038,000: AAA (sf)
Class A-2, $23,878,000: AA (sf)
Class A-3, $31,300,000: A (sf)
Class M-1, $13,875,000: BBB (sf)
Class B-1, $9,519,000: BB (sf)
Class B-2, $7,745,000: B (sf)
Class B-3, $5,326,701: Not rated
Class A-IO-S, notional(i): Not rated
Class XS, notional(i): Not rated
Class R, not applicable: Not rated
(i)The notional amount will equal the aggregate stated principal
balance of the mortgage loans as of the first day of the related
due period and is initially $322,681,701.
PRPM 2024-RCF3: DBRS Gives Prov. BB(low) Rating on Class M-2 Notes
------------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings to the
Asset-Backed Notes, Series 2024-RCF3 (the Notes) to be issued by
PRPM 2024-RCF3, LLC (PRPM 2024-RCF3 or the Trust) as follows:
-- $85.6 million Class A-1 at AAA (sf)
-- $12.9 million Class A-2 at AA (high) (sf)
-- $16.4 million Class A-3 at A (high) (sf)
-- $14.0 million Class M-1 at BBB (high) (sf)
-- $15.1 million Class M-2 at BB (low) (sf)
The AAA (sf) rating on the Class A-1 Notes reflects 49.70% of
credit enhancement provided by subordinated notes. The AA (high)
(sf), A (high) (sf), BBB (high) (sf), and BB (low) (sf) ratings
reflect 42.10%, 32.45%, 24.20%, and 15.35% of credit enhancement,
respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of newly originated
and seasoned, performing and reperforming, first-lien residential
mortgages, to be funded by the issuance of mortgage-backed notes
(the Notes). The Notes are backed by 565 loans with a total
principal balance of $170,118,089 as of the Cut-Off Date (March 31,
2024).
Morningstar DBRS calculated the portfolio to be approximately 26
months seasoned on average, though the age of the loans is quite
dispersed, ranging from two months to 371 months. Approximately
99.5% of the loans had origination guideline or document
deficiencies, which prevented these loans from being sold to Fannie
Mae, Freddie Mac, or another purchaser, and the loans were
subsequently put back to the sellers. In its analysis, Morningstar
DBRS assessed such defects and applied certain penalties,
consequently increasing expected losses on the mortgage pool.
Guild Mortgage Company originated 14.2% of the pool. The remaining
originators each accounted for less than 10.0% of the pool.
In the portfolio, 9.9% of the loans are modified. The modifications
happened less than two years ago for 45.1% of the modified loans.
Within the portfolio, 24 mortgages have non-interest-bearing
deferred amounts, equating to 0.3% of the total unpaid principal
balance (UPB). Unless specified otherwise, all statistics on the
mortgage loans in this report are based on the current UPB,
including the applicable non-interest-bearing deferred amounts.
Based on Issuer-provided information, certain loans in the pool
(7.6%) are not subject to or exempt from the Consumer Financial
Protection Bureau's (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because of seasoning or because they are
business-purpose loans. The loans subject to the ATR rules are
designated as QM Safe Harbor (83.6%), QM Rebuttable Presumption
(8.2%), and Non-QM (0.5%) by UPB.
PRP-LB VI, LLC (the Sponsor) acquired the mortgage loans prior to
the up-coming Closing Date and, through a wholly owned subsidiary,
PRP Depositor 2024-RCF3, LLC (the Depositor), will contribute the
loans to the Trust. As the Sponsor, PRP-LB VI, LLC or one of its
majority-owned affiliates will acquire and retain a portion of the
Class B Notes and the membership certificate representing the
initial overcollateralization amount to satisfy the credit risk
retention requirements.
PRPM 2024-RCF3 is the fifth scratch & dent rated securitization for
the Issuer. The Sponsor has securitized many rated and unrated
transactions under the PRPM shelf, most of which have been
seasoned, reperforming, and non-performing securitizations.
SN Servicing Corporation (SNSC; 60.4%), Fay Servicing, LLC (Fay
Servicing; 27.5%) and Rushmore (12.1%) will act as the Servicers of
the mortgage loans.
The Servicers will not advance any delinquent principal and
interest (P&I) on the mortgages; however, the Servicers are
obligated to make advances in respect of prior liens, insurance,
real estate taxes, and assessments as well as reasonable costs and
expenses incurred in the course of servicing and disposing of
properties.
The Issuer has the option to redeem the Notes in full at a price
equal to the sum of (1) the remaining aggregate Note Amount; (2)
any accrued and unpaid interest due on the Notes through the
redemption date (including any Cap Carryover); and (3) any fees and
expenses of the transaction parties, including any unreimbursed
servicing advances (Redemption Price). Such Optional Redemption may
be exercised on or after the payment date in May 2026.
Additionally, a failure to pay the Notes in full by the Payment
Date in May 2029 will trigger a mandatory auction of the underlying
certificates. If the auction fails to elicit sufficient proceeds to
make-whole the Notes, another auction will follow every four months
for the first year and subsequently auctions will be carried out
every six months. If the Asset Manager fails to conduct the
auction, holder of more than 50% of the Class M-2 Notes will have
the right to appoint an auction agent to conduct the auction.
The transaction employs a sequential-pay cash flow structure with a
bullet feature to Class A-2 and more subordinate notes on the
Redemption Date. P&I collections are commingled and are first used
to pay interest and any Cap Carryover amount to the Notes
sequentially and then to pay Class A-1 until its balance is reduced
to zero, which may provide for timely payment of interest on
certain rated Notes. Class A-2 and below are not entitled to any
payments of principal until the Redemption Date or upon the
occurrence of a Credit Event, except for remaining available funds
representing net sales proceeds of the mortgage loans. Prior to the
Redemption Date or an Event of Default, any available funds
remaining after Class A-1 is paid in full will be deposited into a
Redemption Account. Beginning on the Payment Date in June 2028, the
Class A-1 and the other offered Notes will be entitled to its
initial Note Rate plus the step-up note rate of 1.00% per annum. If
the Issuer does not redeem the rated Notes in full by the payment
date in July 2031 or an Event of Default occurs and is continuing,
a Credit Event will have occurred. Upon the occurrence of a Credit
Event, accrued interest on Class A-2 and the other offered Notes
will be paid as principal to Class A-1 or the succeeding senior
Notes until it has been paid in full. The redirected amounts will
accrue on the balances of the respective Notes and will later be
paid as principal payments.
Notes: All figures are in US Dollars unless otherwise noted.
RAD CLO 24: Fitch Assigns 'BB+sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to RAD CLO
24, Ltd.
Entity/Debt Rating
----------- ------
RAD CLO 24, Ltd.
A-1 LT AAAsf New Rating
A-2 LT NRsf New Rating
B LT AA+sf New Rating
C 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
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
RAD CLO 24, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Irradiant Partners, LP. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $600 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.38, versus a maximum covenant, in accordance with
the initial expected matrix point of 24. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of 97%
first-lien senior secured loans. The weighted average recovery rate
(WARR) of the indicative portfolio is 76.48% versus a minimum
covenant, in accordance with the initial expected matrix point of
71.9%.
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 to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D-1,
between less than 'B-sf' and 'BB+sf' for class D-2, and between
less than 'B-sf' and 'BB-sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1 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, 'A+sf' for
class D-1, 'A-sf' for class D-2, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for RAD CLO 24, 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.
RAMP SERIES 2006-RS5: Moody's Hikes Rating on Cl. A-4 Certs to Ba3
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 11 bonds from eight US
residential mortgage-backed transactions (RMBS), backed by subprime
mortgages issued by Residential Asset Securities Corporation and
Residential Asset Mortgage Products.
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: RAMP Series 2006-RS5 Trust
Cl. A-4, Upgraded to Ba3 (sf); previously on Mar 11, 2016 Upgraded
to Caa2 (sf)
Issuer: RASC Series 2005-KS11 Trust
Cl. M-3, Upgraded to A1 (sf); previously on Jun 29, 2023 Upgraded
to Baa3 (sf)
Issuer: RASC Series 2005-KS6 Trust
Cl. M-7, Upgraded to A1 (sf); previously on Jun 29, 2023 Upgraded
to Ba1 (sf)
Issuer: RASC Series 2005-KS7 Trust
Cl. M-6, Upgraded to Aaa (sf); previously on Jun 29, 2023 Upgraded
to A2 (sf)
Cl. M-7, Upgraded to Caa1 (sf); previously on Mar 28, 2017 Upgraded
to Ca (sf)
Issuer: RASC Series 2005-KS8 Trust
Cl. M-5, Upgraded to Aaa (sf); previously on Jun 29, 2023 Upgraded
to Aa2 (sf)
Cl. M-6, Upgraded to Baa2 (sf); previously on Jun 29, 2023 Upgraded
to Ba2 (sf)
Issuer: RASC Series 2006-KS6 Trust
Cl. M-1, Upgraded to Aaa (sf); previously on Jun 29, 2023 Upgraded
to A3 (sf)
Issuer: RASC Series 2006-KS8 Trust
Cl. A-4, Upgraded to A3 (sf); previously on Jun 29, 2023 Upgraded
to Ba2 (sf)
Issuer: RASC Series 2007-KS3 Trust
Cl. A-I-4, Upgraded to Baa1 (sf); previously on Jun 29, 2023
Upgraded to B1 (sf)
Cl. A-II, Upgraded to A1 (sf); previously on Jun 29, 2023 Upgraded
to Ba2 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds. The 60 day through REO pipeline, as of current
collateral balance for all eight transactions, ranges from 9.37% to
14.04% and the average 12 month increase in credit enhancement
available to each of the upgraded tranches is 4.06%. In addition,
each transaction has failed cumulative loss triggers and is paying
sequentially among senior and subordinate tranches.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. This includes the potential impact of
collateral performance volatility on ratings.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
RCKT MORTGAGE 2024-CES4: Fitch Assigns Bsf Rating on Cl. B-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings to the residential
mortgage-backed notes issued by RCKT Mortgage Trust 2024-CES4 (RCKT
2024-CES4).
The previously assigned expected ratings reflected an incorrect
mapping of exchangeable classes:
- Class A-4: Previously rated 'A(EXP)sf'/Outlook Stable and should
have been 'AA(EXP)sf'/Outlook Stable;
- Class A-5: Previously rated 'BBB(EXP)sf'/Outlook Stable and
should have been 'A(EXP)sf'/Outlook Stable;
- Class A-6: Previously was not assigned a rating and should have
been 'BBB(EXP)sf'/Outlook Stable.
The final rating actions reflect the corrected mapping for the
exchangeable classes. All other previously assigned expected
ratings and Outlooks were correct and have been converted to final
ratings.
Entity/Debt Rating Prior
----------- ------ -----
RCKT 2024-CES4
A-1A LT AAAsf New Rating AAA(EXP)sf
A-1B LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
A-1 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAsf New Rating A(EXP)sf
A-5 LT Asf New Rating BBB(EXP)sf
A-6 LT BBBsf New Rating
A-1L LT WDsf Withdrawn AAA(EXP)sf
B-1A LT BBsf New Rating BB(EXP)sf
B-1B LT BBsf New Rating BB(EXP)sf
B-X-1A LT BBsf New Rating BB(EXP)sf
B-X-1B LT BBsf New Rating BB(EXP)sf
LTR LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The notes are supported by 5,455 closed-end second lien loans with
a total balance of approximately $445 million as of the cutoff
date. The pool consists of closed-end second-lien mortgages
acquired by Woodward Capital Management LLC from Rocket Mortgage,
LLC. Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure in which
excess cash flow can be used to repay losses or net weighted
average coupon (WAC).
Fitch has withdrawn the expected rating of 'AAA(EXP)sf' for the
previous class A-1L notes as the loan was not funded at close and
is no longer being offered.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.7% above a long-term sustainable level (versus
11.1% on a national level as of 3Q23, up 1.68% qoq). Housing
affordability is at its worst levels in decades, driven by both
high interest rates and elevated home prices. Home prices have
increased 5.5% yoy nationally as of December 2023, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
Prime Credit Quality (Positive): The collateral consists of 5,455
loans totaling $445 million and seasoned at approximately zero
months in aggregate as calculated by Fitch (zero months per the
transaction documents) — taken as the difference between the
origination date and the cutoff date. The borrowers have a strong
credit profile consisting of a weighted average (WA) Fitch model
FICO score of 738; a 38.7% debt-to-income ratio (DTI); and moderate
leverage, with a sustainable loan-to-value ratio (sLTV) of 77.4%.
Of the pool, 99.2% consists of loans where the borrower maintains a
primary residence and 0.8% represents second homes, while 93.6% of
loans were originated through a retail channel. Additionally, 60.1%
of loans are designated as safe harbor qualified mortgages (SHQM),
18.3% are higher-priced qualified mortgages (HPQM) and 21.6% are
nonqualified mortgages (non-QM, or NQM). Given the 100% loss
severity (LS) assumption, no additional penalties were applied for
the HPQM and non-QM loan status.
Second-Lien Collateral (Negative): The entirety of the collateral
pool comprises closed-end second-lien loans originated by Rocket
Mortgage. Fitch assumed no recovery and a 100% LS based on the
historical behavior of second-lien loans in economic stress
scenarios. Fitch assumes second-lien loans default at a rate
comparable to first-lien loans; after controlling for credit
attributes, no additional penalty was applied to Fitch's
probability of default (PD) assumption.
Sequential Structure (Positive): The transaction features a typical
sequential payment structure. Principal is used to pay down the
bonds sequentially and losses are allocated reverse sequentially.
Monthly excess cash flow is derived from remaining amounts after
allocation of the interest and principal priority of payments.
These amounts will be applied as principal, first to repay any
current and previously allocated cumulative applied realized loss
amounts and then to repay any potential net WAC shortfalls. A
change from prior RCKT CES transactions is that excess interest is
no longer used to turbo down the bonds and the senior classes now
incorporate a step-up coupon of 1.00% (to the extent still
outstanding) after the 48th payment date.
While Fitch has previously analyzed CES transactions using an
interest rate cut, this stress is not being applied for this
transaction. Given the lack of evidence of interest rate
modifications being used as a loss mitigation tactic, the
application of the stress was overly punitive. If this re-emerges
as a common form of loss mitigation or if certain structures are
overly dependent on excess interest, Fitch may apply additional
sensitivities to test the structure.
180-Day Chargeoff Feature (Positive): The asset manager has the
ability, but not the obligation, to instruct the servicer to write
off the balance of a loan at 180 days delinquent (DQ) based on the
Mortgage Bankers Association (MBA) delinquency method. To the
extent the servicer expects a meaningful recovery in any
liquidation scenario, the asset manager noteholder may direct the
servicer to continue to monitor the loan and not charge it off. The
180-day chargeoff feature will result in losses incurred sooner
while there is a larger amount of excess interest to protect
against losses. This compares favorably with a delayed liquidation
scenario, where the loss occurs later in the life of the
transaction and less excess is available. If the loan is not
charged off due to a presumed recovery, this will provide added
benefit to the transaction, above Fitch's expectations.
Additionally, subsequent recoveries realized after the writedown at
180 days DQ (excluding forbearance mortgage or loss mitigation
loans) will be passed on to bondholders as principal.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch's incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the metropolitan statistical area level. Sensitivity
analysis was conducted at the state and national level to assess
the effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 42.6% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC Diligence, LLC. The third-party due diligence
described in Form 15E focused on credit, regulatory compliance, and
property valuation. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment to
its analysis: a 5% PD credit to the 24.9% of the pool by loan count
in which diligence was conducted. This adjustment resulted in a
20bps reduction to the 'AAAsf' expected loss.
ESG CONSIDERATIONS
RCKT 2024-CES4 has an ESG Relevance Score of '4 [+]' for
Transaction Parties & Operational Risk due to lower operational
risk considering R&W, transaction due diligence and originator and
servicer results in a decrease in expected losses, 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.
READY CAPITAL 2021-FL6: DBRS Confirms B(low) Rating on G Notes
--------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by Ready Capital Mortgage Financing 2021-FL6, LLC (the
Issuer) 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 as well as the increased credit
support to the bonds since issuance as a result of successful loan
repayments. Since issuance, there has been collateral reduction of
38.1%, an increase from 9.0% at the previous Morningstar DBRS
rating action in June 2023. While the specially serviced loan count
for the pool has increased to six loans, representing 36.3% of the
current trust balance, the risk is slightly mitigated as the loans
are secured by multifamily properties, which are likely more stable
from a value standpoint in the current environment as compared with
other commercial property types such as office or mixed use. The
transaction as a whole is primarily concentrated by multifamily
properties as 20 of the outstanding 21 loans, representing 97.3% of
the current trust balance, are 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 and with business
plan updates on select loans.
The initial collateral pool consisted of 52 floating-rate mortgage
assets with an aggregate cut-off date balance of $652.5 million
secured by 55 mortgaged properties. The majority of the assets were
in transition with stated business plans to increase property cash
flow and value. As of the April 2024 remittance, the pool comprises
a cumulative trust balance of $409.8 million. The transaction
benefits from overcollateralization as the outstanding cumulative
bond balance is $403.9 million. Since the previous Morningstar DBRS
rating action in June 2023, seven loans, with a former cumulative
trust balance of $142.4 million, have been paid in full.
