/raid1/www/Hosts/bankrupt/TCR_Public/240714.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, July 14, 2024, Vol. 28, No. 195
Headlines
AIMCO CLO 16: S&P Assigns BB- (sf) Rating on Class E-R Notes
AMERICAN CREDIT 2024-3: S&P Assigns Prelim 'BB-' Rating on E Notes
ARES LOAN VI: Fitch Assigns 'BB-sf' Rating on Class E Notes
BALLYROCK CLO 14: S&P Assigns Prelim BB- (sf) Rating on D-R Notes
BANK 2018-BNK13: Fitch Lowers Rating on 2 Tranches to CCCsf
BENEFIT STREET XV: Fitch Assigns 'B-sf' Rating on Class F-R Notes
BRAVO RESIDENTIAL 2024-NQM4: Fitch Gives B(EXP) Rating on B-2 Notes
CAPITAL ONE: Fitch Affirms 'BBsf' Rating on Class 2002-1D Debt
CARLYLE US 2017-4: Moody's Affirms Ba3 Rating on $27MM Cl. D Notes
CARLYLE US 2022-4: Fitch Assigns BB-(EXP)sf Rating on Cl. E-R Notes
CARVAL CLO X-C: S&P Assigns Prelim. BB- (sf) Rating on Cl. E Notes
CD 2017-CD4: Fitch Lowers Rating on 2 Tranches to 'B-sf'
COMM 2018-COR3: Fitch Lowers Rating on Class D Certs to CCCsf
CREDIT SUISSE 2004-AR3: S&P Lowers Class CB2 Certs Rating to D(sf)
DRYDEN 41 SENIOR: Moody's Cuts Rating on $8.25MM F-R Notes to Caa3
DRYDEN 49 SENIOR: Moody's Lowers Rating on $7.75MM F Notes to Caa3
DRYDEN 85: S&P Assigns Prelim BB- (sf) Rating ON Class E-R Notes
ELMWOOD CLO 30: S&P Assigns B- (sf) Rating on Class F Notes
EXTENET ISSUER 2024-1: Fitch Gives BB-(EXP) Rating on Class C Notes
FRONTIER ISSUER: Fitch Assigns 'BB-sf' Rating on Class C Notes
GALAXY XXI CLO: Moody's Cuts Rating on $8MM Cl. F-R Notes to Caa1
JP MORGAN 2020-MKST: Moody's Lowers Rating on Cl. D Certs to B3
MORGAN STANLEY 2016-C28: Fitch Lowers Rating on 2 Tranches to CC
MORGAN STANLEY 2016-UBS11: Fitch Affirms CCC Rating on 2 Tranches
MOSAIC SOLAR 2022-2: Fitch Lowers Rating on Class D Notes to 'Bsf'
OCP CLO 2019-17: S&P Assigns 'BB- (sf)' Rating on Cl. E-R2 Notes
OCP CLO 2022-25: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
OCTAGON 52: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
OCTAGON 69: Fitch Assigns 'BB-sf' Rating on Class E Notes
REGATTA FUNDING XIII: Moody's Ups Rating on $35MM D Notes to Ba3
ROCKFORD TOWER 2017-3: Moody's Affirms Ba3 Rating on Class E Notes
SEQUOIA MORTGAGE 2024-7: Fitch Gives B+(EXP) Rating on Cl. B4 Certs
SLM PRIVATE 2003-B: Fitch Lowers Rating on Cl. B Notes to 'Bsf'
SOUND POINT 39: Fitch Assigns 'BB-sf' Rating on Class E Notes
SOUND POINT VI-R: Moody's Cuts Rating on $12MM Cl. F Notes to Caa2
STRATA CLO II: S&P Affirms BB- (sf) Rating on Class E Notes
TRALEE CLO IV: S&P Lowers Class E Notes Rating to 'B+ (sf)'
UBS-BARCLAYS 2013-C5: Moody's Lowers Rating on Cl. E Certs to C
WELLS FARGO 2024-5C1: Fitch Assigns B-(EXP)sf Rating on G-RR Certs
[*] Moody's Takes Action on $16MM of US RMBS Issued 2003-2005
[*] Moody's Takes Action on $30MM of US RMBS Issued 2004-2007
[*] Moody's Upgrades Ratings on $72MM of US RMBS Issued 2004-2006
[*] Moody's Upgrades Ratings on $72MM of US RMBS Issued 2005-2007
*********
AIMCO CLO 16: S&P Assigns BB- (sf) Rating on Class E-R Notes
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S&P Global Ratings assigned its ratings to the class A-L loans and
class A-R, B-R, C-R, D-1R, D-2R, and E-R replacement debt from
AIMCO CLO 16 Ltd./AIMCO CLO 16 LLC, a CLO originally issued in
December 2021 that is managed by Allstate Investment Management Co.
At the same time, S&P withdrew its ratings on the original class
A-L loan, and class A, B, C, D, and E debt following payment in
full.
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 non-call period was extended to July 17, 2026.
-- The reinvestment period was extended to July 17, 2029.
-- The legal final maturity dates for the replacement debt and the
existing subordinated debt were extended to July 17, 2037.
-- The required minimum overcollateralization coverage ratios was
amended.
-- Additional subordinated debt of $2.40 million was issued on the
refinancing date.
-- Collateral obligations related to certain industries were
prohibited.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-L loans, $212.25 million: Three-month CME term SOFR +
1.40%
-- Class A-R, $107.75 million: Three-month CME term SOFR + 1.40%
-- Class B-R, $60.00 million: Three-month CME term SOFR + 1.65%
-- Class C-R, $30.00 million: Three-month CME term SOFR + 1.95%
-- Class D-1R, $30.00 million: Three-month CME term SOFR + 2.90%
-- Class D-2R, $6.25 million: Three-month CME term SOFR + 4.20%
-- Class E-R, $13.75 million: Three-month CME term SOFR + 5.60%
Original debt
-- Class A-L loan, $222.25 million: Three-month CME term SOFR +
1.13% + CSA(i)
-- Class A, $95.25 million: Three-month CME term SOFR + 1.13% +
CSA(i)
-- Class B, $62.50 million: Three-month CME term SOFR + 1.65% +
CSA(i)
-- Class C, $30.00 million: Three-month CME term SOFR + 2.00% +
CSA(i)
-- Class D, $30.00 million: Three-month CME term SOFR + 2.90% +
CSA(i)
-- Class E, $18.75 million: Three-month CME term SOFR + 6.20% +
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
AIMCO CLO 16 Ltd./AIMCO CLO 16 LLC
Class A-L loans, $212.25 million: AAA (sf)
Class A-R, $107.75 million: AAA (sf)
Class B-R, $60.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-1R (deferrable), $30.00 million: BBB- (sf)
Class D-2R (deferrable), $6.25 million: BBB- (sf)
Class E-R (deferrable), $13.75 million: BB- (sf)
Ratings Withdrawn
AIMCO CLO 16 Ltd./AIMCO CLO 16 LLC
Class A-L loan to NR from 'AAA (sf)'
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 Debt
AIMCO CLO 16 Ltd./AIMCO CLO 16 LLC
Subordinated notes, $50.10 million: NR
NR--Not rated.
AMERICAN CREDIT 2024-3: S&P Assigns Prelim 'BB-' Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to American
Credit Acceptance Receivables Trust 2024-3's automobile
receivables-backed notes.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of July 5,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The availability of approximately 64.56%, 58.02%, 47.40%,
38.45%, and 34.07% credit support (hard credit enhancement and
haircut to excess spread) for the class A, B, C, D, and E notes,
respectively, based on stressed cash flow scenarios. These credit
support levels provide at least 2.35x, 2.10x, 1.70x, 1.37x, and
1.20x coverage of S&P's expected cumulative net loss of 27.25% for
the class A, B, C, D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.37x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB- (sf)' ratings on
the class A, B, C, D, and E notes, respectively, are within its
credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under our stressed cash flow modeling
scenarios, which we believe are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the series' subprime
automobile loans, our view of the collateral's credit risk, and our
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 American Credit Acceptance
LLC as servicer, and our view of the company's underwriting and
backup servicing arrangement with Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with its sector benchmark.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
American Credit Acceptance Receivables Trust 2024-3
Class A, $198.46 million: AAA (sf)
Class B, $44.62 million: AA (sf)
Class C, $87.15 million: A (sf)
Class D, $71.92 million: BBB (sf)
Class E, $41.47 million: BB- (sf)
ARES LOAN VI: Fitch Assigns 'BB-sf' Rating on Class E Notes
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Fitch Ratings has assigned ratings and Rating Outlooks to Ares Loan
Funding VI, Ltd.
Entity/Debt Rating
----------- ------
Ares Loan
Funding VI, Ltd.
Class A-1 LT AAAsf New Rating
Class A-2 LT AAAsf New Rating
Class B LT AAsf New Rating
Class C LT Asf New Rating
Class D LT BBB-sf New Rating
Class E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Ares Loan Funding VI, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Ares
CLO Management LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $500 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.06, versus a maximum covenant, in accordance with
the initial expected matrix point of 24.6. 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
98.2% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.37% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.29%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'BBB+sf' and 'AA+sf' for class A-2, between 'BB+sf' and 'A+sf' for
class B, between 'B+sf' and 'BBB+sf' for class C, between less than
'B-sf' and 'BB+sf' for class D, and between less than 'B-sf' and
'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1 and class A-2
notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'Asf' for
class D, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Ares Loan Funding
VI, 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.
BALLYROCK CLO 14: S&P Assigns Prelim BB- (sf) Rating on D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the
replacement class A-1a-R, A-1b-R, A-2-R, B-R, C-1-R, C-2-R, and D-R
debt and proposed new class X-R debt from Ballyrock CLO 14 Ltd., a
CLO originally issued in January 2021 that is managed by Fidelity
Management & Research Co. LLC.
The preliminary ratings are based on information as of July 9,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the July 12, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. At that
time, S&P expects to withdraw our ratings on the original debt and
assign ratings to the replacement debt. However, if the refinancing
doesn't occur, it may affirm its ratings on the original debt and
withdraw its preliminary ratings on the replacement debt.
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class A-1a-R and class A-1b-R debt is expected
to be issued at a higher spread over three-month CME term SOFR than
the original debt over three-month LIBOR.
-- The replacement class B-R, C-1-R, and D-R debt is expected to
be issued at a higher spread over three-month CME term SOFR than
the original debt over three-month LIBOR.
-- The original class A-1 debt is expected to be split into senior
A-1a-R debt and junior A-1b-R debt.
-- The original class C debt is expected to be split into senior
C-1-R debt and junior C-2-R debt.
-- The replacement class A-1a-R, A-1b-R, C-2-R, and D-R debt is
expected to be issued with a lower par subordination than the
original debt.
-- Class X-R debt is expected to be issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds during the first eight payment dates beginning
with the payment date in January 2025.
-- The stated maturity, reinvestment period, and non-call period
are expected to be extended 3.5 years each.
-- The target par amount is expected.000000 to increase to $500.00
million from $400.00 million.
-- The issuer is adding provisions related to workout assets.
-- The concentration limitations of the collateral portfolio's
investment guidelines will be amended.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Ballyrock CLO 14 Ltd./Ballyrock CLO 14 LLC
Class X-R, $2.00 million: AAA (sf)
Class A-1a-R, $320.00 million: AAA (sf)
Class A-1b-R, $10.00 million: AAA (sf)
Class A-2-R, $50.00 million: AA (sf)
Class B-R (deferrable), $30.00 million: A (sf)
Class C-1-R (deferrable), $30.00 million: BBB- (sf)
Class C-2-R (deferrable), $5.00 million: BBB- (sf)
Class D-R (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $45.40 million: Not rated
BANK 2018-BNK13: Fitch Lowers Rating on 2 Tranches to CCCsf
-----------------------------------------------------------
Fitch Ratings has downgraded six and affirmed 10 classes of the
BANK 2018-BNK13 transaction. Following the downgrades to classes D
and X-D, the classes were assigned Negative Rating Outlooks.
Additionally, the Outlooks for classes A-S, B, C and X-B have been
revised to Negative from Stable.