Beyond the multifamily concentration noted above, there is one
remaining loan in the pool (2.7% of the current trust balance),
which is secured by a mixed-use property. In comparison, as of the
May 2023 reporting, loans secured by multifamily properties
represented 93.9% of the trust balance while loans secured by
mixed-use properties represented 3.3% of the trust balance. The
remaining loans are primarily secured by properties in suburban
markets as 16 loans, representing 81.4% of the pool, are secured by
properties located in markets with a Morningstar DBRS Market Rank
of 3, 4, or 5. An additional five loans, representing 18.6% of the
pool, are secured by properties with a Morningstar DBRS Market Rank
of 6 or 7, denoting an urban market. In comparison, in May 2023,
properties in suburban markets represented 81.1% of the collateral
and properties in urban markets represented 13.3% of the
collateral.
Leverage across the pool has increased slightly from issuance
levels as the current weighted-average (WA) as-is appraised value
loan-to-value ratio (LTV) is 74.9%, with a current WA stabilized
LTV of 67.1%. In comparison, these figures were 73.2% and 65.5%,
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 may not reflect the
current rising interest rate or widening capitalization rate
environments. In the analysis for this review, Morningstar DBRS
applied upward LTV adjustments for 12 loans, representing 80.0% of
the current trust balance.
Through March 2024, the lender had advanced cumulative loan future
funding of $28.3 million to 19 of the remaining individual
borrowers to aid in property stabilization efforts, excluding any
funds advanced at loan closing as working capital. The largest
advance ($6.6 million) has been made to the borrower of the 79
Metcalf Apartments loan, which is secured by a 300-unit multifamily
property in the Kansas City suburb of Overland Park, Kansas. Funds
were advanced to the borrower to complete capital improvements
across the property as its business plan is to renovate all
existing units, convert previous storage space to 20 additional
units, and upgrade common areas and property exteriors. The loan is
currently on the servicer's watchlist for a low debt service
coverage ratio (DSCR), which was 0.26 times (x) at YE2023 as well
as the upcoming May 2024 maturity date. According to the servicer,
the borrower has requested to exercise the first extension option;
however, as the property does not meet the required performance
tests, the borrower and lender will need to agree to a loan
modification to extend the loan. At YE2023, the property was 81.3%
occupied with an average rental rate of $1,129 per unit as 20 units
were listed as down and in the process of being fully renovated.
Through YE2023, the borrower had fully upgraded 95 units and
partially upgraded 81 units, according to the rent roll provided.
An additional $14.9 million of the loan future funding allocated to
18 of the remaining individual borrowers remains available. The
largest portion of available funds, $5.2 million, is allocated to
the borrower of the Desert Gardens loan, which is secured by a
307-unit multifamily property in Glendale, Arizona. The available
funds are for the borrower's $6.6 million capital improvement plan,
which includes the renovation of all unit interiors as well as
upgrades to property amenities and exteriors. The borrower appears
to be behind its stated capital improvement plan as only $1.4
million had been advanced to the borrower. The loan is also on the
servicer's watchlist for a low DSCR, which was 0.21x at YE2023 in
addition to the upcoming June 2024 maturity date. The borrower has
requested to exercise the first extension option, which is
currently under review, according to the servicer. As property
performance also does not meet the required performance tests, the
loan will need to be modified to complete an extension. The
sponsor, Tides Equities, has recently experienced stress throughout
its commercial real estate portfolio as a result of increased debt
service payments and slowing rental rate growth. The firm's
liquidity has not been recently disclosed to Morningstar DBRS.
The largest loan in special servicing, Lucern Charlotte Portfolio
(Prospectus ID#4, 8.4% of the current trust balance), is secured by
a portfolio of two multifamily properties in Charlotte, North
Carolina. The loan transferred to special servicing in December
2023 for imminent payment default and remains outstanding for the
December 2023 payment. According to servicer reporting, loan
modification documents are being drafted; however, a more recent
update from the collateral noted the borrower is pursuing a sale of
both assets. Morningstar DBRS expects the loan to ultimately be
repaid in full.
The third-largest loan in special servicing, 1818 Church Street
(Prospectus ID#8, 6.5% of the current trust balance), is secured by
a multifamily property in the Midtown submarket of Nashville,
Tennessee. The loan transferred to special servicing in October
2023 for imminent payment default and the sponsor, GVA Real Estate
Group (GVA), has since requested a forbearance agreement be
granted. The January 2024 debt service payment remains pending.
According to the servicer, the borrower executed a pre-negotiation
letter with discussions ongoing. GVA has also recently encountered
stress across its commercial real estate portfolio with concerns
about the firm's liquidity. The collateral was re-appraised at
$31.0 million, a 12.9% decline from the original As-Is value at
loan closing of $35.6 million. The property is well-located, and
the business plan only involved completing minor property-wide
upgrades and increasing rental rates to market. Performance remains
below expectations; however, the YE2023 net cash flow (NCF) was
$1.1 million, below the issuer's stabilized figure of $2.0 million.
Potentially complicating the resolution process is the upcoming
July 2024 maturity date, which will likely be taken into account by
the lender and borrower in the current negotiations. In its
analysis, Morningstar DBRS recognized the increased credit risk to
the loan, applying upward LTV and probability of default
adjustments, resulting in a loan expected loss in excess of the
pool expected loss.
As of the April 2024 remittance, there are 11 loans are on the
servicer's watchlist, representing 42.1% of the current trust
balance. The majority of these loans have been flagged for upcoming
maturity dates; however, select loans have also been cited for
below breakeven DSCRs and declining occupancy rates. While property
performance was expected to be sluggish across select assets as
borrowers completed the respective business plans to increase
rental rates, prolonged dispersion to property cash flow is
concerning as loans approach maturity dates. This risk is slightly
mitigated as all loans are structured with extension options. While
not all borrowers will qualify based on required property
performance tests, Morningstar DBRS notes these loans may be
modified by the issuer to waive these tests, allowing borrowers to
exercise loan extensions. In return, borrowers will likely be
required to contribute fresh equity in the form of a principal
curtailment, deposit into reserve accounts and/or the purchase of a
new interest rate cap agreement.
Notes: All figures are in U.S. dollars unless otherwise noted.
RR 8: S&P Assigns BB- (sf) Rating on $18MM Class D-R Notes
----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
B-R, C-1-R, C-2-R, and D-R replacement debt from RR 8 Ltd./RR 8
LLC, a CLO originally issued in March 2020 that is managed by
Redding Ridge Asset Management LLC, an affiliate of Apollo Global
Management LLC. At the same time, we withdrew our ratings on the
original class A-1a, A-1b, A-2a, A-2b, B, C, and D debt following
payment in full on the May 23, 2024, refinancing date.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The replacement class A-1-R, A-2-R, B-R, C-1-R, C-2-R, and D-R
debt were issued at a floating spread.
-- The stated maturity was extended by 4.25 years and the
reinvestment period was extended by 2.25 years.
-- A new non-call period was established, which expires on but
excludes May 23, 2025.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1-R, $304.40 million: Three-month CME term SOFR +
1.35%
-- Class A-2-R, $68.75 million: Three-month CME term SOFR + 1.70%
-- Class B-R (deferrable), $29.45 million: Three-month CME term
SOFR + 2.20%
-- Class C-1-R (deferrable), $24.55 million: Three-month CME term
SOFR + 3.15%
-- Class C-2-R (deferrable), $4.95 million: Three-month CME term
SOFR + 4.35%
-- Class D-R (deferrable), $18.40 million: Three-month CME term
SOFR + 6.25%
Original debt
-- Class X(i), $2.00 million: Three-month CME term SOFR + 0.60% +
CSA(ii)
-- Class A-1a, $300.00 million: Three-month CME term SOFR + 1.23%
+ CSA(ii)
-- Class A-1b, $25.00 million: Three-month CME term SOFR + 1.45% +
CSA(ii)
-- Class A-2a, $35.00 million: Three-month CME term SOFR + 1.75% +
CSA(ii)
-- Class A-2b (deferrable), $20.00 million: Three-month CME term
SOFR + 1.85% + CSA(ii)
-- Class B (deferrable), $30.00 million: Three-month CME term SOFR
+ 2.30% + CSA(ii)
-- Class C (deferrable), $27.50 million: Three-month CME term SOFR
+ 3.30% + CSA(ii)
-- Class D (deferrable), $21.25 million: Three-month CME term SOFR
+ 6.25% + CSA(ii)
(i)Class X was paid down on the July 2020 payment date.
(ii)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
RR 8 Ltd./RR 8 LLC
Class A-1-R, $304.40 million: AAA (sf)
Class A-2-R, $68.75 million: AA (sf)
Class B-R (deferrable), $29.45 million: A (sf)
Class C-1-R (deferrable), $24.55 million: BBB (sf)
Class C-2-R (deferrable), $4.95 million: BBB- (sf)
Class D-R (deferrable), $18.40 million: BB- (sf)
Ratings Withdrawn
RR 8 Ltd./RR 8 LLC
Class A-1a to NR from 'AAA (sf)'
Class A-1b to NR from 'AAA (sf)'
Class A-2a to NR from 'AA+ (sf)'
Class A-2b to NR from 'AA (sf)'
Class B to NR from 'A (sf)'
Class C to NR from 'BBB- (sf)'
Class D to NR from 'BB- (sf)'
Other Debt
RR 8 Ltd./RR 8 LLC
Subordinated notes(i), $52.315 million: NR
(i)Includes $40.75 million of subordinated notes issued on the
March 26, 2020, closing date.
NR--Not rated.
SCF EQUIPMENT 2024-1: Moody's Assigns (P)B3 Rating to Cl. F Notes
-----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to the Equipment
Contract Backed Notes, Series 2024-1, Class A-1, Class A-2, Class
A-3, Class B, Class C, Class D, Class E and Class F notes (Series
2024-1 notes or the notes) to be issued by SCF Equipment Leasing
2024-1 LLC and SCF Equipment Leasing Canada 2024-1 Limited
Partnership. Stonebriar Commercial Finance LLC (Stonebriar) along
with its Canadian counterpart - Stonebriar Commercial Finance
Canada Inc. (Stonebriar Canada) are the originators and Stonebriar
alone will be the servicer of the assets backing this transaction.
The issuers are wholly-owned, limited purpose subsidiaries of
Stonebriar and Stonebriar Canada. The assets in the pool will
consist of loan and lease contracts, secured primarily by
manufacturing and assembly, chemical plants, and sand plants.
Stonebriar was founded in 2015 and is led by a management team with
an average of over 26 years of experience in equipment financing.
The complete rating actions are as follows:
Issuer: SCF Equipment Leasing 2024-1 LLC/SCF Equipment Leasing
Canada 2024-1 Limited Partnership
Class A-1 Notes, Assigned (P)P-1 (sf)
Class A-2 Notes, Assigned (P)Aaa (sf)
Class A-3 Notes, Assigned (P)Aaa (sf)
Class B Notes, Assigned (P)Aa2 (sf)
Class C Notes, Assigned (P)A2 (sf)
Class D Notes, Assigned (P)Baa3 (sf)
Class E Notes, Assigned (P)Ba3 (sf)
Class F Notes, Assigned (P)B3 (sf)
RATINGS RATIONALE
The provisional ratings are based on; (1) the experience of
Stonebriar's management team and the company as servicer; (2) US
Bank National Association (long-term deposits Aa3/ long-term CR
assessment A1(cr), short-term deposits P-1, BCA a2) as backup
servicer for the contracts; (3) the weak credit quality and
concentration of the obligors backing the contracts in the pool;
(4) the assessed value of the collateral backing the contracts in
the pool; (5) the inclusion of about 60% non-direct interests in
the assets underlying the contracts included in the pool; (6) the
pre-funding of the pool for inclusion of 10 contracts currently in
the SCFET 2019-2 transaction; (7) the credit enhancement, including
overcollateralization, subordination, excess spread and a
non-declining reserve account and (8) the sequential pay structure.
Moody's also considered sensitivities to various factors such as
default rates and recovery rates in Moody's analysis.
Additionally, Moody's base Moody's (P)P-1 (sf) rating of the Class
A-1 notes on the cash flows that Moody's expect the underlying
receivables to generate during the collection periods prior to the
Class A-1 notes' legal final maturity date.
At closing, the Class A, Class B, Class C, Class D, Class E and
Class F notes benefit from 31.50%, 23.75%, 18.00%, 12.00%, 8.50%,
and 5.50% of hard credit enhancement, respectively. Hard credit
enhancement for the notes consists of a combination of initial
overcollateralization of 1.00% which will build to a target of
7.00% of the outstanding pool balance with a floor of 2.00% of the
initial pool balance, a 1.00% fully funded reserve account with a
floor of 1.00%, and subordination. The notes will also benefit from
excess spread.
The equipment contracts that will back the notes were extended
primarily to middle market obligors and are secured by various
types of equipment including manufacturing and assembly, railcars,
corporate aircraft, and sand plant equipment.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Equipment
Lease and Loan Securitizations Methodology" published in September
2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings on the subordinate notes if
levels of credit protection are greater than necessary to protect
investors against current expectations of loss. Moody's updated
expectations of loss may be better than its original expectations
because of lower frequency of default or improved credit quality of
the underlying obligors or lower than expected depreciation in the
value of the equipment that secure the obligor's promise of
payment. As the primary drivers of performance, positive changes in
the US macro economy and the performance of various sectors where
the obligors operate could also affect the ratings.
Down
Moody's could downgrade the notes if levels of credit protection
are insufficient to protect investors against current expectations
of portfolio losses. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults,
weaker credit quality of the obligors, or greater than expected
deterioration in the value of the equipment that secure the
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud. Additionally, Moody's could downgrade the Class A-1
short term rating following a significant slowdown in principal
collections that could result from, among other reasons, high
delinquencies or a servicer disruption that impacts obligor's
payments.
SEQUOIA MORTGAGE 2017-1: Moody's Ups Rating on B-4 Certs From Ba3
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of nine bonds issued by
seven Sequoia Mortgage Trusts in 2017. The collateral backing these
deals consists of prime jumbo mortgage loans.
The complete rating actions are as follows:
Issuer: Sequoia Mortgage Trust 2017-1
Cl. B-3, Upgraded to A3 (sf); previously on Jul 17, 2023 Upgraded
to Baa2 (sf)
Cl. B-4, Upgraded to A3 (sf); previously on Aug 27, 2020 Downgraded
to Ba3 (sf)
Issuer: Sequoia Mortgage Trust 2017-2
Cl. B-3, Upgraded to A3 (sf); previously on Jul 17, 2023 Upgraded
to Baa2 (sf)
Cl. B-4, Upgraded to A3 (sf); previously on Aug 27, 2020 Downgraded
to Ba3 (sf)
Issuer: Sequoia Mortgage Trust 2017-3
Cl. B-4, Upgraded to A3 (sf); previously on Aug 27, 2020 Downgraded
to Ba3 (sf)
Issuer: Sequoia Mortgage Trust 2017-4
Cl. B4, Upgraded to Baa1 (sf); previously on Aug 27, 2020
Downgraded to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2017-5
Cl. B-4, Upgraded to A3 (sf); previously on Dec 17, 2021 Upgraded
to Ba1 (sf)
Issuer: Sequoia Mortgage Trust 2017-6
Cl. B-4, Upgraded to A3 (sf); previously on Aug 27, 2020 Downgraded
to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2017-7
Cl. B-4, Upgraded to A3 (sf); previously on Dec 17, 2021 Upgraded
to Ba1 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's Ratings' updated loss expectations on the underlying pool.
Each of the transactions Moody's reviewed continue to display
strong collateral performance, with cumulative losses for each
transaction under .03% 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, 6.4x for the
tranches upgraded.
Moody's analysis also considered the existence of historical
interest shortfalls for some of the bonds. Six of the bonds
upgraded have experienced historical interest shortfalls (2017-1,
Class B-4; 2017-2, Class B-3 and B-4; 2017-3, Class B-4; 2017-5,
Class B-4; 2017-6, Class B-4; 2017-7, Class B-4) and 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.
Moody's analysis on certain bonds included an assessment of the
existing credit enhancement floor, in place to mitigate the
potential default of a small number of loans at the tail end of a
transaction.
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 upgrades 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 on the bonds remain commensurate with
their current ratings, after taking into account the updated
performance information, structural features, credit enhancement
and other qualitative considerations. No actions were taken on the
remaining rated classes in these deals as those classes are already
at the highest achievable levels within Moody's rating scale.
Principal Methodologies
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's Ratings' original expectations as a result of a lower
number of obligor defaults or appreciation in the value of the
mortgaged property securing an obligor's promise of payment.
Transaction performance also depends greatly on the US macro
economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's Ratings' expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
SEQUOIA MORTGAGE 2018-2: Moody's Ups Rating on B-4 Certs From Ba1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of five bonds issued by
Sequoia Mortgage Trust in 2018. The collateral backing these deals
consists of 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: Sequoia Mortgage Trust 2018-2
Cl. B-4, Upgraded to A3 (sf); previously on Dec 17, 2021 Upgraded
to Ba1 (sf)
Issuer: Sequoia Mortgage Trust 2018-3
Cl. B-4, Upgraded to A3 (sf); previously on Dec 17, 2021 Upgraded
to Ba1 (sf)
Issuer: Sequoia Mortgage Trust 2018-5
Cl. B-4, Upgraded to A3 (sf); previously on Dec 17, 2021 Upgraded
to Ba2 (sf)
Issuer: Sequoia Mortgage Trust 2018-6
CL. B-4, Upgraded to A3 (sf); previously on Dec 17, 2021 Upgraded
to Ba1 (sf)
Issuer: Sequoia Mortgage Trust 2018-7
Cl. B-4, Upgraded to A3 (sf); previously on Oct 30, 2019 Upgraded
to Ba2 (sf)
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.
Each of the transactions Moody's reviewed continue to display
strong collateral performance, with cumulative losses for each
transaction under .03% 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, 10.3x for the
tranches upgraded.
Moody's analysis also considered the existence of historical
interest shortfalls for some of the bonds. Four of the upgraded
bonds have experienced historical interest shortfalls (2018-2,
Class B-4; 2018-5, Class B-4; 2018-6, Class B-4; 2018-7, Class
B-4). 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.
Moody's analysis on each upgraded bond also included an assessment
of the existing credit enhancement floor, in place to mitigate the
potential default of a small number of loans at the tail end of a
transaction.
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 upgrades.
No actions were taken on some rated classes in these deals because
their expected losses on the bonds remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. No actions were taken on the other
remaining rated classes in these deals 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.
SLM STUDENT 2004-10: Moody's Cuts Rating on Cl. A-8 Certs to Ba1
----------------------------------------------------------------
Moody's Ratings takes action on 61 notes issued by 28 SLM Student
Loan Trust FFELP securitizations, sponsored and administered by
Navient Solutions, LLC, and Class A notes from the SLM Student Loan
ABS Repackaging Trust 2009-I whose underlying assets consist of
notes from two of the FFELP securitizations. The FFELP
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
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: SLM Student Loan ABS Repackaging Trust 2009-I
Float Rate Cl. A Notes, Confirmed at Aaa (sf); previously on Apr
12, 2024 Aaa (sf) Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2003-1
Class A-5A, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class A-5B, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class A-5C, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class B, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2003-11
Cl. A-7, Downgraded to A1 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at Baa2 (sf); previously on Apr 4, 2024 Baa2 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2003-12
Cl. A-6, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. B, Downgraded to A2 (sf); previously on Apr 4, 2024 A1 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2003-14
Cl. A-7, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at A1 (sf); previously on Apr 4, 2024 A1 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2003-4
Class A5-A, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class A5-B, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class A5-C, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class A5-D, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class A5-E, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1
(sf) Placed On Review for Downgrade
Class B, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2003-7
Cl. A-5A, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review for Downgrade
Cl. A-5B, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2004-1
Cl. A-5, Upgraded to Aaa (sf); previously on Apr 4, 2024 A2 (sf)
Placed On Review for Downgrade
Cl. A-6, Downgraded to A1 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at Baa2 (sf); previously on Apr 4, 2024 Baa2 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2004-10
Cl. A-7A, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. A-7B, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. A-8, Downgraded to Ba1 (sf); previously on Apr 4, 2024 Baa3
(sf) Placed On Review for Downgrade
Cl. B, Downgraded to Ba2 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2004-2
Cl. A-6, Downgraded to Baa1 (sf); previously on Apr 4, 2024 A2 (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at Baa2 (sf); previously on Apr 4, 2024 Baa2 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2004-3
Cl. A-6A, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. A-6B, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. B, Upgraded to Aaa (sf); previously on Apr 4, 2024 A1 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2004-5
Cl. A-6, Downgraded to Baa3 (sf); previously on Apr 4, 2024 A3 (sf)
Placed On Review for Downgrade
Cl. B, Downgraded to Baa2 (sf); previously on Apr 4, 2024 A3 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2005-4
Cl. A-4, Confirmed at Aa1 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2005-5
Cl. A-5, Downgraded to Aa3 (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at Baa2 (sf); previously on Apr 4, 2024 Baa2 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2005-6
Cl. A-7, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Cl. B, Upgraded to Aaa (sf); previously on Apr 4, 2024 A1 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2005-7
Cl. A-5, Downgraded to A3 (sf); previously on Apr 4, 2024 Aa2 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2005-8
Cl. A-5, Confirmed at Aa1 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2006-10
Cl. A-6, Downgraded to A1 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review for Downgrade
Cl. B, Upgraded to A3 (sf); previously on Apr 4, 2024 Baa1 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2006-2
Cl. A-6, Downgraded to Aa2 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at Baa2 (sf); previously on Apr 4, 2024 Baa2 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2006-4
Cl. A-6, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2006-6
Cl. A-4, Confirmed at Aaa (sf); previously on Apr 4, 2024 Aaa (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2006-7
Cl. A-6A, Downgraded to Aa2 (sf); previously on Apr 4, 2024 Aa1
(sf) Placed On Review for Downgrade
Cl. A-6B, Downgraded to Aa2 (sf); previously on Apr 4, 2024 Aa1
(sf) Placed On Review for Downgrade
Cl. A-6C, Downgraded to Aa2 (sf); previously on Apr 4, 2024 Aa1
(sf) Placed On Review for Downgrade
Cl. B, Downgraded to A1 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2006-8
Cl. A-6, Downgraded to A2 (sf); previously on Apr 4, 2024 Aa1 (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at Baa2 (sf); previously on Apr 4, 2024 Baa2 (sf)
Placed On Review Direction Uncertain
Issuer: SLM Student Loan Trust 2006-9
Cl. A-6, Downgraded to Baa2 (sf); previously on Apr 4, 2024 A2 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2007-1
Cl. A-6, Downgraded to A3 (sf); previously on Apr 4, 2024 Aa2 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2007-4
Cl. A-5, Downgraded to Ba1 (sf); previously on Apr 4, 2024 Baa2
(sf) Placed On Review for Downgrade
Cl. B-2A, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review for Downgrade
Cl. B-2B, Confirmed at Ba1 (sf); previously on Apr 4, 2024 Ba1 (sf)
Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2007-5
Cl. A-6, Downgraded to Ba1 (sf); previously on Apr 4, 2024 Baa3
(sf) Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2007-6
Cl. A-5, Downgraded to Baa2 (sf); previously on Apr 4, 2024 Baa1
(sf) Placed On Review for Downgrade
Issuer: SLM Student Loan Trust 2007-8
Cl. A-5, Downgraded to Ba1 (sf); previously on Apr 4, 2024 A3 (sf)
Placed On Review for Downgrade
Cl. B, Confirmed at A1 (sf); previously on Apr 4, 2024 A1 (sf)
Placed On Review Direction Uncertain
RATINGS RATIONALE
The rating actions resolve the review actions announced on April 4
and April 12, 2024, and reflect the correction of Moody's prior
cash flow analysis of notes from 28 SLM Student Loan Trust
Securitizations. The actions also consider the updated performance
of the transactions.
The rating actions also reflect updated expected loss on those
tranches across Moody's cashflow scenarios. Moody's quantitative
analysis derives the expected loss for a tranche using 28 cash flow
scenarios with weights accorded to each scenario. Although the
correction of the cashflow modeling had a positive impact on the
subordinate notes in most cases, this was offset by the negative
impact of 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 previous increases in forbearance 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 plans, 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 may not pay down entirely ahead of their legal final
maturity dates in certain scenarios. The rating analysis also
reflects the higher collateral prepayment rates observed since late
2023.
The ratings were upgraded on the Class A-5 Notes of SLM Student
Loan Trust 2004-1 and confirmed on the Class A-6 notes of SLM
Student Loan Trust 2003-12, Class A-7 notes of SLM Student Loan
Trust 2003-14, Class A-6A and A-6B notes of SLM Student Loan Trust
2004-3, Class A-7A and A-7B notes of SLM Student Loan Trust
2004-10, Class A-7 notes of SLM Student Loan Trust 2005-6, Class
A-6 notes of SLM Student Loan Trust 2006-4 and Class A-4 notes of
SLM Student Loan Trust 2006-6. Although the correction of the
cashflow modeling had a negative impact on these senior notes, the
impact is mitigated by improving performance and/or long-dated
maturity on the notes. The ratings were confirmed on the Class B
notes of SLM Student Loan Trust 2003-11, 2003-14, 2006-2 and 2007-8
as their expected losses remain commensurate with their current
ratings.
The confirmations on the Class B notes of SLM Student Loan Trust
2004-1, Class B notes of SLM Student Loan Trust 2004-2, Class A-4
notes of SLM Student Loan Trust 2005-4, Class B notes of SLM
Student Loan Trust 2005-5, Class A-5 notes of SLM Student Loan
Trust 2005-8 and Class B notes of SLM Student Loan Trust 2006-8, as
well as the downgrade actions on the Class A-7 notes of SLM Student
Loan Trust 2003-11, Class A-6 notes of SLM Student Loan Trust
2004-1, Class A-5 notes of SLM Student Loan Trust 2005-5, Class A-5
notes of SLM Student Loan Trust 2005-7, Class A-6 notes of SLM
Student Loan Trust 2006-2, Class A-6A, A-6B and A-6C notes of SLM
Student Loan Trust 2006-7, Class A-6 notes of SLM Student Loan
Trust 2006-8, Class A-6 notes of SLM Student Loan Trust 2006-9,
Class A-6 notes of SLM Student Loan Trust 2006-10, Class A-6 notes
of SLM Student Loan Trust 2007-1, Class A-5 notes of SLM Student
Loan Trust 2007-6 and Class A-5 notes of SLM Student Loan Trust
2007-8, also 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 confirmations on all outstanding notes of SLM Student Loan
Trust 2003-1, 2003-4 and 2003-7 as well as the Class B notes of SLM
Student Loan Trust 2007-4, and the downgrade action on Class B
notes of SLM Student Loan Trust 2004-10, also take into
consideration the uncertainty regarding the sponsor's willingness
and ability to support the notes by paying them off prior to their
legal final maturity dates. The transaction documents include a 10%
optional call provision which, if exercised by the sponsor, would
pay down the notes. Although Navient has previously supported other
similar transactions by exercising the optional call provision or
doing additional loan purchases, more recently, certain deals were
not supported due to limited current market interest in FFELP
loans. The rating of Ba1 reflects the higher likelihood for these
notes to miss pay off by their legal final maturity dates should
the sponsor not exercise the optional call provision prior to those
dates. In the case of Class B notes of SLM Student Loan Trust
2004-10, the rating of Ba2 also reflects the impact of the
cross-currency swap.
The rating of the Class A notes from SLM Student Loan ABS
Repackaging Trust 2009-I (the repack notes) is determined largely
based on the cashflows of the underlying notes, the Class A5-B and
Class A5-C notes from SLM Student Loan Trust 2003-4 and the Class
A-7 notes from SLM Student Loan Trust 2003-11. The confirmation of
the repack notes reflects the updated cash flows of these
underlying notes and the ability of the repack notes to be paid
off by legal final maturity date of December 17, 2040.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating 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 declining borrower usage of
deferment, forbearance and IBR, increasing voluntary prepayment
rates, or prepayments with proceeds from sponsor repurchases of
student loan collateral. Moody's could also upgrade the ratings
owing to a build-up in credit enhancement and upgrade of rating or
CR Assessment on the swap counterparty.
Down
Moody's could downgrade the ratings if the paydown speed of the
loan pool declines as a result of 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. Moody's could also downgrade the rating
further if sponsor's willingness or ability to support the notes by
paying off the outstanding amount of the notes by their legal final
maturity date is diminished. 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. Moody's Ratings could also downgrade the rating owing
to downgrades of the CR Assessment on the swap counterparty. For
SLM Student Loan ABS Repackaging Trust 2009-I, among the factors
that could drive the ratings down are higher defaults and net
losses on the underlying student loan pools than Moody's expects.
SOUND POINT III-R: Moody's Affirms B1 Rating on $21MM Cl. E Notes
-----------------------------------------------------------------
Moody's Ratings has upgraded the rating on the following notes
issued by Sound Point CLO III-R, Ltd.:
USD32.8M Class D Mezzanine Secured Deferrable Floating Rate Notes,
Upgraded to A2 (sf); previously on Dec 12, 2023 Upgraded to Baa1
(sf)
Moody's has also affirmed the ratings on the following notes:
USD48.6M (current outstanding amount USD45,560,700) Class B Senior
Secured Floating Rate Notes, Affirmed Aaa (sf); previously on Jul
28, 2023 Upgraded to Aaa (sf)
USD25.2M Class C Mezzanine Secured Deferrable Floating Rate Notes,
Affirmed Aaa (sf); previously on Dec 12, 2023 Upgraded to Aaa (sf)
USD21M Class E Junior Secured Deferrable Floating Rate Notes,
Affirmed B1 (sf); previously on Jul 28, 2023 Downgraded to B1 (sf)
USD10M Class F Junior Secured Deferrable Floating Rate Notes,
Affirmed Caa3 (sf); previously on Nov 2, 2022 Downgraded to Caa3
(sf)
Sound Point CLO III-R, Ltd., issued in April 2018, is a
collateralised loan obligation (CLO) backed by a portfolio of
mostly high-yield senior secured US loans. The portfolio is managed
by Sound Point Capital Management, LP. The transaction's
reinvestment period ended in April 2021.
RATINGS RATIONALE
The rating upgrade on the Class D notes is primarily a result of
the significant deleveraging of the senior notes following
amortisation of the underlying portfolio since the last rating
action in December 2023.
The affirmations on the ratings on the Class B, C, E and F notes
are primarily a result of the expected losses on the notes
remaining consistent with their current rating levels, after taking
into account the CLO's latest portfolio, its relevant structural
features and its actual over-collateralisation ratios.
The Class A-1 and A-2 notes have fully paid down (by approximately
20% or $67.1 million collectively) and the Class B notes have been
paid down by approximately 6% or $3.1 million since the last rating
action in December 2023. As a result of the deleveraging,
over-collateralisation (OC) has increased. According to the trustee
report dated May 2024 [1] the Class D OC ratio is reported at
122.3% compared to November 2023 [2] levels, on which the last
rating action was based, of 115.2%.
The key model inputs Moody's uses in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers.
In its base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: USD130.6m
Defaulted Securities: USD 4.3m
Diversity Score: 35
Weighted Average Rating Factor (WARF): 3113
Weighted Average Life (WAL): 2.3 years
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.59%
Weighted Average Recovery Rate (WARR): 45.6%
Par haircut in OC tests and interest diversion test: 4.6%
The default probability derives from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties using the methodology "Moody's Approach to
Assessing Counterparty Risks in Structured Finance methodology"
published in October 2023. Moody's concluded the ratings of the
notes are not constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
-- Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
-- Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's analysed
defaulted recoveries assuming the lower of the market price or the
recovery rate to account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a positive
impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
SREIT TRUST 2021-FLWR: DBRS Confirms B(low) Rating on F Certs
-------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2021-FLWR
issued by SREIT Trust 2021-FLWR (the Issuer) as follows:
-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable to
improving performance of the transaction, which has remained in
line with Morningstar DBRS' expectations since issuance as
evidenced by the steady occupancy rate of 95% and consistent net
cash flow (NCF) growth since issuance. These factors have served as
mitigants to the credit risks around the low in-place debt service
coverage ratio (DSCR), which declined to 1.10 times (x) as of
September 2023, and Morningstar DBRS' concerns around insurance and
other expenses recently increasing at a rate that outpaces income
growth for multifamily properties in the Florida and Texas markets,
where the portfolio is heavily concentrated.
The transaction is collateralized by a portfolio of 16 Class A
multifamily assets totaling 5,260 units, spread across 11
metropolitan statistical areas within six states. The borrower used
whole loan proceeds of $796.5 million, alongside $385.0 million of
sponsor equity, to facilitate the acquisition of the portfolio for
approximately $1.09 billion ($216,300 per unit). The loan benefits
from experienced sponsorship by Starwood, which owns nearly 350
multifamily properties totaling approximately 88,000 units in the
United States.
The loan has a two-year initial term, with three one-year extension
options and pays interest only through the fully extended maturity
date of July 2026. To hedge exposure to Libor, at issuance, the
borrower entered into an interest rate cap agreement with a strike
price of 1.00% and a five-year term, consistent with the fully
extended loan maturity. The borrower exercised its first one-year
loan extension option along with a new capitalization rate (cap
rate) agreement that has a conversion from Libor to the Secured
Overnight Financing Rate. The loan has a partial pro
rata/sequential-pay structure, which allows for pro rata paydowns
across the capital structure for the first 20% of the unpaid
principal balance. The borrower can release individual properties
subject to customary debt yield and loan-to-value ratio (LTV)
tests. The prepayment premium for the release of individual assets
is 105.0% of the allocated loan amount (ALA) on the first 15.0% of
the original principal balance, and 110.0% of the ALA for the
release of individual assets thereafter, which Morningstar DBRS
considers to be weaker than a generally credit-neutral standard of
115.0%.
The underlying properties were constructed between 2006 and 2017,
and generally exhibit high-quality finishes and comprehensive
amenities. The properties are in generally strong, high-growth
markets, with geographic concentrations in Texas and Florida
representing 78.2% of the total units and 76.8% of the total
purchase price.
As of the September 2023 reporting, the portfolio had a
weighted-average (WA) occupancy rate of 95.2%, generally in line
with the occupancy rate of 95.0% at YE2022, 95.3% at YE2021, and
96.2% at issuance. The annualized trailing nine-month NCF of $57.5
million, as of September 2023, reflects an increase of 8.8% from
$52.9 million as of September 2022, a 27.2% increase from the
YE2021 NCF of $45.2 million, a 28.3% increase from the Issuer's NCF
of $44.8 million, and an increase of 39.2% from the Morningstar
DBRS NCF of $41.3 million at issuance. As previously mentioned,
based on Q3 2023 reporting, despite the increases to NCF, the loan
had a WA DSCR of 1.10x, down significantly from 2.11x at YE2022,
3.49x at YE2021, and 3.17x at issuance because of an increased
interest rate.