In addition, Fitch has affirmed 12 classes of the BANK 2018-BNK10
transaction. The 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-BNK10
A-4 065404BA2 LT AAAsf Affirmed AAAsf
A-5 065404BB0 LT AAAsf Affirmed AAAsf
A-S 065404BC8 LT AAAsf Affirmed AAAsf
A-SB 065404AZ8 LT AAAsf Affirmed AAAsf
B 065404BD6 LT AA-sf Affirmed AA-sf
C 065404BE4 LT A-sf Affirmed A-sf
D 065404AA3 LT BBB-sf Affirmed BBB-sf
E 065404AC9 LT BB-sf Affirmed BB-sf
X-A 065404BF1 LT AAAsf Affirmed AAAsf
X-B 065404BG9 LT A-sf Affirmed A-sf
X-D 065404AN5 LT BBB-sf Affirmed BBB-sf
X-E 065404AQ8 LT BB-sf Affirmed BB-sf
BANK 2018-BNK13
A-2 06539LAX8 LT AAAsf Affirmed AAAsf
A-3 06539LAY6 LT AAAsf Affirmed AAAsf
A-4 06539LBA7 LT AAAsf Affirmed AAAsf
A-5 06539LBB5 LT AAAsf Affirmed AAAsf
A-S 06539LBE9 LT AAAsf Affirmed AAAsf
A-SB 06539LAZ3 LT AAAsf Affirmed AAAsf
B 06539LBF6 LT AA-sf Affirmed AA-sf
C 06539LBG4 LT A-sf Affirmed A-sf
D 06539LAJ9 LT BB-sf Downgrade BBB-sf
E 06539LAL4 LT CCCsf Downgrade BB-sf
F 06539LAN0 LT CCsf Downgrade CCCsf
X-A 06539LBC3 LT AAAsf Affirmed AAAsf
X-B 06539LBD1 LT AAAsf Affirmed AAAsf
X-D 06539LAA8 LT BB-sf Downgrade BBB-sf
X-E 06539LAC4 LT CCCsf Downgrade BB-sf
X-F 06539LAE0 LT CCsf Downgrade CCCsf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Transaction-level 'Bsf'
ratings case losses are 6.20% in BANK 2018-BNK13 and 4.06% in BANK
2018-BNK10. The BANK 2018-BNK13 transaction has seven loans (18.0%
of the pool) that have been identified as Fitch Loans of Concern
(FLOCs), including one loan (1.75%) in special servicing. The BANK
2018-BNK10 transaction also has seven FLOCs (17.8%).
Downgrades of classes D, E, F, X-D, X-E and X-F in the BANK
2018-BNK13 transaction reflect increased pool loss expectations
driven by performance deterioration, most notably from Ditson
Building (4.6%), as well as the value decline of the specially
serviced loan, Regal Cinemas Lincolnshire. The Negative Outlooks on
classes A-S, B, C and X-B reflect the overall office concentration
(38.6% of the pool) as well as concerns with the ultimate
resolution of Fair Oaks Mall (3.7%) given performance declines and
the prolonged timeline for the property's proposed redevelopment.
The Negative Outlooks for classes D, E, X-D and X-E in the BANK
2018-BNK10 transaction reflect concerns with underperforming office
and hotel loans in the top 15 including the Wisconsin Hotel
Portfolio (5.3%), 2020 Northwest 4th Avenue (3.6%), One Kennedy
Square (2.8%) and One Newark Center (2.7%).
The largest contributor to expected loss in the BANK 2013-BNK13
transaction is Regal Cinemas Lincolnshire, which transferred to
special servicing in March 2023 due to imminent default. Regal
Cinemas (100% NRA) filed bankruptcy in September 2022. The lease
was subsequently rejected through the bankruptcy proceedings. The
tenant continued to pay rent until February 2023 but has since
vacated. A receiver was appointed and is marketing both a sale and
lease of the building.
According to servicer updates, the value of the building has
declined significantly from issuance primarily due to an existing
development agreement containing restrictive covenants on property
use, prohibiting a repurpose of the building for anything other
than a theater. Due to the impact on value from these covenants
that limit redevelopment opportunities, Fitch expects significant
losses. Fitch's 'Bsf' Rating Case Loss (prior to concentration
add-on) of 93.5% is based on the June 2023 appraised value,
representing an approximately 90% decline compared to issuance.
The second largest contributor to expected loss in the BMARK
2018-BNK13 transaction is the Ditson Building, which is secured by
a 58,850-sf office property located in Midtown Manhattan. The loan
has been designated as FLOC due to declining occupancy.
The property's largest tenant, TTC USA Consulting (47.2% of NRA and
46% of total base rent), vacated at its lease expiration in June
2022. As a result, occupancy declined to approximately 43% from 91%
at YE 2021 and 100% at YE 2020. NOI previously declined 20.7% to YE
2021 from YE 2020 due to a nearly 15% drop in total revenue as a
result of significantly lower base rental income. Servicer-reported
NOI DSCR was 0.39x at YE 2023 down from 0.82x at YE 2021, 1.04x at
YE 2020 and 1.42x at YE 2019.
Fitch's 'Bsf' Rating Case Loss (prior to concentration add-on) of
31.8% is based on an 9.50% cap rate and a 20% stress to the YE 2021
NOI.
The Fair Oaks Mall loan is the third largest contributor to
expected loss in BANK 2018-BNK13. The 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 gives
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 gave 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.
The largest FLOC and contributor to expected losses in the BANK
2018-BNK10 transaction is Wisconsin Hotel Portfolio, which is
secured by a 1,255-key hotel portfolio across five different
submarkets in Wisconsin, including Milwaukee, Madison and Fond Du
Lac. Portfolio occupancy has improved to 57% at YE 2023 from 37% at
YE 2022, but remains below the pre-pandemic level of 64%. Despite
the increase in occupancy, the servicer-reported YE 2023 NOI DSCR
remains relatively unchanged at 0.78x compared to 0.79x for the
year prior.
Fitch's 'Bsf' rating case loss of 15.7% (prior to concentration
adjustments) is based on an 11.50% cap rate on the YE 2023 NOI, and
factors a higher probability of default accounting for secondary
and tertiary market locations and continued portfolio
underperformance.
The second largest contributor to expected losses in BANK
2018-BNK10 is One Newark Center, secured by a portion of a
418,000-sf office property located in the Newark CBD. The loan's
collateral consists of floors 6-22 of an office building and an
attached parking garage. Floors 1-5 are owned and occupied by Seton
Hall Law School.
Occupancy declined to 68.8% as of December 2023 from 94% in
December 2020 due to a number of tenants vacating in 2021 and 2022.
Global Crossing (8% of NRA) vacated upon its 2021 lease expiration,
while Sedgwick (6%) vacated prior to its 2025 lease expiration.
Additionally, K&L Gates reduced its space to 26,074 sf (6.2%) from
52,148 sf (12.5%). The largest tenants include the U.S. Government
IRS (10.8%; June 2028 LXD), K&L Gates (6.2%; August 2032), and
Littler Mendelson P.C. (5.8%; May 2027). There is limited rollover
scheduled through 2026.
The NOI DSCR dropped at YE 2021 as the loan started amortizing in
January 2021. The YE 2023 NOI DSCR was 1.39x, compared with 1.10x
at YE 2022, 1.33x at YE 2021, 2.30x at YE 2020, 2.87x at YE 2019,
and 2.75x at YE 2018. Fitch's 'Bsf' rating case loss of 27.9%
(prior to concentration add-ons) reflects a 10% cap rate, 10%
stress to the YE 2023 NOI and factors a higher probability of
default due to the sustained lower occupancy.
Changes in Credit Enhancement (CE): As of the May 2024 distribution
date, the aggregate balances of the BANK 2018-BNK13 and BANK
2018-BNK10 transactions have been paid down by 13.4% and 4.9%,
respectively, since issuance. The BANK 2018-BNK13 transaction
includes one loan (0.42% of the pool) that has fully defeased.
There are three loans (7.9% of the pool) that are defeased within
the BANK 2018-BNK10 transaction.
Cumulative interest shortfalls of approximately $667,000 are
affecting the non-rated class G in BANK 2018-BNK13 and
approximately $693,000 are affecting the non-rated class G in BANK
2018-BNK10.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not likely due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly or interest shortfalls occur.
For the BANK 2018-BNK13 transaction, a downgrade to the junior
'AAAsf' rated class A-S would be likely with continued performance
deterioration of the FLOCs, increased expected losses and limited
to no improvement in class CE, or if interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs or more loans than expected
experience performance deterioration or default at or before
maturity.
Downgrades to 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 or with greater certainty of losses on FLOCs. Loans of
particular concern in the BANK 2018-BNK13 transaction include
Ditson Building, Fair Oaks Mall and Regal Cinemas Lincolnshire.
Loans of particular concern in the BANK 2018-BNK10 transaction
include Wisconsin Hotel Portfolio, 2020 Northwest 4th Avenue, One
Kennedy Square and One Newark Center.
Downgrades to classes with distressed ratings 'CCCsf' and 'CCsf'
would occur if additional loans transfer to special servicing 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' categories may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance on the FLOCs.
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 the '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.
Upgrades to distressed ratings are not expected but would be
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.
BENEFIT STREET XV: Fitch Assigns 'B-sf' Rating on Class F-R Notes
-----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Benefit
Street Partners CLO XV, Ltd. Reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Benefit Street
Partners CLO XV, Ltd.
A-1 08179MAA7 LT PIFsf Paid In Full AAAsf
X LT NRsf New Rating
A-1-R LT NRsf New Rating
A-2-R LT AAAsf New Rating
B-R LT AAsf New Rating
C-R LT Asf New Rating
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E-R LT BB-sf New Rating
F-R LT B-sf New Rating
TRANSACTION SUMMARY
Benefit Street Partners CLO XV, Ltd. (the issuer) is an arbitrage
cash flow collateralized loan obligation (CLO) managed by Benefit
Street Partners L.L.C. that originally closed in August 2018. On
July 8, 2024 (the refinancing date), the CLO's secured notes will
be refinanced in whole from refinancing proceeds. The secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first-lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.75, versus a maximum covenant, in
accordance with the initial matrix point of 26.5. Issuers rated in
the 'B' rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.21% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.81% versus a
minimum covenant, in accordance with the initial matrix point of
72.6%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBBsf' and 'AA+sf' for class A-2-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, between less
than 'B-sf' and 'B+sf' for class E-R, and between less than 'B-sf'
and 'Bsf' for class F-R
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2-R notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in 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, 'BBB+sf' for class E-R,
and 'BB+sf' for class F-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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Benefit Street
Partners CLO XV, 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.
BRAVO RESIDENTIAL 2024-NQM4: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to BRAVO Residential
Funding Trust 2024-NQM4 (BRAVO 2024-NQM4).
Entity/Debt Rating
----------- ------
BRAVO 2024-NQM4
A-1A LT AAA(EXP)sf Expected Rating
A-1B LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
FB LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The BRAVO 2024-NQM4 notes are supported by 548 loans with a total
balance of approximately $244 million as of the cutoff date.
Approximately 87.2% of the loans in the pool were originated by
Citadel Servicing Corporation (d/b/a Acra Lending), 12.3% by First
Guaranty Mortgage Corporation [First Guaranty], and the remaining
approximately 0.5% of the loans were originated by various
originators. Approximately 87.2% of the loans will primarily be
serviced by Citadel [primarily subserviced by ServiceMac] and the
remaining approximate 12.8% of the loans will be serviced by
Nationstar Mortgage LLC (d/b/a Rushmore).
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.3% above a long-term sustainable level (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.
Non-Qualified Mortgage Credit Quality (Mixed): The collateral
consists of 548 loans totaling around $244 million and seasoned at
around 32 months in aggregate, calculated by Fitch as the
difference between the origination date and the cutoff date. The
borrowers have a strong credit profile, a 731 model FICO and a 48%
debt-to-income (DTI) ratio, including mapping for debt service
coverage ratio (DSCR) loans, and low leverage of 63% for a
sustainable loan-to-value (sLTV) ratio.
Of the pool, 54.8% of loans are treated as owner-occupied, while
45.2% are treated as an investor property or second home, which
include loans to foreign nationals or loans where the residency
status was not confirmed. Additionally, 9% of the loans were
originated through a retail channel. Of the loans, 56% are
non-qualified mortgages (non-QMs), 0.4% are safe-harbor qualified
mortgages (SHQM), 0.07% are rebuttable presumption QM (HPQM), while
the Ability to Repay/Qualified Mortgage Rule (ATR) is not
applicable for the remaining portion.