Given the improvement in NCF, Morningstar DBRS derived an updated
value of $676.9 million based on a cap rate of 6.25% and a 20%
haircut to the YE2022 NCF, representing an upgrade stress scenario,
which supports the confirmations and Stable trends. Because of the
strong rental growth, recent construction and comprehensive amenity
packages, and the properties' locations in high-growth markets,
Morningstar DBRS maintained the increased LTV thresholds for cash
flow volatility, property quality, and market fundamentals of 2.0%,
2.0%, and 2.5%, respectively. Morningstar DBRS also applied a
penalty to the transaction's capital structure to account for the
pro rata nature of certain voluntary prepayments and weak release
premiums.
Notes: All figures are in U.S. dollars unless otherwise noted.
TOWD POINT 2024-CES3: Fitch Assigns 'B-(EXP)sf' Rating on B2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Towd Point Mortgage
Trust 2024-CES3 (TPMT 2024-CES3).
Entity/Debt Rating
----------- ------
TPMT 2024-CES3
A LT AAA(EXP)sf Expected Rating
A2 LT AA-(EXP)sf Expected Rating
M1 LT A-(EXP)sf Expected Rating
M2 LT BBB-(EXP)sf Expected Rating
B1 LT BB-(EXP)sf Expected Rating
B2 LT B-(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
B1A LT BB-(EXP)sf Expected Rating
B1AX LT BB-(EXP)sf Expected Rating
B1B LT BB-(EXP)sf Expected Rating
B1BX LT BB-(EXP)sf Expected Rating
AX LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
XS1 LT NR(EXP)sf Expected Rating
XS2 LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch Ratings expects to rate the residential mortgage-backed notes
issued by Towd Point Mortgage Trust 2024- CES3 (TPMT 2024- CES3) as
indicated above. The transaction is expected to close on June 11,
2024. The notes are supported by one collateral group that consists
of 6,409 newly originated, closed-end second lien (CES) loans with
a total balance of $491 million, as of the cutoff date.
Spring EQ, LLC (Spring EQ), Rocket Mortgage, LLC (Rocket), PennyMac
Loan Services, LLC (PennyMac), and Nationstar Mortgage LLC dba Mr.
Cooper (Nationstar) originated approximately 50%, 22%, 15% and 13%
of the loans, respectively. Shellpoint Mortgage Servicing (SMS),
Rocket, PennyMac and Nationstar will service the loans. The
servicers will not advance delinquent monthly payments of principal
and interest (P&I).
Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full.
Excess cash flow can be used to repay losses or net weighted
average coupon (WAC) shortfalls. In addition, the structure
includes a senior interest-only class, which represents a senior
interest strip of 1.00%, with such interest strip entitlement being
senior to the net interest amounts paid to the P&I (principal and
interest) certificates.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to an updated view
on sustainable home prices, Fitch views the home price values of
this pool as 11.2% above a long-term sustainable level, compared
with 11.1% on a national level as of 4Q23, remained unchanged since
last quarter. Housing affordability is the worst it has been in
decades, driven by high interest rates and elevated home prices.
Home prices had increased 5.5% yoy nationally as of February 2024,
despite modest regional declines, but are still being supported by
limited inventory.
Closed-End Second Liens (Negative): The entirety of the collateral
pool is composed of newly originated CES mortgages. Fitch assumed
no recovery and 100% loss severity (LS) on second lien loans based
on the historical behavior of second lien loans in economic stress
scenarios. Fitch assumes second lien loans default at a rate
comparable to first lien loans; after controlling for credit
attributes, no additional penalty was applied.
Strong Credit Quality (Positive): The pool consists of
new-origination CES loans, seasoned approximately five months (as
calculated by Fitch), with a relatively strong credit profile
—weighted average (WA) model credit score of 729, a 39%
debt-to-income ratio (DTI) and a moderate sustainable loan-to-value
ratio (sLTV) of 80%.
Roughly 99% of the loans were treated as full documentation in
Fitch's analysis. Approximately 69% of the loans were originated
through a retail channel.
Sequential-Pay Structure with Realized Loss and Writedown Feature
(Positive): The transaction's cash flow is based on a
sequential-pay structure, whereby the subordinate classes do not
receive principal until the most senior classes are repaid in full.
Losses are allocated in reverse-sequential order. Furthermore, the
provision to reallocate principal to pay interest on the 'AAAsf'
rated notes prior to other principal distributions is highly
supportive of timely interest payments to those notes in the
absence of servicer advancing.
With respect to any loan that becomes DQ for 150 days or more under
the Office of Thrift Supervision (OTS) methodology, the related
servicer will review, and may charge off, such loan with the
approval of the asset manager, based on an equity analysis review
performed by the servicer, causing the most subordinated class to
be written down.
Fitch views the writedown feature positively, despite the 100% LS
assumed for each defaulted second lien loan, as cash flows will not
be needed to pay timely interest to the 'AAAsf' rated notes during
loan resolution by the servicers. In addition, subsequent
recoveries realized after the writedown at 150 days DQ (excluding
forbearance mortgage or loss mitigation loans) will be passed on to
bondholders as principal.
Unlike prior TPMT CES transactions, the structure does not allocate
excess cashflow to turbo down the bonds and includes a step-up
coupon feature whereby the fixed interest rate for class A-1, A-2,
M-1 and M2 will increase by 100 bps, subject to the net WAC, after
four years.
In addition, the structure includes a senior interest-only class
(class AX), which represents a senior interest strip of 1.00% per
annum based off the related mortgage rate of each mortgage loan,
with such interest strip entitlement being senior to the net
interest amounts paid to the notes, and paid at the top of the
waterfall. Given it is a strip-off of the entire collateral balance
and accrual amounts will be reduced by any losses on the collateral
pool, class AX cannot be rated by Fitch.
Overall, in contrast to earlier TPMT CES transactions, this
transaction has less excess spread available and its application
offers diminished support to the rated classes, requiring a higher
level of credit enhancement.
Separately, while Fitch has previously analyzed CES transactions
using an interest rate cut, this stress is not being applied for
this transaction. Given the lack of evidence of interest rate
modifications being used as a loss mitigation tactic, the
application of the stress was overly punitive. If this re-emerges
as a common form of loss mitigation or if certain structures are
overly dependent on excess interest, Fitch may apply additional
sensitivities to test the structure.
No Servicer P&I Advances (Neutral): The servicers will not advance
DQ monthly payments of P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' rated classes. Fitch is
indifferent to the advancing framework, as given its projected 100%
LS, no credit would be given to advances on the structure side and
no additional adjustment would be made as it relates to LS.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
This defined negative rating sensitivity analysis shows how ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the
model-projected 42.3%, at 'AAAsf'. The analysis indicates there is
some potential rating migration, with higher MVDs for all rated
classes compared with model projections. 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 rated classes. Specifically, a
10% gain in home prices would result in a full category upgrade for
the rated classes, excluding those being assigned ratings of
'AAAsf'.
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 (AMC), Clayton, LLC (Clayton) and Consolidated
Analytics. A third-party due diligence review was completed on 100%
of the loans. The scope, as described in Form 15E, focused on
credit, regulatory compliance and property valuation reviews,
consistent with Fitch criteria for new originations. The results of
the reviews indicated low operational risk with no loans receiving
a final grade of C/D. Fitch applied a credit for the high
percentage of loan-level due diligence, which reduced the 'AAAsf'
loss expectation by 90bps.
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.
TRICOLOR AUTO 2024-2: Moody's Assigns B2 Rating to Class F Notes
----------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to the notes issued
by Tricolor Auto Securitization Trust 2024-2 (TAST 2024-2). This is
the second auto loan transaction of the year and the third rated by
Moody's for Tricolor Auto Acceptance, LLC (Tricolor). The notes are
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, Definitive Rating Assigned A1 (sf)
Class B Asset Backed Notes, Definitive Rating Assigned A1 (sf)
Class C Asset Backed Notes, Definitive Rating Assigned A1 (sf)
Class D Asset Backed Notes, Definitive Rating Assigned A3 (sf)
Class E Asset Backed Notes, Definitive Rating Assigned Ba1 (sf)
Class F Asset Backed Notes, Definitive Rating Assigned 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.
The definitive rating for the Class D notes, A3 (sf), is one notch
higher than its provisional rating, (P)Baa1 (sf). The difference is
a result of the transaction closing with a lower weighted average
cost of funds (WAC) than Moody's modeled when the provisional
ratings were assigned. The WAC assumptions and other structural
features, were provided by the issuer.
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 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.
VERTICAL BRIDGE 2024-1: Fitch Assigns 'BB-sf' Rating on Cl. F Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks as
follows:
Entity/Debt Rating Prior
----------- ------ -----
Vertical
Bridge 2022-1
C-1 LT Asf Affirmed Asf
C-2-I 91823AAU5 LT Asf Affirmed Asf
C-2-II 91823AAW1 LT Asf Affirmed Asf
D 91823AAY7 LT BBB-sf Affirmed BBB-sf
F 91823ABA8 LT BB-sf Affirmed BB-sf
Vertical
Bridge 2024-1
C-2 LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
F LT BB-sf New Rating BB-(EXP)sf
R LT NRsf New Rating NR(EXP)sf
- $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.
In addition, Fitch has affirmed the following classes:
- $100,000,000a series 2022-1 class C-1 at 'Asf'; Outlook Stable;
- $462,000,000 series 2022-1 class C-2-I at 'Asf'; Outlook Stable;
- $462,000,000 series 2022-1 class C-2-II at 'Asf'; Outlook
Stable;
- $202,000,000 series 2022-1 class D at 'BBB-sf'; Outlook Stable;
- $242,000,000 series 2022-1 class F at 'BB-sf'; Outlook Stable.
The following class was not 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, the 2022-1 class C-1 variable
funding note's committed balance has increased to $100 million from
$80 million as a result of the first amendment to the Variable
Funding Note Purchase Agreement.
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 were issued pursuant to the amended
indenture and indenture supplement dated as of the transaction
closing date.
At closing, note proceeds were 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, and 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 to 'BBBsf' from
'Asf'; class D to 'BB+sf' from 'BBB-sf'; and class F to 'Bsf' from
'BB-sf'.
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 2022-1 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.
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.
VISTA POINT 2024-CES1: DBRS Gives Prov. B Rating on Class B2 Notes
------------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Asset-Backed Securities, Series 2024-CES1 (the Notes) to be issued
by Vista Point Securitization Trust 2024-CES1 (VSTA 2024-CES1 or
the Trust):
-- $247.8 million Class A-1 at AAA (sf)
-- $16.7 million Class A-2 at AA (sf)
-- $16.9 million Class A-3 at A (sf)
-- $18.0 million Class M-1 at BBB (sf)
-- $15.9 million Class B-1 at BB (sf)
-- $10.4 million Class B-2 at B (sf)
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Notes reflects 25.80% of credit
enhancement provided by subordinate Notes. The AA (sf), A (sf), BBB
(sf), BB (sf), and B (sf) credit ratings reflect 20.80%, 15.75%,
10.35%, 5.60%, and 2.50% of credit enhancement, respectively.
This transaction is a securitization of a portfolio of fixed,
prime, expanded-prime, closed-end second-lien (CES) residential
mortgages funded by the issuance of the Asset-Backed Securities,
Series 2024-CES1 (the Notes). The Notes are backed by 1,721
mortgage loans with a total principal balance of $333,980,313 as of
the Cut-Off Date (March 31, 2024).
The portfolio, on average, is five months seasoned, though
seasoning ranges from zero to 15 months. Borrowers in the pool
represent prime and expanded-prime credit
quality—weighted-average (WA) Morningstar DBRS-calculated FICO
score of 723, Issuer-provided original combined loan-to-value ratio
(CLTV) of 69.3%. The loans were generally originated with the full
documentation standards.
As of the Cut-Off Date, 98.7 % of the pool is current, and 1.3% is
30 days delinquent under the Mortgage Bankers Association (MBA)
delinquency method. Since then, 1.1% of the total pool that were 30
days delinquent loans have self-cured. Additionally, none of the
borrowers are in active bankruptcy.
VSTA 2024-CES1 represents the first CES securitization by Vista
Point Mortgage, LLC. Home Mortgage Alliance Corporation (HMAC;
25.2%) and Fund Loans Capital (Fund Loans; 13.6%) are the top
originators for the mortgage pool. The remaining originators each
comprise less than 10.0% of the mortgage loans.
NewRez, LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint;
100.0%) is the Servicer of all the loans in this transaction.
U.S. Bank Trust Company, National Association (rated AA (high) with
a Negative trend by Morningstar DBRS) will act as the Indenture
Trustee. U.S. Bank National Association will act as the Custodian.
U.S. Bank Trust National Association will act as the Delaware
Trustee.
On or after the earlier of (1) the Payment Date occurring in May
2027 or (2) the date when the aggregate stated principal balance of
the mortgage loans is reduced to 30% of the Cut-Off Date balance,
the Controlling Holder (majority holder of the Class XS Notes;
initially expected to be affiliate of the Sponsor), may terminate
the Issuer at a price equal to the greater of (A) the class
balances of the related Notes plus accrued and unpaid interest,
including any cap carryover amounts and (B) the principal balances
of the mortgage loans plus accrued and unpaid interest, including
fees, expenses, and indemnification amounts. The Controlling Holder
must complete a qualified liquidation, which requires (1) a
complete liquidation of assets within the Trust and (2) proceeds to
be distributed to the appropriate holders of regular or residual
interests.
The Controlling Holder will have the option, but not the
obligation, to repurchase any mortgage loan (other than loans under
the forbearance plan as of the Closing Date) that becomes 90 or
more days delinquent at the repurchase price (par plus interest),
provided that such repurchases in aggregate do not exceed 10% of
the total principal balance as of the Cut-Off Date.
Although the majority of the mortgage loans were originated to
satisfy the Consumer Financial Protection Bureau's (CFPB)
Ability-to-Repay (ATR) rules, they were made to borrowers who
generally do not qualify for agency, government, or private-label
nonagency prime jumbo products for various reasons. In accordance
with the Qualified Mortgage (QM)/ATR rules, 90.4% (includes 3.2%
that are consumer investor loans) of the loans are designated as
non-QM, 0.2% are designated as QM Rebuttable Presumption, and 3.5%
are designated as QM Safe Harbor. Approximately 5.9% of the
mortgages are loans that were not subject to the QM/ATR rules as
they are made to investors for business purposes.
There will not be any advancing of delinquent principal or interest
on any mortgages by the Servicer or any other party to the
transaction. In addition, the related servicer is not obligated to
make advances in respect of homeowner association fees, taxes, and
insurance, installment payments on energy improvement liens, and
reasonable costs and expenses incurred in the course of servicing
and disposing of properties unless a determination is made that
there will be material recoveries.
For this transaction, any loan that is 180 days delinquent under
the Mortgage Bankers Association delinquency method, upon review by
the related Servicer, may be considered a Charged Off Loan. With
respect to a Charged Off Loan, the total unpaid principal balance
will be considered a realized loss and will be allocated reverse
sequentially to the Noteholders. If there are any subsequent
recoveries for such Charged Off Loans, the recoveries will be
included in the principal remittance amount and applied in
accordance with the principal distribution waterfall; in addition,
any class principal balances of Notes that have been previously
reduced by allocation of such realized losses may be increased by
such recoveries sequentially in order of seniority. Morningstar
DBRS' analysis assumes reduced recoveries upon default on loans in
this pool.
This transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls after
the more senior tranches are paid in full (IPIP).
Notes: All figures are in U.S. dollars unless otherwise noted.
VOYA CLO 2016-3: S&P Affirms 'B- (sf)' Rating on Class D-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R2,
A-3-R2, and B-R2 replacement debt and the new class A-1-RL debt
from Voya CLO 2016-3 Ltd./Voya CLO 2016-3 LLC, a CLO managed by
Voya Alternative Asset Management LLC that was originally issued in
October 2016 and underwent a refinancing in October 2018. At the
same time, S&P withdrew its ratings on the class A-1-R, A-3-R, and
B-R debt following payment in full on the May 24, 2024, refinancing
date. The replacement class A-2-R2 debt will not be rated. S&P also
affirmed its ratings on the class C-R and D-R 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 Nov. 24, 2024.
-- The reinvestment period was not extended, and this deal is
still amortizing.
-- The legal final maturity date was not extended and remains at
Oct. 18, 2031.
-- No additional subordinated notes were issued on the refinancing
date.
-- The original class A-1-R debt will be replaced by the class
A-1-R2 (floating) and A-1RL debt (loan).
Replacement And October 2018 Debt Issuances
Replacement debt
-- Class A-1-R2, $190.47 million: Three-month CME term SOFR +
1.15%
-- Class A-1-RL, $110.00 million: Three-month CME term SOFR +
1.15%
-- Class A-2-R2, $30.00 million: Three-month CME term SOFR +
1.35%
-- Class A-3-R2, $66.00 million: Three-month CME term SOFR +
1.70%
-- Class B-R2, $36.00 million: Three-month CME term SOFR + 2.25%
October 2018 debt
-- Class A-1-R, $190.47 million: Three-month CME term SOFR + 1.19%
+ CSA(i)
-- Class A-2-R, $30.00 million: Three-month CME term SOFR + 1.40%
+ CSA(i)
-- Class A-3-R, $66.00 million: Three-month CME term SOFR + 1.75%
+ CSA(i)
-- Class B-R, $36.00 million: Three-month CME term SOFR + 2.20% +
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
Voya CLO 2016-3 Ltd./Voya CLO 2016-3 LLC
Class A-1-R2, $190.47 million: AAA (sf)
Class A-1-RL, $110.00 million: AAA (sf)
Class A-3-R2, $66.00 million: AA (sf)
Class B-R2, $36.00 million: A (sf)
Ratings Withdrawn
Voya CLO 2016-3 Ltd./Voya CLO 2016-3 LLC
Class A-1-R to NR from 'AAA (sf)'
Class A-3-R to NR from 'AA (sf)'
Class B-R to NR from 'A (sf)'
Ratings Affirmed
Voya CLO 2016-3 Ltd./Voya CLO 2016-3 LLC
Class C-R: 'BBB- (sf)'
Class D-R: 'B- (sf)'
Other Debt
Voya CLO 2016-3 Ltd./Voya CLO 2016-3 LLC
A-2-R2, $30.00 million: NR
Subordinated notes, $56.00 million: NR
WELLFLEET CLO 2015-1: Moody's Cuts Rating on E-R3 Notes to Caa1
---------------------------------------------------------------
Moody's Ratings has upgraded the rating on the following notes
issued by Wellfleet CLO 2015-1, Ltd.:
US$16,975,000 Class C-R4 Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class C-R4 Notes"), Upgraded to Aaa (sf);
previously on March 31, 2023 Upgraded to Aa1 (sf)
Moody's has also downgraded the rating on the following notes:
US$19,775,000 Class E-R3 Junior Secured Deferrable Floating Rate
Notes due 2029 (the "Class E-R3 Notes"), Downgraded to Caa1 (sf);
previously on June 5, 2019 Assigned Ba3 (sf)
Wellfleet CLO 2015-1, Ltd., originally issued in September 2015 and
most recently refinanced in September 2021, is a managed cashflow
CLO. The notes are collateralized primarily by a portfolio of
broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in July 2021.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating action on the Class C-R4 notes is primarily a
result of deleveraging of the senior notes and an increase in the
transaction's over-collateralization (OC) ratios since May 2023.
The Class A-R4 notes have been paid down by approximately 98% or
$130.1 million since May 2023. Based on the trustee's May 2024
report [1], the OC ratios for the Class C-R4 notes are reported at
172.69% versus May 2023 [2] levels of 131.61%.
The downgrade rating action on the Class E-R3 notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
Moody's calculation, the total collateral par balance, including
recoveries from defaulted securities, is $102.6 million, or $27.3
million less than the $350 million initial par amount targeted
during the deal's ramp-up after taking into account principal
payments. Furthermore, the trustee-reported [3] weighted average
rating factor (WARF) has been deteriorating and is currently 3596
compared to 3095 in May 2023 [4] failing the trigger of 3049. Based
on Moody's calculation, the OC ratio for the Class E-R3 notes is
95.50%. Based on the trustee's May 2024 report[5], the percentage
of Caa rated issuers are currently at 27.97% compared to 13.68% in
May 2023[6].
No actions were taken on the Class A-R4, Class B-R4, and Class D-R4
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: $100,396,031
Defaulted par: $7,147,129
Diversity Score: 40
Weighted Average Rating Factor (WARF): 3452
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.28%
Weighted Average Coupon (WAC): 10.00%
Weighted Average Recovery Rate (WARR): 44.71%
Weighted Average Life (WAL): 2.77 years
Par haircut in OC tests and interest diversion test: 8.12%
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, 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
May 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
WELLFLEET CLO 2016-2: Moody's Cuts $19.2MM D-R Notes Rating to B1
-----------------------------------------------------------------
Moody's Ratings has downgraded the rating on the following notes
issued by Wellfleet CLO 2016-2, Ltd.:
US$19,200,000 Class D-R Junior Secured Deferrable Floating Rate
Notes due 2028 (the "Class D-R Notes"), Downgraded to B1 (sf);
previously on September 22, 2020 Confirmed at Ba3 (sf)
Wellfleet CLO 2016-2, Ltd., originally issued in November 2016 and
refinanced in November 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 2020.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The downgrade rating action on the Class D-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
Moody's calculation, the total collateral par balance, including
recoveries from defaulted securities, is $99.2 million, or $22.2
million less than the $400 million initial par amount targeted
during the deal's ramp-up, after taking into account principal
payments. Furthermore, the trustee-reported[1] weighted average
rating factor (WARF) has been deteriorating and is currently 4001,
compared to 3662 in November 2023[2], failing the trigger of 3089.
The trustee-reported[3] Class D-R over-collateralization (OC) ratio
and percentage of Caa-rated issuers are currently 96.96% and
29.21%, respectively, compared to 101.04% and 19.15%, respectively,
in November 2023[4].
No actions were taken on the Class A-2-R, Class B-R, and Class C-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: $97,426,384
Defaulted par: $5,028,214
Diversity Score: 33
Weighted Average Rating Factor (WARF): 3663
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.20%
Weighted Average Coupon (WAC): 10.00%
Weighted Average Recovery Rate (WARR): 45.53%
Weighted Average Life (WAL): 2.55 years
Par haircut in OC tests and interest diversion test: 9.18%
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, and lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
WELLS 2024-SVEN: S&P Assigns Prelim BB- (sf) Rating on HRR Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Wells Fargo
Commercial Mortgage Trust 2024-SVEN's commercial mortgage
pass-through certificates.
The certificate issuance is a CMBS securitization backed primarily
by the beneficial ownership interest in a five-year fixed rate,
interest-only mortgage loan with an outstanding principal balance
of $450,000,000 secured by the borrowers' fee simple interest in
Sven, a class A, LEED Platinum-certified, 71-story, mixed-use
apartment building totaling 622,743 square feet of net rentable
area comprised of 958 units and 8,945 square feet of retail space
located in Long Island City, N.Y.
The preliminary ratings are based on information as of May 28,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
S&P said, "The preliminary ratings reflect our view of the
collateral's historical and projected performance, the sponsor's
and the manager's experience, the trustee-provided liquidity, the
loan terms, and the transaction's structure. We determined that the
mortgage loan has a beginning and ending loan-to-value (LTV) ratio
of 82.5%, based on S&P Global Ratings' value and the $450.0 million
commercial first mortgage loan balance."
Preliminary Ratings Assigned
Wells Fargo Commercial Mortgage Trust 2024-SVEN(i)
Class A, $245,419,000: AAA (sf)
Class X, $450,000,000(ii): BB- (sf)
Class B, $61,627,000: AA- (sf)
Class C, $45,812,000: A- (sf)
Class D, $46,902,000: BBB- (sf)
Class E, $27,740,000: BB (sf)
Class HRR(iii), $22,500,000: BB- (sf)
(i)Certificate balances are approximate, subject to a variance of
plus or minus 5%. The issuer will issue the certificates to
qualified institutional buyers in line with Rule 144A of the
Securities Act of 1933, to institutional accredited investors under
Regulation D and to non-U.S. persons under Regulation S.
(ii)Notional amount. The notional amount of the X certificates will
be equal to the aggregate balances of all the certificates.
(iii)Horizontal risk retention certificates.
WELLS FARGO 2015-C27: DBRS Confirms C Rating on Class F Certs
-------------------------------------------------------------
DBRS Limited downgraded its credit ratings on five classes of
Commercial Mortgage Pass-Through Certificates, Series 2015-C27
issued by Wells Fargo Commercial Mortgage Trust 2015-C27 as
follows:
-- Class C to BB (high) (sf) from BBB (sf)
-- Class PEX to BB (high) (sf) from BBB (sf)
-- Class D to C (sf) from B (low) (sf)
-- Class X-B to C (sf) from B (sf)
-- Class E to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class F at C (sf)
Morningstar DBRS changed the trends on Classes C and PEX to
Negative from Stable. All other classes carry Stable trends, with
the exception of Classes D, E, F, and X-B, which have credit
ratings that typically do not carry a trend in Commercial
Mortgage-Backed Securities (CMBS) transactions.
The credit rating downgrades reflect Morningstar DBRS' increased
liquidated loss projections for the loans in special servicing,
which collectively represent 22.3% of the pool balance. With this
review, Morningstar DBRS considered liquidation scenarios for four
of the five specially serviced loans, which include the largest and
third-largest loans in the pool, resulting in total implied losses
exceeding $86.0 million. Those losses would completely erode the
nonrated Class G, as well as the balance of rated Classes F and E,
and approximately 40.0% of the balance of Class D, significantly
reducing credit support for the transaction as a whole. Morningstar
DBRS did not liquidate the Holiday Inn-Cherry Creek loan
(Prospectus ID#16; 2.3% of the pool) that transferred to special
servicing during the pandemic, as the loan's performance has
surpassed issuance expectations, reporting a DSCR of 2.31 times (x)
as of September 2023, and is expected to be returned to the Master
Servicer.
The Negative trends reflect Morningstar DBRS' concerns with several
nonspecially serviced loans that have exhibited increased risk of
default given performance challenges, property type, and/or general
market concerns, as the majority of the remaining loans are
scheduled to mature within the next 12 months. For these loans,
Morningstar DBRS used stressed loan-to-value ratios (LTVs) and/or
elevated probability of defaults (PODs) to increase the expected
loss at the loan level as applicable. The credit rating
confirmations and Stable trends reflect the otherwise overall
stable performance of the nonspecially serviced loans in the pool,
which Morningstar DBRS generally expects to repay at maturity based
on the most recent year-end (YE) weighted-average debt service
coverage ratio (DSCR) that is above 1.80x.
As of the April 2024 remittance, 71 of the original 95 loans remain
in the pool, with a trust balance of $719.9 million, representing a
collateral reduction of 31.3% since issuance, as a result of loan
amortization, loan repayments, and loan liquidations. Since
Morningstar DBRS' last review, the Fairfield Inn &
Suites-Cincinnati loan (Prospectus ID#49), was liquidated from the
trust at a realized loss of approximately $2.2 million, in line
with Morningstar DBRS' expectation. Nineteen loans, representing
14.7% of the pool, are fully defeased, and 11 loans, representing
16.4% of the pool balance, are on the servicer's watchlist, which
are predominantly being monitored for a low DSCR, occupancy, and/or
deferred maintenance.
The largest specially serviced loan is secured by a
572,724-square-foot (sf) portion of the 977,888-sf Westfield Palm
Desert regional mall in Palm Desert, California. The pari passu
$125.0 million interest-only (IO) whole loan transferred to special
servicing in August 2020 because of payment default. A receiver was
appointed in October 2021, shortly after which the property was
rebranded as The Shops at Palm Desert. The special servicer began
pursuing foreclosure shortly thereafter; however, in November 2023,
Pacific Retail Capital Partners (PRCP) acquired the property and
assumed the existing debt. The company specializes in repositioning
malls through value-add strategies and reportedly plans to
redevelop portions of the property to include green space,
multifamily housing, and entertainment offerings. In conjunction
with the assumption, the loan was modified to include, among other
things, a two-year maturity extension through March 2027 with two
one-year extension options available. As of April 2024 reporting,
the loan was reported late and is expected to return to the master
servicer as a corrected loan after a period of monitoring; however,
the loan will remain in a cash sweep period through the extended
maturity, with all excess cash flow held in reserve.
The property's occupancy rate has improved to 85.4% as of November
2023; however, occupancy has historically shown volatility, falling
as low as 77.0% in December 2021 and well below 95.9% at issuance.
During 2023, the receiver was able to renew Dick's Sporting Goods
(4.7% of the net rentable area (NRA); expiration in January 2029)
to a five-year term. According to the servicer-reported financials,
the annualized net cash flow (NCF) for the year-to-date period
(YTD) ended September 30, 2023, was $5.3 million (a DSCR of 1.63x),
a decline from the YE2022 and YE2021 figures of $8.3 million (a
DSCR of 1.70x) and $6.6 million (a DSCR of 1.80x), respectively.
Per the January 2023 financial package, total in-line sales for
2022 were $386 per square foot (psf), a 25.3% drop from the
previous year.
Morningstar DBRS expects performance of the asset to continue
showing some volatility during the near-term as PRCP works toward
executing on its business plan, while managing upcoming tenant
rollover. During the next 12 months, more than 30 tenants
representing approximately 11.0% of the NRA, have scheduled lease
expirations, the largest of which are F21RED (2.2% of NRA) and H&M
(2.2% of NRA), which have lease expirations in January 2025. While
no sales price has been provided, an updated appraisal dated June
2023 valued the property at $57.4 million, a decline from the June
2022 value of $68.8 million, showing volatility in tandem with
fluctuations in occupancy over the past few years, but a
significant decline from the issuance appraised value of $212.0
million. Morningstar DBRS' analysis, which includes a liquidation
scenario based on a stress to the most recent appraisal, is
indicative of a loss severity in excess of 75.0%.
The 312 Elm and 312 Plum loans (Prospectus ID#3 and #17;
collectively 8.0% of the pool) transferred to special servicing in
July 2023 for imminent monetary default. Both of these loans are
secured by office properties in downtown Cincinnati, within walking
distance of each other, and are sponsored by Rubenstein Properties
Fund II, LP. As of April 2024, the borrower remains in discussion
with the special servicer in regard to potential workout
strategies. As noted during the prior review, both of these loans
have reported declines in performance in recent years following the
departure of several large tenants at each property. For 312 Elm,
while the borrower was able to sign several new smaller tenants in
2023, including Apex Systems, LLC (3.3% of the NRA), occupancy
remains low at 52.0% as of September 2023 given the departure of
previous major tenants, the General Services Administration
(approximately 20.0% of the NRA) and Gannett (28.9% of the NRA),
which vacated the property in 2018 and 2022, respectively. For 312
Plum, the occupancy rate dropped to 38.0% as of September 2023 from
63.1% as of YE2022 after the previous largest tenant, KAO USA Inc.
(23.8% of the NRA) vacated the property at its lease expiry in June
2023. According to the Cincinnati Business Courier, there is
potential for converting the property into an
office/residential-mixed-use space. Due to the sustained decline in
occupancy, both properties reported DSCRs of approximately 0.50x as
of the YTD ended September 30, 2023, period.
As the properties have yet to be reappraised, Morningstar DBRS
liquidated these loans based on a stressed haircut to the issuance
appraisal values of $67.0 million (Elm) and $26.5 million (Plum)
given the softening submarket performance, upcoming rollover risk,
and general lack of liquidity for this property type. The resulting
projected loss severity exceeds 42.0% and 26.0%, respectively, with
the stressed value estimates on a per square foot basis relatively
in line with several other Ohio office properties that are
securitized in CMBS transactions that are in special servicing
and/or nonsecuritized office properties within a 0.5 mile radius
that have been sold in 2023, per Reis.
The 300 East Lombard loan (Prospectus ID#9; 3.3% of the pool), is
secured by a 20-story, 225, 485-sf Class A office property in the
Baltimore central business district. The loan was transferred to
special servicing in March 2022 due to imminent monetary default,
and is currently over 121 days delinquent. After the property lost
its largest tenant, Ballard Spahr (previously 15.0% of the NRA),
upon its lease expiration in April 2022, occupancy dropped to 65.9%
as of YE2022. Although two new tenant leases were signed in 2023,
the previous second and fourth largest tenants, Offit Kurman (7.4%
NRA) and Alex Brown Realty (4.7% of the NRA), vacated in August and
May 2023, respectively, bringing occupancy down again, to 52.4% as
of December 2023. The annualized T6 through June 30, 2023, NCF of
$1.1 million, as a result, is expected to decline further with
those tenant exits. In addition, tenants representing more than
7.0% of the NRA, have lease expirations scheduled in prior to the
loan's maturity in February 2025.
The property was reappraised in January 2024, at a value of $9.1
million, which represents a 76.4% decline from the issuance
appraised value of $38.5 million, and is well below the current
whole-loan amount of $23.5 million. In the analysis for this
review, Morningstar DBRS liquidated the loan via a stressed haircut
to the updated value in consideration of the continuous decline in
occupancy, soft submarket metrics, and rollover risk prior to the
loan's maturity. This resulted in a loss severity in excess of
76.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2019-C50: Fitch Lowers Rating to 'B-sf' on Two Tranches
-------------------------------------------------------------------
Fitch Ratings has affirmed 17 classes of Wells Fargo Commercial
Mortgage Trust 2019-C49 (WFCM 2019-C49). The Rating Outlooks remain
Negative for classes F-RR and G-RR. Fitch downgraded two classes
and affirmed 15 classes of Wells Fargo Commercial Mortgage Trust
2019-C50 (WFCM 2019-C50) and assigned Outlook Negative to classes F
and X-F following the downgrades. Fitch also revised the Outlooks
to Negative from Stable for classes D, E, and X-D in WFCM
2019-C50.
Entity/Debt Rating Prior
----------- ------ -----
WFCM 2019-C49
A-1 95001WAW8 LT AAAsf Affirmed AAAsf
A-2 95001WAX6 LT AAAsf Affirmed AAAsf
A-3 95001WAY4 LT AAAsf Affirmed AAAsf
A-4 95001WBA5 LT AAAsf Affirmed AAAsf
A-5 95001WBB3 LT AAAsf Affirmed AAAsf
A-S 95001WBE7 LT AAAsf Affirmed AAAsf
A-SB 95001WAZ1 LT AAAsf Affirmed AAAsf
B 95001WBF4 LT AA-sf Affirmed AA-sf
C 95001WBG2 LT A-sf Affirmed A-sf
D 95001WAC2 LT BBB-sf Affirmed BBB-sf
E-RR 95001WAE8 LT BBB-sf Affirmed BBB-sf
F-RR 95001WAG3 LT BBsf Affirmed BBsf
G-RR 95001WAJ7 LT B-sf Affirmed B-sf
H-RR 95001WAL2 LT CCCsf Affirmed CCCsf
X-A 95001WBC1 LT AAAsf Affirmed AAAsf
X-B 95001WBD9 LT A-sf Affirmed A-sf
X-D 95001WAA6 LT BBB-sf Affirmed BBB-sf
WFCM 2019-C50
A-2 95001XAX4 LT AAAsf Affirmed AAAsf
A-3 95001XAY2 LT AAAsf Affirmed AAAsf
A-4 95001XBA3 LT AAAsf Affirmed AAAsf
A-5 95001XBB1 LT AAAsf Affirmed AAAsf
A-S 95001XBC9 LT AAAsf Affirmed AAAsf
A-SB 95001XAZ9 LT AAAsf Affirmed AAAsf
B 95001XBD7 LT AA-sf Affirmed AA-sf
C 95001XBE5 LT A-sf Affirmed A-sf
D 95001XAJ5 LT BBBsf Affirmed BBBsf
E 95001XAL0 LT BBsf Affirmed BBsf
F 95001XAN6 LT B-sf Downgrade Bsf
G 95001XAQ9 LT CCCsf Affirmed CCCsf
X-A 95001XBF2 LT AAAsf Affirmed AAAsf
X-B 95001XBG0 LT A-sf Affirmed A-sf
X-D 95001XAA4 LT BBsf Affirmed BBsf
X-F 95001XAC0 LT B-sf Downgrade Bsf
X-G 95001XAE6 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' ratings
case losses are 5.2% in WFCM 2019-C49 and 6.7% in WFCM 2019-C50.