Loan Documentation (Negative): Approximately 93.3% of the pool
loans were underwritten to less than full documentation, as
determined by Fitch, and approximately 47.1% were underwritten to a
12-month or 24-month bank statement program for verifying income,
which is not consistent with Appendix Q standards and 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)
ATR, which reduces the risk of borrower default arising from lack
of affordability, misrepresentation or other operational quality
risks due to the rigors of the ATR mandates regarding underwriting
and documentation of a borrower's ability to repay.
Additionally, approximately 40.86% of the loans are a DSCR product,
while the remainder comprise a mix of asset depletion, profit and
loss (P&L), 12- or 24-month tax returns, award letter and written
verification of employment (WVOE) products. Separately, 42 loans
were originated to foreign nationals or the borrower residency
status of the loans could not be confirmed.
Modified Sequential-Payment Structure (Mixed): The structure
distributes principal pro rata among the senior notes, while
shutting out the subordinate bonds from principal until all senior
classes are reduced to zero. If a cumulative loss trigger event or
delinquency trigger event occurs in a given period, principal will
be distributed sequentially to class A-1A, A-1B, A-2 and A-3 notes
until they are reduced to zero.
The structure has a step-up coupon for the senior classes (A-1A,
A-1B, A-2 and A-3). After four years, the senior classes pay the
lesser of a 125bps increase to the fixed coupon but are limited by
the net weighted average coupon (WAC) rate. Fitch expects the
senior classes to be capped by the net WAC in its analysis. On or
after July 2028, the classes M-1, B-1, andB-2 interest rates will
be 0.00% for as long as there are unpaid interest amounts due to
the senior classes or to the extent they are still outstanding.
This helps ensure payment of the 125 bps step up on the senior
bonds on or after July 2028.
The unrated class B-3 interest will redirect toward the senior cap
carryover amount for as long as there is an unpaid cap carryover
amount. This increases the P&I allocation for the senior classes as
long as class B-3 is not written down and helps ensure payment of
the 125bps step up.
While Fitch has previously analyzed 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
transaction structure.
No P&I Advancing (Mixed): The servicers will not be advancing
delinquent monthly payments of P&I. As P&I advances made on behalf
of loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level loss severities
(LS) are less for this transaction than for those where the
servicer is obligated to advance P&I.
The downside to this is the additional stress on the structure, as
liquidity is limited in the event of large and extended
delinquencies. The structure has enough internal liquidity through
the use of principal to pay interest, excess spread and credit
enhancement (CE) to pay timely interest to senior notes during
stressed delinquency and cash flow periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 41.0% at 'AAA'. The
analysis indicates that there is some potential for rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class, excluding those being
assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by multiple third-party review firms. The third-party due
diligence described in Form 15E focused on credit, compliance, and
property valuation review. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustments to
its analysis:
- A 5% PD credit was applied at the loan level for all loans graded
either 'A' or 'B';
- Fitch lowered its loss expectations by approximately 32 bps as a
result of the diligence review.
ESG CONSIDERATIONS
BRAVO 2024-NQM4 has an ESG Relevance Score of '4' for Transaction
and Operational Risk due to increased operational risk considering
the Tier 2 R&W framework with an unrated counterparty, which has a
negative impact on the credit profile, and is relevant to the
rating(s) in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CAPITAL ONE: Fitch Affirms 'BBsf' Rating on Class 2002-1D Debt
--------------------------------------------------------------
Fitch Ratings has affirmed the long-term ratings assigned to
Capital One Multi-Asset Execution Trust (COMET) notes. The Rating
Outlook remains Stable for all rated notes.
The affirmation of the rated notes reflects available credit
enhancement (CE) and performance to date. The Stable Outlook
reflects Fitch's expectation that performance and loss multiples
will remain supportive of the rating.
Entity/Debt Rating Prior
----------- ------ -----
Capital One
Multi-Asset
Execution Trust
Card Series
2002-1D LT BBsf Affirmed BBsf
2005-3B 14041NCG4 LT Asf Affirmed Asf
2009-A C LT BBBsf Affirmed BBBsf
2009-C B LT Asf Affirmed Asf
2017-5A 14041NFP1 LT AAAsf Affirmed AAAsf
2019-3A 14041NFV8 LT AAAsf Affirmed AAAsf
2021-1A 14041NFW6 LT AAAsf Affirmed AAAsf
2021-2A 14041NFX4 LT AAAsf Affirmed AAAsf
2021-3A 14041NFY2 LT AAAsf Affirmed AAAsf
2022-1A 14041NFZ9 LT AAAsf Affirmed AAAsf
2022-2A 14041NGA3 LT AAAsf Affirmed AAAsf
2022-3A 14041NGB1 LT AAAsf Affirmed AAAsf
2023-1A 14041NGD7 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Receivables' Performance and Collateral Characteristics: Chargeoff
performance has deteriorated over the last year. The 12-month
average gross chargeoff rate as of the June 2024 distribution date
was 3.10%, increased from 2.12% one year ago but lower than the
2019 full year average of 3.62%. The weakening trend in chargeoff
performance reflects the ongoing effects of persistently high
inflation and prolonged period of elevated interest rates on
consumers, with lower income borrowers remaining more vulnerable
amid the recent rise in unemployment. Fitch has maintained a
conservative chargeoff steady state assumption at 6.00%.
Monthly payment rate (MPR), which includes principal and finance
charge collections and is a measure of how quickly credit card
holders are paying off their credit card debts, has slightly
decreased over the past year. The 12-month average MPR as of the
June 2024 distribution date was 47.35%, compared to 48.77% one year
ago. Fitch expects further performance weakening as elevated
interest rates pressure borrowers directly impacting repayment on
card balances. Fitch has maintained its conservative MPR steady
state at 27.00% due to the expected normalization leading to a
decrease in MPR.
The 12-month average gross yield as of the June 2024 distribution
date was 27.90%, which comprises of finance charges, fees, and
interchange. This compares with the 12-month average of 26.87% as
of the June 2023 distribution date. As part of its gross yield
steady state analysis, Fitch applies a haircut to interchange and
fees to account for potential future regulatory or competitive
factors that can affect yields, such as the Consumer Financial
Protection Bureau's Credit Card Penalty Fees Final Rule. Fitch has
maintained its steady state at 20.5%.
CE remains sufficient with loss multiples and are in line with the
current ratings under each rating category. The Stable Outlook on
the notes reflects Fitch's expectation that performance and loss
multiples will remain supportive of these ratings.
Originator and Servicer Quality: Fitch considers Capital One,
National Association (A-/F1/Stable) an effective and capable
originator and servicer given its extensive track record. Any
deterioration in the financial condition of Capital One, National
Association may affect the performance of the pool of receivables
backing the COMET notes
Counterparty Risk: The notes' ratings are dependent on the
financial strength of certain counterparties. Fitch believes this
risk is currently mitigated as evidenced by the ratings of the
applicable counterparties to the transactions.
Interest Rate Risk: Interest rate risk is currently mitigated by
the available CE. For the class A notes, total credit enhancement
of 21.00% is provided by 9.00% subordination of class B notes,
9.00% subordination of class C notes and 3.00% subordination of
class D notes. The class B benefits from 12.00% credit enhancement
achieved through 9.00% subordination of class C and 3.00%
subordination of class D. The class C benefits from 4.00% credit
enhancement achieved through 3.00% subordination of class D and a
reserve account. The class D benefits from a reserve account.
Fitch analyzed characteristics of the underlying collateral to
better assess overall asset performance. This supplements Fitch's
analysis of the originator's historical data when determining the
following steady state performance assumptions and stresses:
Steady State:
- Annualized Gross Chargeoffs: 6.00%;
- Monthly Payment Rate (MPR): 27.00%;
- Annualized Gross Yield: 20.50%;
- Purchase Rate: 100.00%.
Rating Case Assumption (for 'AAAsf', 'Asf', 'BBBsf', and 'BBsf'):
Chargeoffs (multiple): 4.50x/3.00x/2.25x/1.75x
Payment Rate (haircut): 55.00/46.20/39.60/30.80;
Gross Yield (haircut): 35.00/25.00/20.00/15.00;
Purchase Rate (haircut): 50.00/40.00/35.00/30.00.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Rating sensitivity to increased chargeoff rate:
Current ratings for class A, B, C and D notes (Steady State:
6.00%): 'AAAsf'/'Asf'/'BBBsf'/'BBsf', respectively;
- Increase Steady State by 25%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Increase Steady State by 50%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Increase Steady State by 75%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf'.
Rating sensitivity to reduced MPR:
Current ratings for class A, B, C and D notes (Steady State: 27%):
'AAAsf'/'Asf'/BBBsf'/'BBsf', respectively;
- Reduce Steady State by 15%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Reduce Steady State by 25%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Reduce Steady State by 35%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf'.
Rating sensitivity to reduced purchase rate:
Current ratings for class A, B, C and D notes (Steady State: 100%):
'AAAsf'/'Asf'/'BBBsf'/'BBsf', respectively;
- Reduce Steady State by 50%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Reduce Steady State by 75%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Reduce Steady State by 100%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf'.
Rating sensitivity to reduced yield:
Current ratings for class A, B, C and D notes (Steady State:
20.50%): 'AAAsf'/'Asf'/'BBBsf'/'BBsf', respectively;
- Reduce Steady State by 15%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Reduce Steady State by 25%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Reduce Steady State by 35%: 'AAAsf'/'Asf'/'BBBsf'/'BBsf'.
Rating sensitivity to increased chargeoff rate and reduced MPR:
Current ratings for class A, B, C and D notes (charge-off Steady
State: 6.00%; MPR Steady State: 27.00%):
'AAAsf'/'Asf'/'BBBsf'/'BBsf', respectively;
- Increase chargeoff rate by 25% and reduce MPR by 15%:
'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Increase chargeoff rate by 50% and reduce MPR by 25%:
'AAAsf'/'Asf'/'BBBsf'/'BBsf';
- Increase chargeoff rate by 75% and reduce MPR by 35%:
'AAAsf'/'Asf'/'BBBsf'/'BB-sf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Rating sensitivity to decreased chargeoff rate:
- Current ratings for class A, B, C and D notes (Steady State:
6.00%): 'AAAsf', 'Asf', 'BBBsf' and 'BBsf', respectively;
- Decrease Steady State by 50%: 'AAAsf' for all 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.
CARLYLE US 2017-4: Moody's Affirms Ba3 Rating on $27MM Cl. D Notes
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Carlyle US CLO 2017-4, Ltd.:
USD63,000,000 Class A-2 Senior Secured Floating Rate Notes,
Upgraded to Aaa (sf); previously on Mar 20, 2023 Upgraded to Aa1
(sf)
USD33,900,000 Class B Senior Secured Deferrable Floating Rate
Notes, Upgraded to Aa2 (sf); previously on Mar 20, 2023 Upgraded to
A1 (sf)
Moody's has also affirmed the ratings on the following notes:
USD390,000,000 (current outstanding amount USD232,297,772.77)
Class A-1 Senior Secured Floating Rate Notes, Affirmed Aaa (sf);
previously on Nov 30, 2017 Assigned Aaa (sf)
USD38,100,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes, Affirmed Baa3 (sf); previously on Sep 17, 2020 Confirmed at
Baa3 (sf)
USD27,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes, Affirmed Ba3 (sf); previously on Sep 17, 2020 Confirmed at
Ba3 (sf)
Carlyle US CLO 2017-4, Ltd., issued in November 2017, is a a
collateralised loan obligation (CLO) backed by a portfolio of
mostly high-yield senior secured US loans. The portfolio is managed
by Carlyle CLO Management L.L.C. The transaction's reinvestment
period ended in January 2023.
RATINGS RATIONALE
The rating upgrades on the Class A-2 and Class B notes are
primarily a result of the deleveraging of the Class A-1 notes
following amortisation of the underlying portfolio since the last
rating action in March 2023.
The affirmations on the ratings on the Class A-1, Class C and Class
D 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 notes have paid down by approximately EUR157.7million
(40.4%) since the last rating action in March 2023. As a result of
the deleveraging, over-collateralisation (OC) has increased.
According to the trustee report dated June 2024 [1] the Class A,
Class B and Class C OC ratios are reported at 140.44%, 125.98% and
112.91% compared to February 2023 [2] levels of 129.56%, 120.54%
and 111.79%, respectively.
The key model inputs Moody's use 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: EUR417.74m
Defaulted Securities: EUR3.58m
Diversity Score: 63
Weighted Average Rating Factor (WARF): 2958
Weighted Average Life (WAL): 3.64 years
Weighted Average Spread (WAS): 3.23%
Weighted Average Recovery Rate (WARR): 47.47%
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 incorporate 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, such as account bank, 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 assume 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.
-- Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assume that, at transaction maturity, the
liquidation value of such an asset will depend on the nature of the
asset as well as the extent to which the asset's maturity lags that
of the liabilities. Liquidation values 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
Moody's other analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
CARLYLE US 2022-4: Fitch Assigns BB-(EXP)sf Rating on Cl. E-R Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Carlyle US CLO 2022-4, Ltd. Reset Transaction.
Entity/Debt Rating
----------- ------
Carlyle US
CLO 2022-4, Ltd.
A-1-R LT AAA(EXP)sf Expected Rating
A-2-R LT AAA(EXP)sf Expected Rating
B-R LT AA(EXP)sf Expected Rating
C-R LT A(EXP)sf Expected Rating
D-1-R LT BBB(EXP)sf Expected Rating
D-2-R LT BBB-(EXP)sf Expected Rating
E-R LT BB-(EXP)sf Expected Rating
TRANSACTION SUMMARY
Carlyle US CLO 2022-4, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Carlyle CLO Management L.L.C. that originally closed in July 2022.
Net proceeds from the issuance of the secured and subordinated
notes will provide financing on a portfolio of approximately $550
million of primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B/B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.59, versus a maximum covenant, in
accordance with the initial expected matrix point of 26.75. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
95.68% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.5% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.5%.
Portfolio Composition (Negative): The largest three industries may
comprise up to 42.33% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1-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 'BB-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 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-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, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Carlyle US CLO
2022-4, 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.
CARVAL CLO X-C: S&P Assigns Prelim. BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CarVal CLO
X-C Ltd./CarVal CLO X-C 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 CarVal CLO Management LLC.
The preliminary ratings are based on information as of July 10,
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
CarVal CLO X-C Ltd./CarVal CLO X-C LLC
Class A, $315.00 million: AAA (sf)
Class B, $65.00 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, $45.35 million: Not rated
CD 2017-CD4: Fitch Lowers Rating on 2 Tranches to 'B-sf'
--------------------------------------------------------
Fitch Ratings has downgraded five and affirmed 12 classes of CD
2017-CD4 Mortgage Trust Commercial Mortgage Pass-Through
Certificates Series 2017-CD4. Classes D, V-D, X-D, E and X-E were
assigned Negative Outlooks after their downgrades. The Rating
Outlooks on classes B, C, X-B and V-BC were revised to Negative
from Stable.
This rating action commentary corrects an error with respect to the
Rating Outlook for the vertical risk retention exchangeable class
V-D in CD 2017-CD4 published on July 17, 2023. The prior rating
action commentary incorrectly assigned a Stable Rating Outlook to
class V-D that was inconsistent with the Negative Rating Outlook
revision assigned to the underlying class D.
Entity/Debt Rating Prior
----------- ------ -----
CD 2017-CD4
A-3 12515DAQ7 LT AAAsf Affirmed AAAsf
A-4 12515DAR5 LT AAAsf Affirmed AAAsf
A-M 12515DAT1 LT AAAsf Affirmed AAAsf
A-SB 12515DAP9 LT AAAsf Affirmed AAAsf
B 12515DAU8 LT AA-sf Affirmed AA-sf
C 12515DAV6 LT A-sf Affirmed A-sf
D 12515DAF1 LT BBsf Downgrade BBB-sf
E 12515DAG9 LT B-sf Downgrade BB-sf
F 12515DAH7 LT CCCsf Affirmed CCCsf
V-A 12515DAW4 LT AAAsf Affirmed AAAsf
V-BC 12515DBU7 LT A-sf Affirmed A-sf
V-D 12515DAZ7 LT BBsf Downgrade BBB-sf
X-A 12515DAS3 LT AAAsf Affirmed AAAsf
X-B 12515DAA2 LT A-sf Affirmed A-sf
X-D 12515DAB0 LT BBsf Downgrade BBB-sf
X-E 12515DAC8 LT B-sf Downgrade BB-sf
X-F 12515DAD6 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Deal-level 'Bsf' rating case
loss has increased to 6.6% from 4.2% at Fitch's prior rating
action. Fourteen loans (34.2% of the pool) are considered Fitch
Loans of Concern (FLOCs), including five specially serviced loans
(10%).
The downgrades on classes D, V-D, X-D, E and X-E reflect increased
loss expectations since Fitch's prior rating action, primarily
driven by further performance deterioration of the 260 West 36th
Street, 111 Livingston Street and Hamilton Crossing loans in
addition to the newly specially serviced loan Malibu Office.
The Negative Outlooks reflects possible future downgrades based on
the large FLOC exposure including those primarily secured by office
properties (28.1% of the pool). Additional FLOCs include Los
Angeles Corporate Center, Key Center Cleveland and Troy Office
Portfolio. Additionally, the Negative Outlooks incorporate a
sensitivity analysis that considers an increased probability of
default on the Los Angeles Corporate Center, 260 West 36th Street
and Troy Office Portfolio loans.
The largest contributor to overall losses and largest increase
since the prior review is the 260 West 36th Street loan (3.2% of
the pool), which is secured by an 85,000-sf office building located
between Seventh and Eighth Avenue in the Garment District section
of New York City. Performance has been declining with NOI debt
service coverage ratio (DSCR) at September 2023 of 0.55x compared
with 1.08x at YE 2021, and 1.79x at YE 2019.
Occupancy was indicated at 76% per the October 2023 rent roll,
which is fairly granular with several leases indicated as
month-to-month or with near-term lease expiration. In December
2022, the loan was assumed by Ouni Mamrout and partner Meyer
Equities for $33 million ($400 psf) from Albert Monasebian and
Nader Hakakian. Fitch's loss expectation of 46% reflects factors in
a 10.25% cap rate and a 25% stress to the annualized Q3 2023 NOI.
The second largest contributor to overall loss expectations is the
111 Livingston Street loan (3.3%), secured by a 407,861-sf office
building located in Downtown Brooklyn, NY. Major tenants at the
property include Office of Temporary and Disability Assistance
(OTDA) (29.8%; May 2024), Legal Aid (28.7%; October 2037) and
C.U.N.Y. (11%; August 2027). Occupancy started to decline after the
NYS Worker's Compensation Board (12.3% of NRA) vacated their space
in August 2020.
Per the February 2024 rent roll, the property was 79.7% occupied,
compared to 85.6% in March 2023, 86% at YE 2021, 98.6% in June
2020, and 100% at issuance. Per the rent roll, there were four new
leases executed totaling 7.6% of NRA, however, start dates were not
listed. The largest tenant (29.8% of NRA) is scheduled to roll in
May 2024, but an extension has yet to be executed. Fitch requested
a leasing update; however, it was not provided by the borrower.
Fitch's 'Bsf' rating case loss of 32% (prior to concentration
add-ons) reflects a 9.5% cap rate and a 20% stress to the YE 2023
NOI due to high upcoming rollover.
The third largest contributor to expected loss is Malibu Office
(1.6%), which transferred to special servicing in May 2024. The
18,643sf office property is located on the Pacific Coast Highway in
Malibu, CA and was built in 1989 and renovated in 2016. The single
tenant, Regus, vacated in 2020 and the property remains fully
vacant. Fitch's 'Bsf' rating case loss of 49% (prior to a
concentration adjustment) is based on a 10% cap rate and assumes a
50% discount to the income derived from the prior tenant's rent to
account for the dark property and difficulty in re-tenanting office
assets, with an implied recovery value of $322 psf.
Increased Credit Enhancement (CE): As of the June 2024 remittance
reporting, the pool's aggregate balance has been reduced by 18.9%
to $729.37 million from $900.45 million at issuance. Six loans
(8.8% of the pool) have been fully defeased. Nine loans (22%) are
full-term IO and 18 loans (51.4%) were partial-term IO, which have
all started amortizing. To date, the trust has incurred $6.3
million in realized principal losses which have been absorbed by
the non-rated class G and non-rated risk retention classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool-level losses from
underperforming or specially serviced loans. Downgrades to the
'AAAsf' rated classes are not likely due to the expected paydown
from loan repayments and continued amortization, but may occur
should interest shortfalls affect these classes.
Downgrades to classes rated in the 'AAsf', 'Asf', 'BBsf' and 'Bsf'
categories, which have Negative Outlooks, may occur if expected
losses increase on FLOCs, including 260 West 36th Street, 111
Livingston Street, Hamilton Crossing, Malibu Office, Los Angeles
Corporate Center, Key Center Cleveland and Troy Office Portfolio
and/or if workout times are prolonged resulting in increased
exposures or value deterioration for the specially serviced loans.
Downgrades to distressed classes 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 classes rated in the 'AAsf' and 'Asf' categories may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance on the FLOCs.
Upgrades to the '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 (especially loans secured by office properties), are better
than expected and there is sufficient CE to the classes.
Classes would not be upgraded above 'AA+sf' if there is likelihood
for interest shortfalls.
Upgrades to distressed ratings are not expected but would be
possible with better than expected recoveries on specially serviced
loans and/or significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
COMM 2018-COR3: Fitch Lowers Rating on Class D Certs to CCCsf
-------------------------------------------------------------
Fitch Ratings has downgraded three and affirmed 10 classes of COMM
2018-COR3 Mortgage Trust, commercial mortgage pass-through
certificates. Class C was assigned a Negative Rating Outlook
following its downgrade. Following their affirmations, the Outlooks
on classes A-M, B, X-A, and X-B remain Negative.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2018-COR3
A-2 12595VAC1 LT AAAsf Affirmed AAAsf
A-3 12595VAD9 LT AAAsf Affirmed AAAsf
A-M 12595VAF4 LT AA-sf Affirmed AA-sf
A-SB 12595VAB3 LT AAAsf Affirmed AAAsf
B 12595VAG2 LT A-sf Affirmed A-sf
C 12595VAH0 LT BBsf Downgrade BBB-sf
D 12595VAN7 LT CCCsf Downgrade Bsf
E-RR 12595VAQ0 LT CCCsf Affirmed CCCsf
F-RR 12595VAS6 LT CCsf Affirmed CCsf
G-RR 12595VAU1 LT Csf Affirmed Csf
X-A 12595VAE7 LT AA-sf Affirmed AA-sf
X-B 12595VAJ6 LT A-sf Affirmed A-sf
X-D 12595VAL1 LT CCCsf Downgrade Bsf
KEY RATING DRIVERS
Elevated Loss Expectations: Downgrades to classes C, D and X-D
reflect increased pool-level loss expectations driven by loans in
special servicing, namely Kingswood Center, 315 West 26th Street
and 644 Broadway.
The Negative Outlooks reflect the potential for downgrades should
performance of the FLOCs, namely Hyatt @ Olive 8, Grand Hyatt
Seattle, 240 East 54th Street Retail Condo and 2857 West 8th
Street, fail to stabilize, or loans in special servicing experience
prolonged workouts. Fitch identified 13 loans (41.2% of the pool)
as FLOCs, which includes three loans (13.6%) in special servicing.
Fitch's current ratings incorporate a 'Bsf' ratings case loss of
10.30%.
Largest Contributors to Loss: The largest increase and contributor
to loss expectations is the 315 West 26th Street loan (4.8% of the
pool), which is secured by a 143,479-sf office building with
ground-floor retail located in Midtown Manhattan. Floors 11 and
above in the building are residential and not part of the
collateral. WeWork leased 97% of the collateral under two separate
leases through February 2032 and May 2031, but vacated in 2023
after declaring bankruptcy, leaving collateral occupancy at 3%.