Fitch Loans of Concerns (FLOCs) comprise 14 loans (21.9% of the
pool) in WFCM 2019-C49, including two specially serviced loans
(2.4%), and 14 loans (31%) in WFCM 2019-C50, including seven
specially serviced loans (15.1%).
Affirmations and Stable Outlooks in WFCM 2019-C49 and WFCM 2019-C50
reflect generally stable performance of the majority of the pool
since Fitch's prior rating action. While office exposure in WFCM
2019-C49 is relatively low at 17%, the Negative Outlooks reflect
FLOCs secured by office properties. The Outlook revisions as well
as the downgrade and assignment of Negative Outlooks to classes F
and X-F in WFCM 2019-C50 also reflect new transfers to special
servicing, uncertainty of recoveries and office exposure in the
pool (21%).
The largest contributor to overall loss expectations in the WFCM
2019-C49 transaction is the specially serviced Florissant
Marketplace (1.6%) loan. The loan transferred to special servicing
in July 2020 due to payment default when the second largest tenant,
Gold's Gym (27.5% of the NRA), filed for bankruptcy and vacated the
property in 2020 due to pandemic-related hardships.
The space remains vacant. The servicer is reviewing options for
marketing the asset in 3Q2024. The property is anchored by a
grocery store, Schnucks Markets (48% of the NRA; exp. November
2026). Per the April 2024 rent roll, the property was 70.9%
occupied and 29.1% vacant. Rollover consists of 53.5% in 2026 (four
tenants including Schnucks Markets), 6.5% in 2027 (four tenants)
and 4.1% in 2028 (two tenants). Fitch's base case 'Bsf' ratings
case loss of 69% (prior to concentration add-ons) reflects a
haircut to the most recent appraised value.
The second largest contributor to loss expectations is Holland Art
Van (1.2%). The loan is considered a FLOC due to low base rents.
Per the servicer, the borrower entered into lease with American
Signature for the entire property in September 2021 with total
annual rent less than the debt service. The servicer expects that
the property will remain on the watch list and in a cash sweep for
the life of the loan. Fitch's base case 'Bsf' ratings case loss of
36% (prior to concentration add-ons) reflects a higher probability
of default and a 7.50% stress to the YE 2023 NOI which is 54% above
YE 2022 NOI, but 42% below Fitch issuance NCF. The loan has
remained current.
The third largest contributor to loss expectations is the specially
serviced 659 Broadway (0.8%) loan. The loan is secured by a
3,876-sf retail property located in the Greenwich Village
neighborhood of Manhattan. The property had been single-tenanted by
Blades, a skateboarding and roller blading store. The store closed
before the pandemic in January 2020; however, the borrower kept the
loan current until it transferred to special servicing in August
2020 due to imminent monetary default.
A foreclosure sale occurred in November 2023 and the REO asset is
currently under management of the special servicer. Lease
discussions are ongoing with the unapproved tenant occupying the
retail space. Fitch's base case 'Bsf' ratings case loss of 52%
(prior to concentration add-ons) reflects a haircut to the most
recent appraised value.
The largest contributor to overall loss expectations in the WFCM
2019-C50 transaction is the specially serviced 24 Commerce Street
(1.7%) loan. The loan transferred to special servicing in May 2020
for imminent monetary default and the property is now REO following
a foreclosure sale in February 2024. The property is a 171,892-sf,
landmarked historic office building in downtown Newark, NJ. The
December 2023 rent roll shows 68.6% occupancy and 31.4% vacancy.
The largest tenant, ACBB - BITS LLC (8.7%) vacated at lease
expiration December 2023. The sixth and seventh largest tenants,
DPMC (3.9%, July 2024 lease expiration) and Murphy Schillar Wilkes
LLP (3.8%, December 2024 lease expiration) are expected to vacate
at lease expiration. With these departures, occupancy drops to
52.2%. Per the special servicer, there has been leasing activity,
mainly renewals for smaller tenants. Fitch's base case 'Bsf'
ratings case loss of 78% (prior to concentration add-ons) reflects
a haircut to the most recent appraised value.
The second largest contributor to loss expectations is the
specially serviced InnVite Hospitality Portfolio (2.2%) loan. The
loan transferred to special servicing in May 2020 due to payment
default as a result of the Covid-19 pandemic. The special servicer
has commenced the foreclosure process on two hotels after the
borrower put three of five hotels into Chapter 11 bankruptcy
protection.
The court has granted the lender's request for a receivership and
the special servicer is addressing PIP completion and capital
expenditure needs of the hotels as well as branding as the Best
Western flag expired. The receiver is expected to begin marketing
the assets. Fitch's base case 'Bsf' ratings case loss of 46% (prior
to concentration add-ons) reflects a haircut to the most recent
appraised value.
The third largest contributor to loss expectations is 839 Broadway
(2.6%). The loan is considered a FLOC due to the low DSCR and
recent return from special servicing. The loan returned from the
special servicer In June 2023 as corrected. The loan originally
transferred in March 2021 for imminent monetary default at the
borrowers request due to the pandemic. The borrower made a relief
request and the special servicer negotiated a settlement agreement
which closed in January 2023. Fitch's base case 'Bsf' ratings case
loss of 18% (prior to concentration add-ons) reflects a haircut to
the most recent appraised value.
Defeasance: The WFCM 2019-C49 transaction includes seven loans
(8.3% of the pool) that have fully defeased while WFCM 2019-C50 has
two defeased loans (3.2% of the pool).
Change to Credit Enhancement: As of the April 2024 remittance
report, the aggregate balances of the WFCM 2019-C49 and WFCM
2019-C50 transactions have been reduced by 5.2% and 12.1%,
respectively, since issuance. Loan maturities are concentrated in
2029 with 39 loans (78% of the pool) in WFCM 2019-C49 and 53 loans
(94% of the pool) in WFCM 2019-C50.
Interest Shortfalls: Interest shortfalls of approximately $1.5
million are affecting the non-rated class K-RR in WFCM 2019-C49. In
WFCM 2019-C50, there are approximately $160,000 and $199,390 in
interest shortfalls affecting the rated F and G classes,
respectively. There are also approximately $2.2 million affecting
the non-rated H class.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from concerns with potential further declines in performance that
could result in higher expected losses on FLOCs. If expected losses
increase, downgrades to these classes are likely.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to defeased collateral if the U.S. sovereign
rating is lower than 'AAA' could also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes with
Negative Rating Outlooks could occur if the FLOC's continue to
exhibit performance declines or fail to stabilize.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
if loans languish in special servicing and continue to have value
deterioration and increased exposures or if disposition proceeds
are less than expected.
Downgrades to distressed ratings of 'CCCsf' would occur as losses
become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased credit enhancement (CE) from paydowns,
coupled with stable-to-improved pool-level loss expectations and
performance stabilization of FLOCs. Upgrades of these classes to
'AAAsf' would also consider the concentration of defeased loans in
the transaction.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration and would only occur with a turn-around in the
FLOC's, especially those secured by office properties.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' are not expected but
possible with better than expected recoveries on specially serviced
loans or significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WESTGATE RESORTS 2022-1: DBRS Hikes D Notes Rating to BB (high)
---------------------------------------------------------------
DBRS, Inc. upgraded five credit ratings and confirmed six credit
ratings on three Westgate Resorts LLC transactions.
Westgate Resorts 2022-1 LLC
Timeshare Collateralized Notes, Series 2022-1
Class A AAA (sf) Confirmed
Class B A (high)(sf) Upgraded
Class C BBB (high)(sf) Upgraded
Class D BB (high)(sf) Upgraded
The credit rating actions are based on the following analytical
considerations:
-- The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios For Rated
Sovereigns: March 2024 Update," published on March 27, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse COVID-19 pandemic scenarios, which were first published
in April 2020.
-- The transactions' capital structure and form and sufficiency of
available credit enhancement (CE).
-- The transactions' performance to date, with losses coming
within Morningstar DBRS' initial expectations for Westgate Resorts
2020-1.
-- Losses for Westgate Resorts 2022-1 and 2023-1 are tracking
higher than the initial base case assumption. However, for 2022-1,
CE levels have increased materially relative to closing levels. For
2023-1, CE levels inclusive of expected excess spread have also
increased mitigating the higher loss level.
-- The transaction parties' capabilities with regard to
origination, underwriting, and servicing.
WESTLAKE AUTOMOBILE 2024-2: S&P Assigns BB (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Westlake
Automobile Receivables Trust 2024-2's automobile receivables-backed
notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of May 29,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 45.9%, 38.9%, 30.2%, 23.2%,
and 20.3% 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 3.50x, 3.00x, 2.30x, 1.75x, and 1.50x coverage of S&P's
expected cumulative net loss of 12.50% for the class A, B, C, D,
and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.75x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB (sf)' ratings on
the class A, B, C, D, and E notes, respectively, are within our
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, S&P's view of the credit risk of the collateral,
and its updated macroeconomic forecast and forward-looking view of
the auto finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the preliminary ratings.
-- S&P's operational risk assessment of Westlake Services LLC as
servicer and its view of the company's underwriting and the backup
servicing arrangement with Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with its sector benchmark.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
Westlake Automobile Receivables Trust 2024-2
Class A-1, $300.00 million: A-1+ (sf)
Class A-2-A/A-2-B, $405.00 million: AAA (sf)
Class A-3, $113.87 million: AAA (sf)
Class B, $106.53 million: AA (sf)
Class C, $151.28 million: A (sf)
Class D, $134.94 million: BBB (sf)
Class E, $62.50 million: BB (sf)
WFRBS COMMERCIAL 2014-C23: Fitch Lowers Rating on Cl. D Certs to B-
-------------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed 10 classes of WFRBS
Commercial Mortgage Trust Series 2014-C22 (WFRBS 2014-C22)
commercial mortgage trust pass-through certificates. Classes B and
C were assigned Negative Outlooks after their downgrades. The
Rating Outlooks on classes A-S and X-A were revised to Negative
from Stable. The Outlook on class D remains Negative.
Fitch has also downgraded three and affirmed 10 classes of WFRBS
Commercial Mortgage Trust 2014-C23 (WFRBS 2014-C23) commercial
mortgage pass-through certificates. Fitch has assigned a Negative
Outlook to class D after its downgrade. The Rating Outlook for
class X-A was revised to Negative from Stable. The Outlook for
classes A-S, B, C and PEX remains Negative.
This rating action commentary corrects an error in respect to the
Rating Outlook for the interest-only (IO) class X-A in WFRBS
2014-C23 published on June 21, 2023. The prior rating action
commentary incorrectly assigned a Stable Rating Outlook to class
X-A that was inconsistent with the Negative Rating Outlook revision
assigned to the lowest rated reference class A-S, whose payable
interest has an impact on the payment to the IO class.
Entity/Debt Rating Prior
----------- ------ -----
WFRBS 2014-C22
A-4 92890KAZ8 LT AAAsf Affirmed AAAsf
A-5 92890KBA2 LT AAAsf Affirmed AAAsf
A-S 92890KBC8 LT AAAsf Affirmed AAAsf
A-SB 92890KBB0 LT AAAsf Affirmed AAAsf
B 92890KBF1 LT A-sf Downgrade AA-sf
C 92890KBG9 LT BBB-sf Downgrade A-sf
D 92890KAJ4 LT B-sf Affirmed B-sf
E 92890KAL9 LT CCCsf Affirmed CCCsf
F 92890KAN5 LT CCsf Affirmed CCsf
X-A 92890KBD6 LT AAAsf Affirmed AAAsf
X-C 92890KAA3 LT CCCsf Affirmed CCCsf
X-D 92890KAC9 LT CCsf Affirmed CCsf
WFRBS 2014-C23
A-4 92939HAX3 LT AAAsf Affirmed AAAsf
A-5 92939HAY1 LT AAAsf Affirmed AAAsf
A-S 92939HBA2 LT AAAsf Affirmed AAAsf
A-SB 92939HAZ8 LT AAAsf Affirmed AAAsf
B 92939HBB0 LT Asf Affirmed Asf
C 92939HBC8 LT BBBsf Affirmed BBBsf
D 92939HAJ4 LT B-sf Downgrade Bsf
E 92939HAL9 LT CCCsf Downgrade B-sf
F 92939HAN5 LT CCCsf Affirmed CCCsf
PEX 92939HBD6 LT BBBsf Affirmed BBBsf
X-A 92939HBE4 LT AAAsf Affirmed AAAsf
X-C 92939HAA3 LT CCCsf Downgrade B-sf
X-D 92939HAC9 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations; Near-Term Loan Maturities:
Deal-level 'Bsf' rating case loss has increased to 10.9% in WFRBS
2014-C22 and 9.5% in WFRBS 2014-C23. The WFRBS 2014-C22 transaction
has 23 Fitch Loans of Concern (FLOCs; 52.4% of the pool), including
four loans (16.8%) in special servicing. The WFRBS 2014-C23
transaction has 12 FLOCs (55.6%), including one loan (9.4%) in
special servicing.
The downgrade of classes B and C in WFRBS 2014-C22 and classes D, E
and X-C in WFRBS 2014-C23 reflects higher pool loss expectations
since Fitch's prior rating action, driven by further or anticipated
performance declines and/or refinancing concerns on FLOCs secured
primarily by office, including Bank of America Plaza in both
transactions (14.3% in WFRBS 2013-C22 and 15.9% in WFRBS 2014-C23),
as well as Stamford Plaza Portfolio (8.8%), Offices at Broadway
Station (4.5%) and 400 Atlantic Avenue (2.4%) in WFRBS 2014-C22 and
DC Metro Mixed Use Portfolio (7.1%) and 677 Broadway (3.4%) in
WFRBS 2014-C23.
The Negative Outlooks on five classes of WFRBS 2014-C22 and six
classes of WFRBS 2014-C23 reflect each pool's high exposure to
FLOCs, which includes office and additional loans with continued
occupancy and cashflow concerns that are expected to experience
refinance challenges at maturity. Loans secured primarily by office
properties comprise 32.3% of WFRBS 2014-C22 and 27.2% of WFRBS
2014-C23. In addition, the Negative Outlooks reflect concerns with
the ultimate refinanceability and payoff of the modified Columbus
Square loan in both transactions (11% in WFRBS 2014-C22 and 9.4% in
WFRBS 2014-C23).
Both transactions have a significant loan maturity (or anticipated
repayment dates [ARD]) concentration within the next six months.
For WFRBS 2014-C22, this comprises 89% of the remaining pool (of
which 11.9% are defeased; 11.1% are ARD loans). For WFRBS 2014-C23,
this includes 87.2% of the remaining pool (28.3% are defeased).
FLOCs and Largest Loss Contributors: The largest contributor to
overall loss expectations in both WFRBS 2014-C22 and WFRBS 2014-C23
is the Bank of America Plaza loan (14.3% and 15.9%, respectively),
which is secured by a 1.4 million-sf, LEED Gold certified, office
building located in downtown Los Angeles, CA. Major tenants include
Capital Group Companies (26.6% of the NRA, lease expiration of
February 2033), Bank of America (14.7%, June 2029) and Sheppard,
Mullin & Richter (12.8%, December 2024). Prior tenant Alston & Bird
(5.6%) vacated at lease expiration in December 2023.
As of the YE 2023 rent roll, the property was 86.2% occupied with
an interest-only NOI DSCR of 2.42x. Upcoming rollover includes
approximately 15% in 2024. According to CoStar, the subject is
located in the downtown Los Angles submarket, which has a vacancy
rate of 20.8%.
Due to the higher market vacancy rate, Fitch's analysis includes a
9.0% cap rate and a 30% stress to the YE 2023 NOI to reflect
upcoming rollover concerns and limited time to lease up the vacant
spaces prior to the loan's upcoming maturity in September 2024.
Additionally, Fitch factored an increased probability of default
for the loan's heightened maturity default risk. Fitch's 'Bsf'
rating case loss is 23% (prior to concentration add-ons) in both
transactions.
In WFRBS 2014-C22, the Stamford Plaza Portfolio loan (8.8%) is
secured by four office properties totaling 982,483-sf located in
Stamford, CT. The loan was identified as a FLOC due to sustained
lower occupancy throughout the loan term. Occupancy remains lower
at 69% as of YE 2023 (with average base rents of about $46 psf),
compared with 65.2% at YE 2022, 63% at YE 2021, 82% at YE 2018 and
90% at issuance. Due to the occupancy decline, the NOI DSCR has
remained below 1.00x since YE 2018.