The loan is 30 days delinquent as of June 2024. The borrower is in
discussions with the City of New York on a short-term lease for
temporary housing. Fitch's 'Bsf' rating case loss of 58.7% (prior
to concentration adjustments) reflects a discount to a recent
appraised value which equates to a stressed value of $238 psf.
Large Contributors to Loss Expectations: The second largest
contributor to loss expectations is the Kingswood Center loan (6.7%
of the NRA), which is secured by a 130,218-sf mixed-use
(office/retail/parking) property located in an infill location in
Brooklyn, NY. The loan transferred to special servicing in May 2023
after the largest tenant, Visiting Nurse Services of New York (44%
of the NRA) vacated at YE 2023. As a result of the departure,
occupancy declined to 35% and the sponsor is no longer willing to
fund operating shortfalls.
The loan transferred to foreclosure in June 2024. Fitch's 'Bsf'
ratings case loss of 25.1% (prior to concentration adjustments) is
based on a recent appraisal value which equates to a stressed value
of $377 psf.
The next largest contributor to loss expectations is the 644
Broadway loan (2.2%) which is secured by a 47,436-sf mixed-use
property located in San Francisco, CA. The loan transferred to
special servicing in July 2020 due to payment default. Due to the
eviction moratorium, the largest tenant, China Live (58.5% of the
NRA), withheld rental payments, but resumed payments once the
eviction moratorium was lifted. The tenant has refused to pay
outstanding back rent. A receiver was appointed in 2024 and
litigation continues with China Live regarding outstanding rental
amounts.
Fitch's 'Bsf' rating case loss of 50.2% (prior to concentration
add-ons) incorporates a 20% stress to the most recent appraisal
value, which is approximately 56% below the value at issuance.
The next largest contributor to loss expectations is the 240 East
54th Street loan (3.2%), which is secured by a 29,950-sf retail
property in Midtown Manhattan. As of the September 2023 rent roll,
the subject was 98.8% occupied by four health and fitness tenants
and a café. Blink Fitness, Soul Cycle and Clean Market, (93.8% of
NRA) are subsidiaries of Equinox Holding, Inc.
The majority of the subject's fitness and wellness-related tenants
were closed and ceased paying rent during the pandemic and have yet
to pay rent since April 2020. The borrower negotiated new leases
with the tenants to align rental rates with the market.
A modification was executed in April 2024 for a discounted payoff
resulting in a write-down of the loan to $31 million from an
original balance of $42 million. The May 2024 remittance reflected
an $11 million non-cash principal adjustment. The borrower is
expected to contribute capital within 60 days of closing to pay
fees and past due amounts totaling $6.9 million. Cash management
will be instituted for the remainder of the loan term.
Fitch's 'Bsf' rating case loss of 4.2% is based on the original
loan balance and reflects the non-cash principal adjustment in
addition to losses to account for additional fees and expenses.
Two additional contributors to losses in the pool are secured by
hotel properties located in Seattle, with the same sponsorship,
which have had prolonged recoveries from pandemic-related
performance declines.
While loss expectations have improved on the Hyatt @ Olive 8 loan
(8.0%), the loan is the fourth largest contributor to loss
expectations. Occupancy has recovered to 72% as of September 2023
from 65% at YE 2022, 27% at YE 2021, and 13% at YE 2020, but
remains below 2019 levels of 85% and issuance levels of 87%. The
annualized YTD September 2023 NOI is about 15.0% below YE 2019
levels and 36.1% below NOI at issuance.
Despite the lower cash flow relative to pre-pandemic levels, the
loan maintained a 1.74x NOI DSCR for the YTD September 2023
reporting period. The Grand Hyatt Seattle loan (5.0%) reported
occupancy of 66% and NOI DSCR of 1.28x as of YE 2023, an
improvement from 58% and 1.12x as of YE 2022, but remains below
occupancy and NOI DSCR of 83% and 1.85x as of YE 2019.
Fitch's 'Bsf' ratings case loss of 6.4% and 8.0% for the Hyatt @
Olive 8 and Grand Hyatt Seattle (prior to concentration add-ons),
respectively are based on the annualized September 2023 NOI with a
10% stress and YE 2019 with 15% stress.
Minimal Change to Credit Enhancement (CE): As of the June 2024
distribution date, the pool's aggregate balance has been reduced by
2.6% to $979.6 million from $1.006 billion at issuance. The
transaction has limited amortization with only 2.9% expected pay
down for the life of the transaction based on scheduled loan
maturity balances. Four loans (2.9% of the pool) have fully
defeased. There are 25 loans (81.4% of the pool) that are full-term
interest-only (IO) and 16 loans (18.7%) that are amortizing. Losses
of $11.6 million are impacting the non-rated class H-RR. Interest
shortfalls of $2.74 million and $124,098 are impacting class H-RR
and G-RR, respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' and 'AA-sf' rated classes are unlikely,
however may occur should non-FLOCs and performing FLOCs experience
performance declines or transfer to special servicing, or loans
anticipated to refinance at maturity are unable to.
Downgrades to classes rated 'A-sf' may occur should non-performing
FLOCs experience further performance declines, namely the Hyatt @
Olive 8, Grand Seattle Hyatt and 240 East 54th loans.
Downgrades to classes rated 'BBB-sf' may occur with further
performance declines or special servicing transfers of the
nonperforming FLOCs, or outsized losses of the loans in special
servicing.
Distressed classes may experience further downgrades with increased
or greater certainty of losses.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated 'AA-sf' or 'A-sf' may occur with
significant improvement in CE as loans refinance at maturity.
Upgrades to classes rated 'BBBsf' and 'B-sf' would only occur with
the stabilization of FLOCs and specially serviced loans and greater
certainty of refinancing at maturity. Classes would not be upgraded
above 'A-sf' if there is likelihood of interest shortfalls.
Upgrades to distressed classes are not likely unless loans in
special servicing experience favorable workout strategies or the
possibility of nonperforming FLOCs refinancing at maturity is
greater than expected.
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.
CREDIT SUISSE 2004-AR3: S&P Lowers Class CB2 Certs Rating to D(sf)
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on 10 classes of mortgage
pass-through certificates from six U.S. RMBS transactions issued
between 2004 and 2005 to 'D (sf)' and subsequently discontinued one
of the lowered ratings as the bond balance has been fully
written-down. These transactions are backed by prime jumbo,
alternative-A, or negative amortization collateral.
The downgrades reflect its assessment of the principal write-downs'
affect on the classes during recent remittance periods. Nine of the
classes with ratings lowered to 'D (sf)' were rated either 'CCC
(sf)' or 'CC (sf)' before the rating action.
In accordance with S&P's surveillance and withdrawal policies, it
discontinued the rating on one class from one transaction due to
the class being fully written-down.
All of the transactions in this review receive credit enhancement
from a combination of subordination, excess spread, and
overcollateralization (where applicable).
S&P will continue to monitor its ratings on securities that
experience principal write-downs, and it will further adjust its
ratings as it considers appropriate according to its criteria.
Ratings List
RATING
ISSUER
SERIES CLASS CUSIP TO FROM
Credit Suisse First Boston Mortgage Securities Corp.
2004-AR3 CB2 22541SEJ3 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
GSR Mortgage Loan Trust 2005-9F
2005-9F 1A10 362341R43 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
GSR Mortgage Loan Trust 2005-9F
2005-9F 1A6 362341Q85 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
GSR Mortgage Loan Trust 2005-9F
2005-9F 1A7 362341Q93 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
GSR Mortgage Loan Trust 2005-9F
2005-9F 1A9 362341R35 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
HarborView Mortgage Loan Trust 2005-5
2005-5 2A1B 41161PNQ2 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
RESI Finance Limited Partnership 2004-A
2004-A B3 74951PCM8 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
RESI Finance Limited Partnership 2004-A
2004-A B4 74951PCN6 D (sf)/NR CCC (sf)
PRIMARY RATING DRIVER: -writedown.
Structured Asset Mortgage Investments II Trust 2005-AR5
2005-AR5 B1 86359LPL7 D (sf) B+ (sf)
PRIMARY RATING DRIVER: Principal-writedown.
WaMu Mortgage Pass-Through Certificates Series 2004-AR4 Trust
2004-AR4 B1 92922FPU6 D (sf) CCC (sf)
PRIMARY RATING DRIVER: Principal-writedown.
NR--Not rated.
DRYDEN 41 SENIOR: Moody's Cuts Rating on $8.25MM F-R Notes to Caa3
------------------------------------------------------------------
Moody's Ratings has downgraded the rating on the following notes
issued by Dryden 41 Senior Loan Fund:
US$8,250,000 Class F-R Junior Secured Deferrable Floating Rate
Notes due 2031 (the "Class F-R Notes"), Downgraded to Caa3 (sf);
previously on February 7, 2024 Downgraded to Caa1 (sf)
Dryden 41 Senior Loan Fund, originally issued in October 2015 and
refinanced in March 2018, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in April 2023.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The downgrade rating action on the Class F-R notes reflects the
specific risks to the junior notes posed by par loss observed in
the underlying CLO portfolio. Based on Moody's calculation, OC
ratio for the Class F-R notes is currently at 101.25% compared to
the February 2024 level of 102.79%. Additionally, the Class F-R
notes are at increased risk of interest deferral given the OC ratio
for the Class E-R notes, at 103.48%, is failing the Class E-R OC
test level of 104.10%[1].
No actions were taken on the Class A-R, Class B-R, Class C-R, Class
D-R and Class E-R notes because their expected losses remain
commensurate with their current ratings, after taking into account
the CLO's latest portfolio information, its relevant structural
features and its actual over-collateralization and interest
coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on Moody's
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: $450,842,548
Defaulted par: $14,616,253
Diversity Score: 83
Weighted Average Rating Factor (WARF): 2802
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.21%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.39%
Weighted Average Life (WAL): 3.82 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, 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.
DRYDEN 49 SENIOR: Moody's Lowers Rating on $7.75MM F Notes to Caa3
------------------------------------------------------------------
Moody's Ratings has downgraded the ratings on the following notes
issued by Dryden 49 Senior Loan Fund:
US$7,750,000 Class F Junior Secured Deferrable Floating Rate Notes
Due 2030 (the "Class F Notes"), Downgraded to Caa3 (sf); previously
on June 27, 2017 Assigned B3 (sf)
Dryden 49 Senior Loan Fund, originally issued in June 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 July 2022.
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 F notes reflects the
specific risks to the junior notes posed by par loss observed in
the underlying CLO portfolio. Based on Moody's calculation, the
over collateralization (OC) ratio for the Class F notes is 102.16%.
Furthermore, based on the trustee's May 2024 report [1], the Class
D-R OC test ratio is 103.80% compared to a trigger level of
103.70%. Any failure of the test will result in available interest
and principal collections being diverted away from payments to the
Class F notes in order to pay down the notes in order of seniority
until the test is cured.
Moody's analysis also considers the risk posed by the deal's
holdings of collateral that mature after the notes do. Based on the
trustee's May 2024 report, securities that mature after the July
18, 2030 note maturity date currently make up approximately 1.0% of
the portfolio. These investments could expose the notes to market
risk in the event of liquidation when the notes mature.
No actions were taken on the Class A-R, Class B-R, Class C-R, Class
D-R, and Class E notes because their expected losses remain
commensurate with their current ratings, after taking into account
the CLO's latest portfolio information, its relevant structural
features and its actual over-collateralization and interest
coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on Moody's
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: $511,374,900
Defaulted par: $11,062,564
Diversity Score: 84
Weighted Average Rating Factor (WARF): 2702
Weighted Average Spread (WAS): 3.21%
Weighted Average Recovery Rate (WARR): 47.73%
Weighted Average Life (WAL): 3.92 years
In addition to the 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.
DRYDEN 85: S&P Assigns Prelim BB- (sf) Rating ON Class E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R2, A-1, A-1L, A-2-R2, B-R2, C-R2, D-1-R2, D-2-R2, and E-R2
replacement debt from Dryden 85 CLO Ltd./Dryden 85 CLO LLC, a CLO
originally issued in October 2020 that is managed by PGIM Inc.
The preliminary ratings are based on information as of July 10,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
S&P said, "On the July 15, 2024, refinancing date, the proceeds
from the replacement debt will be used to redeem the original debt.