The largest near-term rollover exposure is Indeed (4.8% of the
total portfolio NRA) with lease expiration in July 2024. According
to CoStar, the subject is located in the Stamford submarket, which
has a vacancy rate of 26.1%, and average asking rents of
approximately $40 psf.
Due to the sustained performance declines, Fitch's analysis is
based on a 10% cap rate and a stabilized stressed cash flow to
incorporate near-term rollover as well as an increased probability
of default due to the loan's elevated maturity default risk. The
loan's scheduled maturity is in August 2024. Fitch's 'Bsf' rating
case loss is 32% (prior to concentration add-ons).
Other FLOCs in WFRBS 2014-C22 include the specially serviced
Offices at Broadway Station and 400 Atlantic Avenue. The Offices at
Broadway Station loan, which transferred to special servicing in
April 2024 for imminent maturity default, is a 315,053-sf office
property located in Denver, CO. Occupancy was 82% as of YE 2023
with a NOI DSCR of 1.77x. Fitch's 'Bsf' rating case loss is 30%
(prior to concentration add-ons).
The 400 Atlantic Avenue loan is secured by a now vacant 99,749-sf
office property located in Boston's Financial District. Law firm
Goulston & Storrs was the sole tenant and recently relocated to
another downtown office property ahead of its lease expiration in
May 2024. The loan is scheduled to mature in August 2024. Fitch's
'Bsf' rating case loss of 50% (prior to concentration add-ons)
includes a higher probability of default due to the loan's maturity
default risk and vacant status of the subject property.
Additional FLOCs in WFRBS 2014-C23 are DC Metro Mixed Use Portfolio
(7.1% of the pool) and 677 Broadway (3.4%). Fitch assumed an
increased probability of default for these loans due to their
heightened maturity default risk. The DC Metro portfolio consists
of 14 office, mixed use and retail properties located throughout
the Washington, D.C. area. The servicer-reported third quarter 2023
occupancy was 88% with a NOI DSCR of 1.41x. Fitch's 'Bsf' rating
case loss is 21% (prior to concentration add-ons).
The 677 Broadway loan is secured by a 177,039-sf office property
located in Albany, NY. The loan was previously modified with its
maturity extended one additional year to September 2025. Recent
servicer commentary indicated the borrower is working to extend
leases. The June 2023 occupancy was reported at 70%, down from 96%
at issuance. Fitch's 'Bsf' rating case loss is 42% (prior to
concentration add-ons).
Both transactions have exposure to the Columbus Square Portfolio
loan. The loan remains in special servicing as of May 2024. A loan
modification was executed in March 2024. Terms of the modification
include an extension of the loan's maturity date to August 2027
(from August 2024) and the implementation of a cash trap to
hyper-amortize the loan through the extended maturity.
Columbus Square is an approximately 536,888-sf mixed-use property
located on Manhattan's Upper West side anchored by Whole Foods
(about 24% of the NRA), a private school (9.3%) and TJ Maxx (8.2%).
Several major retailers have vacated over the years; however, the
sponsor has been able to back fill the space; the property is
currently 99.1% occupied. Recent servicer commentary indicated the
strategy will be to monitor the loan and return to the master
servicer.
Fitch's 'Bsf' rating case loss of 4.9% (prior to concentration
add-ons) for both transactions. The loan's transitional status and
potential for higher losses contributed to the Negative Rating
Outlooks in both transactions. Lower-than-expected loan
deleveraging post-modification from excess cash flow and further
declines in performance could result in possible downgrades,
including to classes A-S and X-A.
Changes in Credit Enhancement (CE): As of the April 2024
distribution date, the pool's aggregate balance for WFRBS 2014-C22
has been reduced by 29. 6% to $1.05 billion from $1.49 billion at
issuance. Twenty-two loans (11.9% of pool) have been defeased. The
pool's aggregate balance for WFRBS 2014-C23 has been reduced by 22%
to $733.7 million from $940.8 million at issuance. Twenty-eight
loans (28.3% of pool) have been 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 loss
expectations increase significantly and/or interest shortfalls
occur.
A decline in the ultimate refinance expectations or performance
deterioration for the Columbus Square loan in both transactions may
contribute to downgrades to junior 'AAAsf' rated classes with
Negative Outlooks, including A-S and X-A.
Downgrades to classes rated in the 'Asf' and 'BBBsf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs and/or more loans than expected
experience performance deterioration. These elevated risk loans
include Bank of America Plaza in both transactions, as well as
Stamford Plaza Portfolio, Offices at Broadway Station and 400
Atlantic Avenue in WFRBS 2014-C22 and DC Metro Mixed Use Portfolio
and 677 Broadway in WFRBS 2014-C23.
Downgrades to classes rated in the 'Bsf' category and distressed
rated classes will occur with higher than expected losses on the
aforementioned office FLOCs, lack of progress on the resolution and
increased exposures on the specially serviced loans, should
additional loans transfer to special servicing and/or default, or
as losses become realized or more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are not anticipated given adverse selection concerns and
concentration of upcoming loan maturities. Upgrades to the 'Asf'
and 'BBBsf' category rated classes would be limited based on
sensitivity to concentrations or the potential for future
concentration given the upcoming maturity risk. Classes would not
be upgraded above 'AA+sf' if there is likelihood for interest
shortfalls.
Upgrades to the 'Bsf' category rated classes could occur only if
the performance of the remaining pool improves with significantly
better than expected refinance rates and paydown, better than
expected recoveries on the specially serviced loans and there is
sufficient CE to the classes.
Upgrades to 'CCCsf' and 'CCsf' category rated classes are not
likely, but may be possible with significantly better than expected
recoveries on specially serviced loans and/or significantly higher
recovery 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.
WIND RIVER 2020-1: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Wind
River 2020-1 CLO Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Wind River
2020-1 CLO Ltd.
A-1-R LT AAAsf New Rating AAA(EXP)sf
A-2-R LT AAAsf New Rating AAA(EXP)sf
B-R LT AAsf New Rating AA(EXP)sf
C-R LT Asf New Rating A(EXP)sf
D-1-R LT BBB-sf New Rating BBB-(EXP)sf
D-2-R LT BBB-sf New Rating BBB-(EXP)sf
E-R LT BB-sf New Rating BB-(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
X-R LT AAAsf New Rating AAA(EXP)sf
TRANSACTION SUMMARY
Wind River 2020-1 CLO Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by First Eagle
Alternative Credit, LLC. The original transaction closed in October
2020 and was not rated by Fitch. On the 2024 closing date, the
secured notes will be refinanced in full. Net proceeds from the
issuance of the new secured and existing subordinated notes will
provide financing on a portfolio of approximately $400 million of
primarily first- lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B+'/'B', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 23.17, versus a maximum covenant, in
accordance with the initial expected matrix point of 24.60. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.61% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.5% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.9%.
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 required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrix 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 'AAAsf' for class X-R, between 'BBB+sf' and 'AA+sf' for
class A-1-R, between 'BBB+sf' and 'AA+sf' for class A-2-R, between
'BB+sf' and 'A+sf' for class B-R, between 'B+sf' and 'BBB+sf' for
class C-R, between less than 'B-sf' and 'BB+sf' for class D-1-R,
between less than 'B-sf' and 'BB+sf' for class D-2-R, and between
less than 'B-sf' and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X-R, class A-1-R
and class A-2-R notes as these notes are in the highest rating
category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AA+sf' for class C-R, 'A+sf'
for class D-1-R, 'A+sf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
DATE OF RELEVANT COMMITTEE
23 May 2024
ESG Considerations
Fitch does not provide ESG relevance scores for Wind River 2020-1
CLO 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.
WIND RIVER 2024-1: Fitch Assigns 'B-sf' Rating on Class F Notes
---------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Wind
River 2024-1 CLO Ltd.
Entity/Debt Rating Prior
----------- ------ -----
WIND RIVER
2024-1 CLO LTD.
A LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
F LT B-sf New Rating B-(EXP)sf
Subordinated A LT NRsf New Rating NR(EXP)sf
Subordinated B LT NRsf New Rating NR(EXP)sf
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 23.64, 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 75.74% versus a minimum
covenant, in accordance with the initial expected matrix point of
74.2%.
Portfolio Composition (Neutral): The largest three industries may
comprise up to 45% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B, between 'Bsf' and
'BBB+sf' for class C, between less than 'B-sf' and 'BB+sf' for
class D, between less than 'B-sf' and 'B+sf' for class E, and
between less than 'B-sf' and less than 'B-sf' for class F.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'Asf' for
class D, 'BBB+sf' for class E, and 'BB+sf' for class F.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
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 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, 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.
[*] DBRS Reviews 205 Classes From 21 US RMBS Transactions
---------------------------------------------------------
DBRS, Inc. reviewed 205 classes from 21 U.S. residential
mortgage-backed securities (RMBS) transactions. Out of the 21
transactions reviewed, 20 are classified as legacy RMBS backed by
prime, subprime, or Alt-A collateral and one is classified as
non-Qualified Mortgage. Of the 205 classes reviewed, Morningstar
DBRS upgraded its credit ratings on 17 classes and confirmed its
credit ratings on 188 classes.
The Affected Ratings are available at https://bit.ly/3Kf4Jun
The Issuers are:
Asset Backed Securities Corporation Home Equity Loan Trust, Series
2005-HE2
Asset Backed Securities Corporation Home Equity Loan Trust, Series
NC 2005-HE8
Asset Backed Securities Corporation Home Equity Loan Trust, Series
WMC 2005-HE5
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2006-3
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2005-7
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2005-4
Credit Suisse First Boston Mortgage Acceptance Corp. Home Equity
Asset Trust 2005-9
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2005-5
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2005-6
Structured Asset Investment Loan Trust, Series 2004-11
MFA 2023-NQM2 Trust
J.P. Morgan Mortgage Trust 2005-A4
Soundview Home Loan Trust 2005-3
Long Beach Mortgage Loan Trust 2005-WL1
Argent Securities Inc. Series 2004-W11
Securitized Asset Backed Receivables LLC Trust 2006-OP1
Securitized Asset Backed Receivables LLC Trust 2006-FR1
Securitized Asset Backed Receivables LLC Trust 2006-WM1
Structured Asset Securities Corporation Mortgage Loan Trust
2007-WF1
Structured Asset Securities Corporation Mortgage Loan Trust
2007-BC3
Citigroup Mortgage Loan Trust, Inc., Series 2005-WF1
The credit rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new credit rating levels. The credit rating confirmations
reflect asset performance and credit support levels that are
consistent with the current credit ratings.
Notes: All figures are in U.S. dollars unless otherwise noted.
[*] DBRS Reviews 35 Classes in 3 US RMBS Transactions
-----------------------------------------------------
DBRS, Inc. reviewed 35 classes in three U.S. residential
mortgage-backed securities (RMBS) transactions. Of the three
transactions reviewed, one is classified as non-QM, one as small
balance commercial, and one as reperforming mortgage. Of the 35
classes reviewed, Morningstar DBRS confirmed all 35 credit
ratings.
The Affected Ratings are available at https://bit.ly/4bURDyi
The Issuers are:
-- Velocity Commercial Capital Loan Trust 2023-2
-- A&D Mortgage Trust 2023-NQM2
-- Chase Home Lending Mortgage Trust 2023-RPL1
The credit rating confirmations reflect asset-performance and
credit-support levels that are consistent with the current credit
ratings.
The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns March 2024 Update," published on March 27, 2024
(https://dbrs.morningstar.com/research/430189). These baseline
macroeconomic scenarios replace Morningstar DBRS' moderate and
adverse coronavirus pandemic scenarios, which were first published
in April 2020.
The credit rating actions are the result of Morningstar DBRS'
application of its "U.S. RMBS Surveillance Methodology," published
on March 3, 2023, and its "North American CMBS Surveillance
Methodology," published on March 1, 2024.
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.
[*] Moody's Cuts Ratings on $32.5MM of US RMBS Issued 2005
----------------------------------------------------------
Moody's Ratings has downgraded the ratings of six bonds from Morgan
Stanley ABS Capital I Inc. Trust 2005-HE1, backed by subprime
mortgages. In addition, one of the bonds Moody's downgraded is also
the underlying bond of a repackaged transaction, namely Financial
Asset Securities Corp. AAA Trust 2005-2. Therefore, Moody's have
downgraded the rating of the linked bond from the repackaged
transaction accordingly.
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: Financial Asset Securities Corp. AAA Trust 2005-2
Cl. A3, Downgraded to Aa2 (sf); previously on Jun 4, 2019 Affirmed
Aaa (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE1
Cl. A-1mz, Downgraded to A2 (sf); previously on Jul 15, 2010
Confirmed at Aaa (sf)
Cl. A-1ss, Downgraded to Aa2 (sf); previously on Jul 15, 2010
Confirmed at Aaa (sf)
Cl. A-2mz, Downgraded to A2 (sf); previously on Jul 15, 2010
Confirmed at Aaa (sf)
Cl. A-2ss, Downgraded to Aa1 (sf); previously on Jul 15, 2010
Confirmed at Aaa (sf)
Cl. M-2, Downgraded to B2 (sf); previously on Jun 9, 2020
Downgraded to B1 (sf)
Cl. M-3, Downgraded to Caa1 (sf); previously on Oct 10, 2017
Upgraded to B1 (sf)
RATINGS RATIONALE
The rating actions reflect the current levels of credit enhancement
available to the bonds, the recent performance, analysis of the
transaction structures, and Moody's updated loss expectations on
the underlying pools. In addition, the rating action on the bond
from the repackaged transaction, Financial Asset Securities Corp.
AAA Trust 2005-2, reflects the rating action on Cl. A-1ss from
Morgan Stanley ABS Capital I Inc. Trust 2005-HE1, the bond
underlying that transaction.
The downgrades of class A-1ss, A-1mz, A-2ss and A-2mz reflect the
decrease in credit enhancement by approximately 5% since Moody's
last review in July 2023. Moody's analysis for these bonds
considered the impact of performance triggers, which are currently
passing, resulting in principal payments being made to the
subordinate bonds and locking the senior bonds out of any principal
payments at this time. In fact, the senior classes have not
received principal payments since the trigger step-down date in
February 2008. This has resulted in the eroding credit enhancement
levels for these four downgraded bonds. While there is a
possibility that the deal will eventually fail the cumulative loss
trigger, which would switch the payment waterfall to sequential,
start paying the most senior bonds, and rebuild some of the eroded
credit enhancement, there are uncertainties on when and if this
will occur.
Moody's analysis for the mezzanine tranches considered the
existence of historical interest shortfalls for some of the bonds.
While shortfalls for certain bonds 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 actions. Moody's
analysis also reflects the potential for collateral volatility
given the number of deal-level and macro factors that can impact
collateral performance, the potential impact of any collateral
volatility on the model output, and the ultimate size or any
incurred and projected loss.
Some mezzanine bonds in this review are currently impaired or
expected to become impaired. Moody's ratings on those bonds reflect
any losses to date as well as Moody's expected future loss.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features and credit enhancement.
Principal Methodologies
The principal methodology used in rating all tranches except
Financial Asset Securities Corp. AAA Trust 2005-2 was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Takes Action on $612MM of US RMBS Issued 2001-2006
--------------------------------------------------------------
Moody's Ratings, on May 28, 2024, upgraded the ratings of 21 bonds
and downgraded the ratings of five bonds from 12 US residential
mortgage-backed transactions (RMBS), backed by subprime and Alt-A
mortgages issued by multiple issuers.
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: CSFB ABS Trust Mortgage Pass-Through Certificates, Series
2001-HE20
Cl. A-1, Upgraded to Aaa (sf); previously on Jan 18, 2013
Downgraded to A1 (sf)
Cl. A-IO*, Upgraded to Aaa (sf); previously on Nov 29, 2017
Confirmed at A1 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2005-10
Cl. AF-5, Upgraded to Aa1 (sf); previously on Jul 17, 2023 Upgraded
to A1 (sf)
Cl. AF-6, Upgraded to Aa1 (sf); previously on Jul 17, 2023 Upgraded
to Aa3 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-11
Cl. 3-AV-3, Upgraded to A2 (sf); previously on Jul 17, 2023
Upgraded to Ba1 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-14
Cl. 1-A, Upgraded to Aa3 (sf); previously on Jul 17, 2023 Upgraded
to Ba2 (sf)
Cl. 2-A-3, Upgraded to Aa1 (sf); previously on Jul 17, 2023
Upgraded to Baa2 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-19
Cl. 1-A, Upgraded to Aa1 (sf); previously on Jul 10, 2023 Upgraded
to Aa2 (sf)
Cl. 2-A-3, Upgraded to Aa2 (sf); previously on Jul 10, 2023
Upgraded to Ba1 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-25
Cl. 1-A, Upgraded to Ba2 (sf); previously on Oct 24, 2019 Upgraded
to Caa2 (sf)
Cl. 2-A-4, Upgraded to A1 (sf); previously on Jul 17, 2023 Upgraded
to Baa3 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-26
Cl. 1-A, Upgraded to Ba3 (sf); previously on Jan 21, 2022 Upgraded
to Caa2 (sf)
Cl. 2-A-4, Upgraded to Aa1 (sf); previously on Jul 17, 2023
Upgraded to Baa1 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF18
Cl. A-1, Upgraded to Baa1 (sf); previously on Jul 17, 2023 Upgraded
to B1 (sf)
Cl. A-2B, Upgraded to B3 (sf); previously on Jul 17, 2023 Upgraded
to Caa2 (sf)
Cl. A-2C, Upgraded to B3 (sf); previously on Jul 17, 2023 Upgraded
to Caa2 (sf)
Cl. A-2D, Upgraded to B3 (sf); previously on Jul 17, 2023 Upgraded
to Caa2 (sf)
Issuer: GSAMP Trust 2005-AHL2
Cl. A-1B, Upgraded to Aaa (sf); previously on Jul 17, 2023 Upgraded
to A1 (sf)
Cl. A-2D, Upgraded to Aaa (sf); previously on Jul 17, 2023 Upgraded
to A2 (sf)
Issuer: Merrill Lynch Mortgage Investors Trust, Series 2003-HE1
Cl. M-1, Upgraded to Aaa (sf); previously on Jul 17, 2023 Upgraded
to Baa3 (sf)
Cl. M-2, Upgraded to Ba3 (sf); previously on Jul 17, 2023 Upgraded
to Caa3 (sf)
Issuer: New Century Home Equity Loan Trust, Series 2003-A
Cl. A, Downgraded to A2 (sf); previously on Jul 12, 2023 Downgraded
to Aa3 (sf)
Cl. M-1, Downgraded to Ba2 (sf); previously on Jun 9, 2020
Confirmed at Baa3 (sf)
Issuer: New Century Home Equity Loan Trust, Series 2004-2
Cl. A-1, Downgraded to Aa2 (sf); previously on Jul 12, 2023
Downgraded to Aa1 (sf)
Cl. A-2, Downgraded to Aa3 (sf); previously on Jul 12, 2023
Downgraded to Aa1 (sf)
Cl. A-4, Downgraded to Aa3 (sf); previously on Jul 12, 2023
Downgraded to Aa1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating actions reflect the current levels of credit enhancement
available to the bonds, the recent performance, analysis of the
transaction structures, and Moody's updated loss expectations on
the underlying pools.