At that time, we expect to withdraw our ratings on the original
debt and assign ratings to the replacement debt. However, if the
refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class A-1-R2, A-1, and A-1L debt is expected
replace the original class A-R debt.
-- The replacement class B-R2, C-R2, and D-2-R2 debt is expected
to be issued at a lower spread over three-month CME term SOFR than
the original debt.
-- The replacement class E-R2 debt is expected to be issued at a
higher spread over three-month CME term SOFR than the original
debt.
-- New class A-2-R2 and D-1-R2 debt is expected to be issued.
-- The stated maturity will be extended by 1.75 years.
-- The reinvestment period will be extended by 2.75 years.
-- The non-call period will be extended to July 2026.
-- The weighted average life test will be nine years from the
refinancing date.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1-R2, $225.00 million: Three-month CME term SOFR +
1.38%
-- Class A-1 loans, $63.00 million: Three-month CME term SOFR +
1.38%
-- Class A-1L, $0.00 million: Three-month CME term SOFR + 1.38%
-- Class A-2-R2, $4.50 million: Three-month CME term SOFR + 1.58%
-- Class B-R2, $49.50 million: Three-month CME term SOFR + 1.80%
-- Class C-R2, $27.00 million: Three-month CME term SOFR + 2.10%
-- Class D-1-R2, $20.25 million: Three-month CME term SOFR +
3.10%
-- Class D-2-R2, $11.25 million: Three-month CME term SOFR +
4.95%
-- Class E-R2, $13.50 million: Three-month CME term SOFR + 7.00%
Original debt
-- Class A-R, $288.00 million: Three-month LIBOR + 1.15%
-- Class B-R, $54.00 million: Three-month LIBOR + 1.60%
-- Class C-R, $27.00 million: Three-month LIBOR + 2.05%
-- Class D-R, $27.00 million: Three-month LIBOR + 3.20%
-- Class E-R, $18.00 million: Three-month LIBOR + 6.50%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Dryden 85 CLO Ltd./Dryden 85 CLO LLC
Class A-1-R2, $225.00 million: AAA (sf)
Class A-1 loans(i), $63.00 million: AAA (sf)
Class A-1L(i), $0.00 million: AAA (sf)
Class A-2-R2, $4.50 million: AAA (sf)
Class B-R2, $49.50 million: AA (sf)
Class C-R2 (deferrable), $27.00 million: A (sf)
Class D-1-R2 (deferrable), $20.25 million: BBB- (sf)
Class D-2-R2 (deferrable), $11.25 million: BBB- (sf)
Class E-R2 (deferrable), $13.50 million: BB- (sf)
(i)All or a portion of the class A-1 loans can be converted to
class A-1L notes with a maximum increase up to $63 million, with a
corresponding decrease to the class A-1 loans.
Other Outstanding Debt
Dryden 85 CLO Ltd./Dryden 85 CLO LLC
Class A-R, $288.00 million: AAA (sf)
Class B-R, $54.00 million: AA (sf)
Class C-R (deferrable), $27.00 million: A (sf)
Class D-R (deferrable), $27.00 million: BBB- (sf)
Class E-R (deferrable), $18.00 million: BB- (sf)
Subordinated notes, $36.00 million: Not rated
ELMWOOD CLO 30: S&P Assigns B- (sf) Rating on Class F Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to Elmwood CLO 30
Ltd./Elmwood CLO 30 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Elmwood CLO 30 Ltd./Elmwood CLO 30 LLC
Class A, $352.0 million: AAA (sf)
Class B, $66.0 million: AA (sf)
Class C (deferrable), $33.0 million: A (sf)
Class D-1 (deferrable), $33.0 million: BBB- (sf)
Class D-2 (deferrable), $5.5 million: BBB- (sf)
Class E (deferrable), $16.5 million: BB- (sf)
Class F (deferrable), $5.5 million: B- (sf)
Subordinated notes, $43.5 million: Not rated
EXTENET ISSUER 2024-1: Fitch Gives BB-(EXP) Rating on Class C Notes
-------------------------------------------------------------------
Fitch Ratings has issued a presale report for ExteNet Issuer, LLC,
Secured Distributed Network Revenue Notes, Series 2024-1.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
- $272,200,000 series 2024-1, class A-2, 'A-sf'; Outlook Stable;
- $47,400,000 series 2024-1, class B, 'BBB-sf'; Outlook Stable;
- $56,300,000 series 2024-1, class C, 'BB-sf'; Outlook Stable.
The following class is not expected to be rated:
- $19,800,000 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).
TRANSACTION SUMMARY
This transaction is a securitization of contractual license
payments derived from a national portfolio of 137 outdoor
distributed antenna system (DAS) networks located in major metro
areas across 26 states, guaranteed by the indirect parent of the
borrower issuer. This guarantee is secured by a pledge and
first-priority-security interest in 100% of the equity interest of
the issuer. Collateral assets include small cell equipment, dark
fiber conduits, pole attachments, headend electronics, access
rights, customer license agreements and transaction accounts.
At closing, note proceeds will be used to fund upfront reserves,
refinance existing debt and fund general corporate purposes.
The ratings reflect a structured finance analysis of the cash flows
from the ownership interest in small cell sites, not an assessment
of the corporate default risk of the ultimate parent, ExteNet
Systems, LLC (Extenet).
KEY RATING DRIVERS
Net Cash Flow and Leverage: Fitch's net cash flow (NCF) on the pool
is $31.7 million, implying an 9.8% haircut to issuer NCF. The debt
multiple relative to Fitch's NCF on the rated classes is 11.9x,
versus the debt/issuer NCF leverage of 10.7x.
Based on the Fitch NCF and assumed annual revenue growth consistent
with the weighted average (WA) escalator of the collateralized pool
of distributed network system (DNS) licenses, and following the
transaction's anticipated repayment date (ARD), the notes would be
repaid 20.6 years from closing, and the investment-grade-rated
notes would be repaid 16.2 years from closing.
Credit Risk Factors: The major factors affecting Fitch's
determination of cash flow and maximum potential leverage (MPL)
include: the high quality of the underlying collateral networks;
high contract renewal rates; low market concentration; high
barriers to entry; the creditworthiness of the customer base; the
market position of the operator; the capability of the sponsor;
limited operational requirements; and the 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 digital infrastructure, the senior classes of
this transaction do not achieve ratings above 'Asf'. The securities
have a rated final payment date 30 years after closing, and the
long-term tenor of the securities increases the risk that an
alternative technology, rendering obsolete the current transmission
of wireless signals through small cell nodes or transmission of
data through fiber optic cables, will be developed.
Wireless service providers (WSPs) currently depend on small cells
to transmit their signals in areas that cannot be feasibly reached
by traditional macro wireless towers, and continue to invest in
this technology.
Verizon Rating Cap: Fitch performed a stress scenario in which
revenues were reduced by 45.6% in year one, based on the revenue
contribution of Verizon Communications, Inc. (Verizon, A-/Stable).
Thereafter, the remaining revenues were allowed to increase based
on the average contractual increase of remaining leases, when
considering allowable migration given substitution provisions.
Issuer assumptions for management fee, capital expenditures and
expense margins were maintained.
Fitch compared the total outstanding loan balance: if the series
does not refinance at the respective ARDs and principal is paid
down using excess cash flow; with the total outstanding loan
balance; and if the revenue is stressed. In this scenario, classes
B and C failed to pay-in-full by the transaction's legal maturity
date in July 2054. Therefore, the ratings on classes B and C will
be capped at Verizon's Long-Term Issuer Default Rating (IDR) of
'A-'/Stable.
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 license
churn, and the development of an alternative technology for the
transmission of wireless signal could lead to downgrades.
Fitch's NCF was 9.8% 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 A-2 to 'BBB-sf' from
'A-sf'; class B to 'BBsf' from 'BBB-sf'; and class C to 'B-sf' from
'BB-sf'.
The ratings for classes B and C are also sensitive to negative
rating actions on Verizon's IDR due to excessive counterparty
exposure and the ultimate repayment of these classes being reliant
on obligations from Verizon.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Increasing cash flow without an increase in corresponding debt,
from lower site expenses, contractual license escalators, new
license agreements, or license agreements could lead to upgrades.
However, upgrades are unlikely given the provision to issue
additional debt. Upgrades may also be limited because the ratings
are capped at 'Asf' due to the risk of technological obsolescence.
A 10% increase in Fitch's NCF indicates the following ratings based
on Fitch's determination of MPL: class A-2 to 'Asf' from 'A-sf';
class B to 'BBBsf' from 'BBB-sf' to 'BBBsf'; class F to 'BBsf' from
'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 KPMG 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 license agreements in the data file. Fitch considered this
information in its analysis and it did not have an effect on
Fitch's analysis or conclusions.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The ratings of classes B and C are capped at the IDR of Verizon,
which is the transaction's largest contractual counterparty and
comprised 45.6% of ARRR. A downgrade of Verizon's IDR below the
assigned ratings for classes B and/or C would result in a downgrade
of the notes to Verizon's IDR.
ESG CONSIDERATIONS
ExteNet Issuer, LLC, Secured Distributed Network Revenue Notes,
Series 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.
FRONTIER ISSUER: Fitch Assigns 'BB-sf' Rating on Class C Notes
--------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Frontier Issuer, LLC, Secured Fiber Network Revenue Term Notes,
Series 2024-1 as follows:
- $530.0 million class A-2 'Asf'; Outlook Stable;
- $73.0 million class B 'BBBsf'; Outlook Stable;
- $147.0 million class C 'BB-sf'; Outlook Stable.
Fitch has also affirmed the following ratings:
Frontier Issuer, LLC, Secured Fiber Network Revenue Term Notes,
Series 2023-1
- $1.1 billion Series 2023-1 class A-2 at 'Asf'; Outlook Stable;
- $154.9 million Series 2023-1 class B at 'BBBsf'; Outlook Stable;
- $311.6 million Series 2023-1 class C at 'BB-sf'; Outlook Stable.
Frontier Issuer, LLC, Secured Fiber Network Revenue Variable
Funding Notes, Series 2023-2
- $500(a) million Series 2023-2, class A-1, at 'Asf'; Outlook
Stable.
Entity/Debt Rating Prior
----------- ------ -----
Frontier Issuer LLC,
Secured Fiber Network
Revenue Term Notes,
Series 2024-1
A-2 LT Asf New Rating A(EXP)sf
B LT BBBsf New Rating BBB(EXP)sf
C LT BB-sf New Rating BB-(EXP)sf
Frontier Issuer LLC,
Secured Fiber Network
Revenue Term Notes,
Series 2023-2
A-1 LT Asf Affirmed Asf
Frontier Issuer LLC,
Secured Fiber Network
Revenue Term Notes,
Series 2023-1
Series 2023-1-A-2 35910EAA2 LT Asf Affirmed Asf
Series 2023-1-B 35910EAB0 LT BBBsf Affirmed BBBsf
Series 2023-1-C 35910EAC8 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
The transaction is a securitization of contract payments derived
from an existing fiber-to-the-premises (FTTP) network. The
collateral assets include conduits, cables, network-level
equipment, access rights, customer contracts, transaction accounts
and a shared infrastructure service agreement for common assets.
Debt is secured by net revenue from operations and benefits from a
perfected security interest in the securitized assets.
The collateral network consists of the sponsor's retail fiber
network including 728,012 fiber passings and 215,059 copper
passings across several submarkets located in Dallas, TX and in the
greater North Texas area. The network supports broadband, phone,
video and non-switch (point-to-point ethernet) services for
approximately 329,357 residential and commercial fiber
subscribers.
Transaction proceeds will be utilized to for growth capex, to pay
transaction expenses, to refinance existing debt, and for general
corporate purposes.
The ratings reflect a structured finance analysis of cash flows
from the ownership interest in the underlying fiber optic network,
rather than an assessment of the corporate default risk of the
ultimate parent, Frontier Communications Parent, Inc.
(B+/Negative).
KEY RATING DRIVERS
Net Cash Flow and Leverage: Fitch's net cash flow (NCF) on the pool
is $247.0 million, implying a 12.7% haircut to issuer NCF. The debt
multiple relative to Fitch's NCF is 9.5x, versus the debt/issuer
NCF leverage of 8.3x.