Each of the upgraded bonds has seen strong growth in credit
enhancement since Moody's last review, which is the key driver for
these upgrades.
Moody's analysis of certain deals considered the impact of passing
performance triggers, which has resulted in shared principal
payments between the senior and subordinate bonds. This has caused
credit enhancement levels to remain flat for the senior bonds.
Moody's analysis also considered the existence of historical
interest shortfalls for some of the bonds. While shortfalls for
certain bonds 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 actions.
Other bonds in this review are currently impaired or expected to
become impaired. Moody's ratings on those bonds reflect any losses
to date as well as Moody's expected future loss. Moody's analysis
of these bonds reflects the potential for collateral volatility
given the number of deal-level and macro factors that can impact
collateral performance, the potential impact of any collateral
volatility on the model output, and the ultimate size or any
incurred and projected loss.
The rating upgrades 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, credit enhancement and other
qualitative considerations.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "US RMBS Surveillance Methodology"
published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
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.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Takes Action on $94MM of US RMBS Issued 2006-2007
-------------------------------------------------------------
Moody's Ratings, on Mayo 28, 2024, upgraded the ratings of four
bonds and downgraded the ratings of two bonds from three US
residential mortgage-backed transactions (RMBS), backed by subprime
mortgages issued by multiple issuers.
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: First Franklin Mortgage Loan Trust 2006-FF5
Cl. II-A-3, Upgraded to A3 (sf); previously on Oct 16, 2018
Upgraded to Baa3 (sf)
Cl. II-A-4, Upgraded to Baa1 (sf); previously on Oct 16, 2018
Upgraded to Ba1 (sf)
Issuer: J.P. Morgan Mortgage Acquisition Trust 2007-CH1,
Asset-Backed Pass-Through Certificates, Series 2007-CH1
Cl. MV-9, Downgraded to Caa1 (sf); previously on Nov 22, 2019
Upgraded to B1 (sf)
Cl. MV-10, Downgraded to Caa1 (sf); previously on Nov 22, 2019
Upgraded to B2 (sf)
Issuer: Nomura Home Equity Loan, Inc., Home Equity Loan Trust,
Series 2006-HE3
Cl. II-A-3, Upgraded to A2 (sf); previously on Jun 10, 2022
Upgraded to Baa3 (sf)
Cl. II-A-4, Upgraded to Baa2 (sf); previously on Jun 10, 2022
Upgraded to Ba1 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds. The rating downgrades are a result of considerable
outstanding interest shortfalls remaining on bonds with weak
interest reimbursement mechanisms.
J.P. Morgan Mortgage Acquisition Trust 2007-CH1 classes MV-9 and
MV-10 each has outstanding interest shortfalls since November 2022.
These shortfalls can only be repaid from excess interest once the
overcollateralization target is met and the overcollateralization
amount has remained below its target for more than the past decade.
As such, Moody's do not expect these interest shortfalls to be
repaid and the bonds will likely become impaired.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
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 in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, 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, credit enhancement and other
qualitative considerations.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades $64.9MM of US RMBS Issued 2005-2006
--------------------------------------------------------
Moody's Ratings has upgraded the ratings of six bonds from three US
residential mortgage-backed transactions (RMBS), backed by Alt-A
and subprime mortgages issued by multiple issuers.
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: Bear Stearns ALT-A Trust 2005-8
Cl. I-1A-1, Upgraded to A3 (sf); previously on Nov 14, 2022
Upgraded to Ba2 (sf)
Cl. I-1A-2, Upgraded to B1 (sf); previously on May 22, 2019
Upgraded to Caa2 (sf)
Cl. I-2A-1, Upgraded to Aa2 (sf); previously on Jul 6, 2023
Upgraded to Ba1 (sf)
Cl. I-2A-2, Upgraded to Aa2 (sf); previously on Jul 6, 2023
Upgraded to B2 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-18
Cl. 1-A, Upgraded to A1 (sf); previously on Nov 14, 2022 Upgraded
to Baa3 (sf)
Issuer: RAMP Series 2006-NC1 Trust
Cl. M-1, Upgraded to Aaa (sf); previously on Jul 6, 2023 Upgraded
to A2 (sf)
RATINGS RATIONALE
The rating actions reflect the current levels of credit enhancement
available to the bonds, the recent performance, the expected time
to maturity, and Moody's updated loss expectations on the
underlying pools. Each of the upgraded bonds have seen their
available credit enhancement grow since Moody's last review.
Moody's upgraded four bonds from Bear Stearns ALT-A Trust 2005-8.
Credit enhancement has grown for each of these bonds since Moody's
last review and Moody's loss expectations have been slightly
reduced, increasing loss coverage for each of the bonds. From late
2013 through early 2019, the Class I-1A-2 bonds have seen their
principal balance written-down by approximately $7.7 million. While
the principal balance has since been written back up, Moody's
analysis considered the amount of interest that was not paid on the
written-down portion of the bond throughout that earlier time
frame. In addition to the improved loss coverage levels, Moody's
upgrades on class I-2A-1 and I-2A-2 also reflect Moody's expected
time to the principal being paid in full. Based on the current
speed of amortization, Moody's expect each of these classes to be
paid in full in the next two years.
The upgrade actions on Class A-1 from CWABS Asset-Backed
Certificates Trust 2006-18 and Class M-1 from RAMP Series 2006-NC1
reflect Moody's updated loss expectations in relation to the
increased level of credit enhancement since Moody's last review of
these bonds.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
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 in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
No actions were taken on the other rated bonds in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations. These includes Moody's assessment of
interest and/or principal losses on each of the bonds.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Takes Various Actions on 102 iShares Fixed-Income ETFs
--------------------------------------------------------------
S&P Global Ratings took various actions on its fund credit quality
ratings (FCQRs) and fund volatility ratings (FVRs) on 102 iShares
fixed-income exchange-traded funds (ETFs).
A list of Affected Ratings can be viewed at:
https://rb.gy/xvbnl4
Rating Action Rationale
S&P said, "We raised eight FCQRs, lowered two, and affirmed 87. We
also placed our ratings on four ETFs on CreditWatch with negative
implications and on one ETF on CreditWatch with positive
implications. In general, changes in FCQRs stemmed from changes in
the constituents of the underlying indices and, consequently,
gradual changes in the weighted average credit risk of the ETFs'
portfolios of investments. The components of the underlying indices
typically change over time depending on market conditions and
issuance trends.
"We raised the FCQRs on the following ETFs by one notch because
they have displayed improving credit quality trends over the past
year. Specifically, these funds are holding higher-quality
investments, which is reflective of the composition of their
underlying indices."
-- iShares 0-5 Year Investment Grade Corporate Bond ETF FCQR
raised to 'A-f'
-- iShares Floating Rate Bond ETF FCQR raised to 'A+f'
-- iShares California Muni Bond ETF FCQR raised to 'AAf'
-- iShares New York Muni Bond ETF FCQR raised to 'AAf'
-- iShares National Muni Bond ETF FCQR raised to 'AAf'
-- iShares Short-Term National Muni Bond ETF FCQR raised to
'AA+f'
-- iShares iBonds Dec 2028 Term Corporate ETF FCQR raised to
'BBB+f'
-- iShares iBonds Dec 2029 Term Corporate ETF FCQR raised to
'BBB+f'
S&P said, "We lowered the FCQR by one notch on the BlackRock Short
Duration Bond ETF, an actively managed multisector ETF. The fund
recently underwent a strategy and index change to reflect a longer
duration profile. The duration target for the fund is now one to
three years, whereas the fund previously followed an ultra-short
strategy. We further observed that the ETF's credit quality
declined by investing in lower-rated securities. In our view, this
shift in strategy is consistent with a 'A-f' rating.
"We also lowered the FCQR by one notch on the iShares Broad USD
High Yield Corporate Bond ETF because we have observed the fund's
monthly credit scores have been within the 'Bf' range. Based on our
discussion with management, we understand that the underlying index
has experienced some rising stars activity (upgrades to investment
grade from speculative grade), which have caused those issuers to
roll out of the index. The effect has led to an overall credit
decline within the ETF as a result. In our view, we believe the
fund's credit profile is consistent with the 'Bf' FCQR.
"We placed our 'B+f' rating on the iShares iBoxx $ High Yield
Corporate Bond ETF (HYG) on CreditWatch with negative implications
following recent credit quality deterioration within the fund's
underlying investments. We may lower the rating on HYG if we
observe a continued deterioration in the fund's credit quality.
"Similarly, we placed our 'B+f' ratings on CreditWatch with
negative implications on the iShares High Yield Corporate Bond
BuyWrite Strategy ETF, the iShares Inflation Hedged High Yield Bond
ETF, and the iShares Interest Rate Hedged High Yield Bond ETF since
the ratings are tied to HYG. These funds invest a significant
portion of their assets within HYG. We will reevaluate the ratings
on these funds following our review of a longer track record of
their overall credit quality.
"We placed our 'BB+f' rating on the iShares J.P. Morgan EM Local
Currency Bond ETF (LEMB) on CreditWatch with positive implications
following a recent improvement in credit quality within the fund's
underlying investments. We believe this improvement in credit
quality followed an index rebalancing, which resulted in Egypt
being removed from the index portfolio and, subsequently, LEMB. We
may raise the rating on LEMB if we observe continued improvement in
the fund's credit quality.
"We also raised our FVRs on the nine funds listed below by one
category and affirmed 93 FVRs. For funds with short or no track
records, we evaluated available information, including a comparable
(proxy) fund, designated benchmark, or reference index
performance.
"Specifically, we raised the ratings on seven iBonds ETFs based on
the declining volatility of monthly returns. And we raised the
ratings on two iShares Interest Rate Hedged ETFs given the
volatility of monthly returns diminished in line with the ETFs'
strategy to manage interest rate risk. The funds seek to track the
investment results of the BlackRock Interest Rate Hedged Corporate
Bond and High Yield Bond Indices, which are designed to minimize
the interest rate risk exposure of a portfolio composed of U.S.
dollar-denominated bonds, by including a series of interest rate
swap contracts with different maturities."
-- iShares iBonds 2025 Term High Yield and Income ETF
-- iShares iBonds 2027 Term High Yield and Income ETF
-- iShares iBonds Dec 2025 Term Corporate ETF
-- iShares iBonds Dec 2025 Term Muni Bond ETF
-- iShares iBonds Dec 2027 Term Corporate ETF
-- iShares iBonds Dec 2027 Term Muni ETF
-- iShares iBonds Dec 2028 Term Treasury ETF
-- iShares Interest Rate Hedged Corporate Bond ETF
-- iShares Interest Rate Hedged High Yield Bond ETF
Key Rating Factors
S&P said, "For the FCQR on each fund, we first determined a
preliminary FCQR through our quantitative assessment of the fund's
portfolio credit risk using our fund credit quality matrix. The
assessment reflects the weighted average credit risk of the
portfolios of investments.
"We then conducted a qualitative assessment of the investment
manager's management and organization, risk management and
compliance, credit culture, and credit research. We view BlackRock
Fund Advisors as strong in these categories, where applicable. We
do not assess credit culture or credit research of funds that are
passively managed against an index.
"For each ETF, we conducted a portfolio risk assessment focusing on
counterparty risk, concentration risk, liquidity, and the fund
credit score cushion (the proximity of the preliminary FCQR to a
fund rating threshold). The rating sensitivity tests assess the
degree to which a fund's asset portfolio exposure to the fund's
largest obligor and lowest-credit-quality obligor, as well as
exposure to assets on CreditWatch with negative implications, could
lead to a fund downgrade.
"For the FVR on each fund, we first determined a preliminary FVR by
assessing the historical volatility and dispersion of fund returns
relative to reference indices. Next, we evaluated portfolio risk,
taking into account duration, credit exposures, liquidity,
derivatives, leverage, foreign currency, and investment
concentration. The majority of FVRs we raised were on iBonds ETFs,
owing to lower volatility of returns as a result of decreasing
duration as these funds move toward maturity.
"In determining the final FCQRs and FVRs, we also compared each ETF
with other funds that have similar portfolio strategies and
compositions. We focused on a holistic view of each fund's
portfolio credit quality and characteristics relative to its
peers."
The investment manager, BlackRock Fund Advisors, is a wholly owned
subsidiary of BlackRock Inc. (AA-/Stable/A-1+), which, as of
first-quarter 2024, had assets under management of $10.5 trillion
across equity, fixed-income, cash management, alternative
investment, real estate, and advisory strategies.
The funds are among more than 300 investment portfolios of the
iShares Trust. The trust was organized as a Delaware statutory
trust on Dec. 16, 1999, and is authorized to have multiple series
or portfolios. The trust is an open-end management investment
company registered under the Investment Company Act of 1940 as
amended. The offering of the trust's shares is registered under the
Securities Act of 1933 as amended. The shares of the trust are
listed and traded at market prices on national securities
exchanges.
State Street Bank & Trust Co. is the administrator, custodian, and
transfer agent for the fund. BlackRock Investments LLC, a
subsidiary of BlackRock Inc., is the fund's distributor.
S&P Global Ratings' FCQRs And FVRs
An S&P Global Ratings FCQR, also known as a "bond fund rating," is
a forward-looking opinion about the overall credit quality of a
fixed-income investment fund. FCQRs, identified by the 'f' suffix,
are assigned to fixed-income funds, actively or passively managed,
typically exhibiting variable net asset values.
The ratings reflect the credit risks of the portfolio investments,
the level of the fund's counterparty risk, and the risk of the
fund's management ability and willingness to maintain current fund
credit quality. Unlike traditional credit ratings (e.g., issuer
credit ratings), an FCQR does not address a fund's ability to meet
payment obligations and is not a commentary on yield levels.
An S&P Global Ratings FVR is a forward-looking opinion about a
fixed-income investment fund's volatility of returns relative to
that of a "reference index" denominated in the base currency of the
fund. A reference index is composed of government securities
associated with the fund's base currency. FVRs are not globally
comparable.
FVRs indicate our expectation of a fund's future volatility of
returns to remain consistent with its historical volatility of
returns. FVRs are based on our view of a fund's sensitivity to
interest rate risk, credit risk, and liquidity risk, as well as
other factors that may affect returns such as use of derivatives,
use of leverage, exposure to foreign currency risk, and investment
concentration and fund management.
S&P said, "We use different symbology to distinguish FVRs from our
traditional issue or issuer credit ratings. We do so because FVRs
do not reflect creditworthiness but rather our view of a fund's
volatility of returns.
"We review pertinent fund information and portfolio reports monthly
as part of our surveillance process of our fund credit quality and
volatility ratings."
[*] S&P Takes Various Actions on 54 Classes From 18 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 54 ratings from 18 U.S.
RMBS transactions issued between 2003 and 2007. The review yielded
six upgrades, 12 downgrades, three discontinuances, and 33
affirmations.
A list of Affected Ratings can be viewed at:
https://rb.gy/aafaii
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; 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.
"Five of the downgrades reflect our assessment of reduced interest
payments due to loan modifications and other credit-related events.
To determine the maximum potential rating for these securities, we
consider the amount of interest the security has received to date
versus how much it would have received absent such credit-related
events, as well as interest reduction amounts that we expect during
the remaining term of the security.
"In accordance with our surveillance and withdrawal policies, we
discontinued three ratings from Morgan Stanley Mortgage Loan Trust
2006-15XS with missed interest payments during recent remittance
periods. We previously lowered our ratings on these classes to 'D
(sf)' because of missed interest payments. We view a subsequent
upgrade to a rating higher than 'D (sf)' to be unlikely under the
relevant criteria for these classes. In addition, from the same
transaction, we subsequently discontinued the ratings on two of the
lowered ratings since we view a subsequent upgrade to a rating
higher than 'D (sf)' to be unlikely under the relevant criteria."
A majority of the classes with ratings raised have the benefit of
failing cumulative loss triggers and/or decreased delinquencies.
Ultimately, S&P believes these classes have credit support that is
sufficient to withstand losses at higher rating levels.
*********
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