Based on the Fitch NCF and assumed annual revenue growth consistent
with the issuer, and following the transaction's ARD, the 2023-1
and 2024-1 notes would be repaid within 18.6 years from closing and
the investment-grade-rated notes would be repaid within 10.8 years
from closing.
Credit Risk Factors: The major factors affecting Fitch's
determination of cash flow and maximum potential leverage (MPL)
include the high quality of the underlying collateral networks,
scale of the customer base, market position and penetration, market
concentration, capability of the operator, and strength of the
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 digital infrastructure, the senior classes of
this transaction do not achieve ratings above 'Asf'.
The securities have a rated final payment date 30 years after
closing, and the long-term tenor of the securities increases the
risk that an alternative technology, rendering obsolete the current
transmission of data through fiber optic cables, will be developed.
Fiber optic cable networks are currently the fastest and most
reliable means to transmit information, and data providers continue
to invest in and utilize this technology.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Declining cash flow as a result of higher expenses, customer
churn, lower market penetration, declining contract rates or the
development of an alternative technology for the transmission of
data could lead to downgrades;
- Fitch's base case NCF was 12.7% 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 A-2
from 'Asf' to 'BBB+sf'; class B from 'BBBsf' to 'BBB-sf'; class C
from 'BB-sf' to 'Bsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Increasing cash flow without an increase in corresponding debt,
from rate increases, additional customers, contract amendments, or
lower expenses could lead to upgrades;
- A 10% increase in Fitch's NCF indicates the following ratings
based on Fitch's determination of MPL: Class A-2 from 'Asf' to
'Asf'; class B from 'BBBsf' to 'Asf'; class C from 'BB-sf' to
'BBBsf';
- Upgrades are unlikely for these transactions due to the provision
for the issuer to issue additional notes, which rank pari passu or
subordinate to existing notes, without the benefit of additional
collateral. In addition, the transaction is capped in the 'Asf'
category, because of the risk of technological obsolescence.
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.
GALAXY XXI CLO: Moody's Cuts Rating on $8MM Cl. F-R Notes to Caa1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Galaxy XXI CLO, Ltd.:
US$44,000,000 Class B-R Senior Floating Rate Notes due 2031 (the
"Class B-R Notes"), Upgraded to Aaa (sf); previously on March 31,
2023 Upgraded to Aa1 (sf)
US$24,000,000 Class C-R Deferrable Mezzanine Floating Rate Notes
due 2031 (the "Class C-R Notes"), Upgraded to Aa2 (sf); previously
on March 31, 2023 Upgraded to A1 (sf)
US$22,000,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2031 (the "Class D-R Notes"), Upgraded to Baa1 (sf); previously
on March 1, 2018 Assigned Baa3 (sf)
Moody's has also downgraded the rating on the following notes:
US$8,000,000 Class F-R Deferrable Junior Floating Rate Notes due
2031 (the "Class F-R Notes"), Downgraded to Caa1 (sf); previously
on March 1, 2018 Assigned B3 (sf)
Galaxy XXI CLO, Ltd., originally issued in December 2015 and
refinanced in March 2018 is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in April 2023.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
These upgrade rating actions are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since March 2023. The Class A-R
notes have been paid down by approximately 30% or $79.0 million
since that time. Based on Moody's calculation, the OC ratios for
the Class A-R/B-R, Class C-R ,Class D-R and Class E-R notes are
currently 137.89%, 124.59%, 114.48% and 107.35% respectively,
versus trustee reported April 2023 levels [1] of 129.94%, 120.44%,
112.87% and 107.35%, respectively.
The downgrade rating action on the Class F-R notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the Moody's calculation, the total collateral par balance,
including all principal payments made to senior notes and assumed
recoveries from defaulted securities, is $389.2 million, or $10.8
million less than the $400 million initial par amount targeted
during the deal's ramp-up. Furthermore, based on Moody's
calculation, exposure to issuers rated Caa1 or lower increased to
7.7% from 4.9% since March 2023.
No actions were taken on the Class A-R and Class E-R notes because
their expected losses remain commensurate with their current
ratings, after taking into account the CLO's latest portfolio
information, its relevant structural features and its actual
over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $308,600,524
Defaulted par: $3,606,495
Diversity Score: 69
Weighted Average Rating Factor (WARF): 2775
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.12%
Weighted Average Recovery Rate (WARR): 47.8%
Weighted Average Life (WAL): 3.6 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, and lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
JP MORGAN 2020-MKST: Moody's Lowers Rating on Cl. D Certs to B3
---------------------------------------------------------------
Moody's Ratings has downgraded seven classes in J.P. Morgan Chase
Commercial Mortgage Securities Trust 2020-MKST, Commercial Mortgage
Pass-Through Certificates, Series 2020-MKST as follows:
Cl. A, Downgraded to Baa2 (sf); previously on Nov 21, 2023
Downgraded to A1 (sf)
Cl. B, Downgraded to Ba1 (sf); previously on Nov 21, 2023
Downgraded to A3 (sf)
Cl. C, Downgraded to B1 (sf); previously on Nov 21, 2023 Downgraded
to Baa2 (sf)
Cl. D, Downgraded to B3 (sf); previously on Nov 21, 2023 Downgraded
to Ba2 (sf)
Cl. E, Downgraded to Caa3 (sf); previously on Nov 21, 2023
Downgraded to B2 (sf)
Cl. F, Downgraded to C (sf); previously on Nov 21, 2023 Downgraded
to Caa3 (sf)
Cl. X-CP*, Downgraded to Ba2 (sf); previously on Nov 21, 2023
Downgraded to Baa2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on six P&I classes were downgraded due to the continued
delinquency and the resulting accumulation of loan advances from
the sustained decline in property and loan performance. The
downgrades also reflect the potential for higher losses due to the
uncertainty around timing and extent of the property's cash flow
recovery given weaker office fundamentals and lower office
valuations in the Philadelphia CBD. The floating rate loan has been
in special servicing since August 2022 after failing to payoff or
extend at its initial maturity date in December 2022. As of the
June 2024 distribution date, the loan remains last paid through its
August 2023 payment date and there is approximately $25 million (7%
of loan balance) of P&I and T&I advances, other expenses and
cumulative accrued unpaid advance interest outstanding up from
approximately $18 million at last review.
The property's net cash flow (NCF) and occupancy has declined since
securitization and the property does not generate enough NCF to
service the floating rate interest only debt service amount. As a
result, Moody's expect the advances and interest shortfalls to
remain outstanding and continue to increase. 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 rating on the interest only (IO) class, Cl. X-CP, was
downgraded due to decline in the credit quality of its referenced
classes.
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 rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
DEAL PERFORMANCE
As of the June 17, 2024 distribution date, the transaction's
certificate balance was $368 million, the same as at
securitization. The interest only, floating rate loan transferred
to special servicing in August 2022 due to imminent maturity
default and remains delinquent since December 2022. The special
servicer subsequently filed a motion for foreclosure and a receiver
was appointed in May 2023.
The mortgage loan (approximately $376 million) consists of the
trust loan of $368 million and approximately $7.6 million of
non-trust note for pari passu future funding commitment that was
funded. The future advance loan is not an asset of the trust. At
securitization, non-trust pari passu future funding up to $22
million was to be advanced in connection with lender-approved
capital spending and leasing expenses, however, the future funding
period has since expired. Moody's have taken the additional funded
leverage of $7.6 million in Moody's analysis.
The loan is secured by a fee simple interest in 1500 Market Street,
a 1.8 million SF office building in downtown Philadelphia. The
collateral for the loan was built in 1974 and primarily comprises
two towers — the East Tower and the West Tower. The towers are
connected by a three-story atrium. 1500 Market Street occupies an
entire city block at 15th and Market Streets in Philadelphia's CBD,
directly adjacent to City Hall. The subject is the only office
complex in Philadelphia's CBD that features its own on-site
subterranean parking garage with access to Philadelphia's SEPTA and
New Jersey Transit's transportation networks.
At securitization, approximately 15% of the property's NRA was
scheduled to expire and vacate in 2020, and the borrower originally
planned to lease up the space with higher rents. The Philadelphia
CBD submarket fundamentals were strong at securitization and
according to CBRE, the Class A, office vacancy rate in
Philadelphia's Downtown submarket was 6.6% in 2019. However, the
Philadelphia CBD market fundamentals have significantly weakened
since securitization and according to CBRE the Class A direct
vacancy rate was 18.4% in downtown Philadelphia as of Q1 2024, same
as it was at Moody's last review.
The property's NCF for the trailing twelve month period ending
March 2023 was $18.4 million compared to $20.6 million, $23.6
million, $17.3 million, and $18.4 million achieved in full years
2019, 2020, 2021, and 2022, respectively. The occupancy has been
hovering in the high 60% since 2021 compared to 93% at
securitization. There is also future lease rollover risk as leases
representing approximately 10% of the property's NRA have lease
expiration dates by the end of 2024, including Dilworth Paxson
(83,000 SF) which is reportedly relocating to another building in
Philadelphia.
Moody's LTV ratio for the first mortgage balance is 204% based on
Moody's Value. Adjusted Moody's LTV ratio for the first mortgage
balance is 181% based on Moody's Value using a cap rate adjusted
for the current interest rate environment. Moody's stressed debt
service coverage ratio (DSCR) is 0.50x. Moody's NCF and cap rate
assumptions have not changed since the last review, however,
Moody's analysis factors the potential for higher expected losses
given the increase in loan advances from continued loan delinquency
and decline in office valuations in the Philadelphia CBD market.
The combination of higher floating index rates and decline in
property performance has caused the property's most recent DSCR to
be well below 1.00X. Interest shortfalls totaling $7.2 million
currently impact Cl. F, Cl. G, Cl. H and Cl. VRR based on a $115.3
million appraisal reduction effective January 2024. The most
recently reported 2023 appraised value of $292.6 million was 27%
lower than previous valuations of $401.2 million dated October 2022
and 38% lower than the $471.1 million as-is valuation at
securitization. The most recent appraisal value is now well below
both the $376 million mortgage loan amount and the aggregate loan
exposure of $400 million (inclusive of P&I and T&I advances, other
expenses and accrued unpaid advance interest outstanding).
MORGAN STANLEY 2016-C28: Fitch Lowers Rating on 2 Tranches to CC
----------------------------------------------------------------
Fitch Ratings has downgraded nine and affirmed six classes of
Morgan Stanley Bank of America Merrill Lynch Trust (MSBAM) Mortgage
Trust 2016-C28 commercial mortgage pass-through certificates. Fitch
assigned Negative Rating Outlooks to classes A-S, B, X-B, C, D and
X-D following the downgrades.
Fitch has also downgraded eight and affirmed four classes of Morgan
Stanley Bank of America Merrill Lynch Trust, commercial mortgage
pass-through certificates, series 2016-C30 (MSBAM 2016-C30).
Negative Outlooks were assigned to classes A-S, B, X-B and C
following the downgrades.
Fitch has also affirmed 14 classes of Morgan Stanley Bank of
America Merrill Lynch Trust, Commercial Mortgage Pass-Through
Certificates, series 2016-C31 (MSBAM 2016-C31). The Rating Outlooks
on classes B, X-B and C have been revised to Negative from Stable.
The Outlooks remain Negative for classes D and X-D.
Entity/Debt Rating Prior
----------- ------ -----
MSBAM 2016-C28
A-3 61766LBR9 LT AAAsf Affirmed AAAsf
A-4 61766LBS7 LT AAAsf Affirmed AAAsf
A-S 61766LBV0 LT AA-sf Downgrade AAAsf
A-SB 61766LBQ1 LT AAAsf Affirmed AAAsf
B 61766LBW8 LT A-sf Downgrade AA-sf
C 61766LBX6 LT BBB-sf Downgrade A-sf
D 61766LAC3 LT Bsf Downgrade BBsf
E 61766LAJ8 LT CCsf Downgrade CCCsf
E-1 61766LAE9 LT CCCsf Downgrade B-sf
E-2 61766LAG4 LT CCsf Downgrade CCCsf
EF 61766LAS8 LT CCsf Affirmed CCsf
F 61766LAQ2 LT CCsf Affirmed CCsf
X-A 61766LBT5 LT AAAsf Affirmed AAAsf
X-B 61766LBU2 LT AA-sf Downgrade AAAsf
X-D 61766LAA7 LT Bsf Downgrade BBsf
MSBAM 2016-C30
A-4 61766NBA2 LT AAAsf Affirmed AAAsf
A-5 61766NBB0 LT AAAsf Affirmed AAAsf
A-S 61766NBE4 LT Asf Downgrade AAsf
A-SB 61766NAY1 LT AAAsf Affirmed AAAsf
B 61766NBF1 LT BBBsf Downgrade Asf
C 61766NBG9 LT BB-sf Downgrade BBB-sf
D 61766NAJ4 LT CCCsf Downgrade Bsf
E 61766NAL9 LT CCsf Downgrade CCCsf
X-A 61766NBC8 LT AAAsf Affirmed AAAsf
X-B 61766NBD6 LT BBBsf Downgrade Asf
X-D 61766NAA3 LT CCCsf Downgrade Bsf
X-E 61766NAC9 LT CCsf Downgrade CCCsf
MSBAM 2016-C31
A-4 61766RAY2 LT AAAsf Affirmed AAAsf
A-5 61766RAZ9 LT AAAsf Affirmed AAAsf
A-S 61766RBC9 LT AA+sf Affirmed AA+sf
A-SB 61766RAW6 LT AAAsf Affirmed AAAsf
B 61766RBD7 LT Asf Affirmed Asf
C 61766RBE5 LT BBBsf Affirmed BBBsf
D 61766RAJ5 LT B-sf Affirmed B-sf
E 61766RAL0 LT CCsf Affirmed CCsf
F 61766RAN6 LT Csf Affirmed Csf
X-A 61766RBA3 LT AAAsf Affirmed AAAsf
X-B 61766RBB1 LT Asf Affirmed Asf
X-D 61766RAA4 LT B-sf Affirmed B-sf
X-E 61766RAC0 LT CCsf Affirmed CCsf
X-F 61766RAE6 LT Csf Affirmed Csf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' rating case
losses are 12.9% in MSBAM 2016-C28, 12.1% in MSBAM 2016-C30 and
9.9% in MSBAM 2016-C31. Fitch Loans of Concerns (FLOCs) comprise
nine loans (33.8% of the pool) in MSBAM 2016-C28, including three
specially serviced loans (15.6%); 11 loans (41%) in MSBAM 2016-C30,
including one specially serviced loan (0.6%); and 14 loans (37.8%)
in MSBAM 2016-C31, including four specially serviced loans (7.3%).
The downgrades in MSBAM 2016-C28 reflect increased pool loss
expectations since Fitch's prior rating action driven by further
performance deterioration of two suburban office loans, Princeton
Pike Corporate Center and Princeton South Corporate Center, as well
as continued weak performance on the Navy League Building office
loan and limited workout progress of the specially serviced
DoubleTree by Hilton - Cleveland, OH loan. The Negative Outlooks
reflect the potential for further downgrades should performance of
these aforementioned FLOCs fail to stabilize or decline further and
also consider the elevated concentration of office loans (29%) and
regional mall/outlet loans (23%).
The downgrades in MSBAM 2016-C30 reflect increased pool loss
expectations since Fitch's prior rating action driven primarily by
further office performance deterioration of the Bellevue Park
Corporate Center, Flagler Corporate Center, Park Tower Long Beach
and West LA Office - 1950 Sawtelle Boulevard loans, as well as the
lack of performance stabilization on the Briarwood Mall and Simon
Premium Outlets loans. The Negative Outlooks reflect the high
concentration of office loans (35% of pool) and potential further
downgrades should the aforementioned office and retail FLOCs not
stabilize or decline further.
The affirmations in MSBAM 2016-C31 reflect the relatively stable
pool performance and loss expectations since the prior rating
action. The Negative Outlooks reflects the high office
concentration (40%) and possible future downgrades based upon an
additional sensitivity scenario that incorporates a potential
outsized loss of 75% on One Stamford Forum due to continued lack of
leasing progress, weak submarket fundamentals and deteriorating
office outlook, which would contribute to lower recovery
expectations or a prolonged workout of the REO asset.
The largest increase in loss expectations since the prior rating
action and largest contributor to overall pool losses in MSBAM
2016-C28 is the Princeton South Corporate Center asset (5.8%), a
267,426-sf suburban office property located in Trenton, NJ. The
loan transferred to special servicing in February 2022 and became
REO in November 2023. According to special servicer updates, recent
leasing has increased occupancy to 53% as January of 2024 from 76%
as of September 2021. Fitch's 'Bsf' rating case loss of
approximately 61% (prior to concentration add-ons) incorporates a
haircut to the most recently reported appraised value, reflecting a
stressed value of $83 psf.
The next largest increase in loss expectations since the prior
rating action in MSBAM 2016-C28 is the Princeton Pike Corporate
Center loan (6.5%), which is secured by an 818,140-sf suburban
office property consisting of eight buildings located in Lawrence
Township, NJ. The loan emerged from special servicing in September
2021 with a loan modification, but transferred back in February
2024 due to imminent default. Occupancy has fallen to 60% as of YE
2023, compared with 74% at YE 2022 and 77% at YE 2021. The property
occupancy has been steadily declining since its peak in 2018 at
91%. According to special servicer updates, the borrower is
planning to propose another loan modification and workout
discussions remain ongoing. The loan was current as of the June
2024 distribution date.
Fitch's 'Bsf' rating case loss of 23.5% reflects is based on an 11%
cap rate and a 20% haircut to the YE 2022 NOI, accounting for
occupancy declines and an increased probability of default due to
the loans performance and specially serviced status.
The next largest contributor to loss in MSBAM 2016-C28 is the
DoubleTree by Hilton - Cleveland, OH loan (3.3%), which is secured
by a 379-bed full service hotel located in Cleveland, OH. The loan
transferred to special servicing in October 2019 due to cash flow
problems. Fitch's 'Bsf' rating case loss of 74.4% incorporates a
haircut to the most recent appraisal, which reflects a stressed
value of approximately $49,000 per key.
The next largest contributor to loss in MSBAM 2016-C28 is the Navy
League Building loan (7.4%), a 190,926 sf CBD office building
located in Arlington, VA approximately 2 miles from Washington DC.
The loan has been designated as a FLOC due to cash flow problems
stemming from a decline in occupancy. Occupancy was 57% as of YE
2023 compared with 69% at YE 2022. The servicer reported NOI DSCR
was 0.90x at YE 2023 compared with 0.49x at YE 2022 and 1.01x at YE
2021. Fitch's 'Bsf' rating case loss of 22.4% (prior to
concentration adjustments) is based on a 9% cap rate to the YE 2023
NOI. Fitch's analysis assumed a higher probability of default due
to refinance concerns.
The largest increase in loss expectations since the prior rating
action in MSBAM 2016-C30 is the Bellevue Park Corporate Center loan
(6.8%), which is secured by three office buildings totaling 305,398
sf located on the Delaware and Pennsylvania border between the
Philadelphia and Wilmington central business districts. This FLOC
was flagged due to performance declines. Occupancy has fallen to
61% as of September 2023 from 99% at issuance, due to BNY vacating
at its April 2023 lease expiration and other major tenants,
including Blackrock and CIGNA, downsizing.
However, both tenants did execute lease renewals, where Blackrock
renewed for five years through April 2027 and CIGNA renewed for
eight years through September 2029. Upcoming rollover at the
property includes 8.6% of the NRA in 2024, followed by 6.7% in 2025
and 1% in 2026. Fitch's 'Bsf' rating case loss of 29.4% (prior to
concentration adjustments) is based on a 10% cap rate to the YE
2023 NOI. Fitch's analysis also incorporated an increased
probability of default due to anticipated refinance concerns.
The next largest increase in loss expectations since the prior
rating action in MSBAM 2016-C30 is the Flagler Corporate Center
(4.8%), which is secured by a 634,818-sf suburban office property
in Miami, FL. The loan has been designated as a FLOC due to
significant occupancy declines. As of YE 2023, the property was 20%
occupied. Florida Power & Light (previously 62.5% of the NRA)
vacated the majority of its space except for 7,800 sf. The
serviced-reported NOI DSCR was 0.72x at YE 2023 compared with 2.12x
at YE 2022. Fitch's 'Bsf' rating case loss of 38% (prior to a
concentration adjustment) is based on a 10% cap rate to the YE 2023
NOI. Fitch's analysis assumed a higher probability of default due
to depressed performance and refinance concerns.
The next largest increase in loss expectations since the prior
rating action in MSBAM 2016-C30 is the Park Tower Long Beach loan
(2.2%), which is secured by 119,517 sf office building located in
Long Beach, CA. The loan has been designated as a FLOC due to
performance declines. As of March 2024, occupancy has declined to
44% from 48% at YE 2022 and 91% from YE 2021. The largest tenant at
issuance, ChildNet Youth and Family Services (36% NRA), vacated at
its November 2022 lease expiration. According to servicer updates,
the borrower has plans to convert the building to student housing
for Cal Tech Long Beach; however, no plans for the conversion have
been submitted for review and approval.
Fitch's 'Bsf' rating case loss of 43% (prior to a concentration
adjustment) is based on a 10% cap rate to the YE 2023 NOI. Fitch's
analysis also incorporated an increased the probability of default
due to anticipated refinance concerns.
The largest increase in expected loss since Fitch's prior rating
action in MSBAM 2016-C31 is the REO One Stamford Forum asset
(7.1%), a 504,471-sf suburban office building located in Stamford,
CT. The loan transferred to special servicing in March 2019 for
imminent monetary default when major tenant Purdue Pharma filed for
bankruptcy due to lawsuits related to the opioid crisis. A
foreclosure sale was completed in October 2023.
The asset was 51.1% occupied as of the April 2024 rent roll,
compared with 51.7% at YE 2023, 53.9% at YE 2022 and 53.8% at YE
2021. The servicer-reported NOI DSCR was 0.22x at YE 2023, -0.17x
at YE 2022 and -0.02x at YE 2021. Major tenants include Purdue
Pharma L.P. (25.3% of NRA, leased through December 2026), W.J.
Deutsch & Sons LTD. (9.1%, March 2027), AirCastle Advisor, LLC
(6.5%, August 2028) and CBRE, Inc. (2.9%, December 2026). According
to the special servicer, a lease up strategy is being implemented
with a projected disposition in 4Q25. Per CoStar, the property lies
within the Stamford, CT CBD office submarket. As of 1Q24, submarket
asking rents averaged $38.96 psf and the submarket vacancy rate was
23.8%.
Fitch's 'Bsf' rating case loss of 57% (prior to concentration
adjustments) is based on a haircut to the most recent (July 2023)
appraisal, reflecting a stressed value of $99 psf. In addition to
its base case analysis, Fitch performed a sensitivity analysis that
assumed an outsized loss of 75% to reflect lower recovery
expectations and a possible prolonged workout given the weak asset
performance and submarket fundamentals.
The largest contributor to loss in the MSBAM 2016-C31 transaction
is the Simon Premium Outlets loan (4.6%), which is secured by a
782,765-sf portfolio of three outlet centers located in tertiary
markets, including Lee, MA; Gaffney, SC and Calhoun, GA. Portfolio
occupancy was 66.8% as of the March 2024 rent rolls, compared with
65% at YE 2022, 65% at YE 2021, 69% at YE 2020 and 82% at YE 2019.
Per the March 2024 rent rolls, 17.6% of the portfolio NRA rolls by
YE 2024.
Total portfolio sales have declined to $132.0 million as of the TTM
March 2024, down 30.6% from the $190.2 million reported for 2018
and down 38.9% from the $215.9 million reported around the time of
issuance.
Fitch's 'Bsf' rating case loss of 38.9% (prior to concentration
adjustments) is based on a 25% cap rate and 15% stress to the YE
2022 NOI. Fitch's analysis assumed a higher probability of default
due to the upcoming rollover, declining occupancy and sales trends
and concerns with the loan refinancing at maturity.
Increased Credit Enhancement (CE): As of the May 2024 remittance
report, the aggregate balances of the MSBAM 2016-C28, MSBAM
2016-C30 and MSBAM 2016-C37 transactions have been reduced by
19.4%, 13.7% and 17%, respectively, since issuance.
Respective defeasance percentages in the MSBAM 2016-C28, MSBAM
2016-C30 and MSBAM 2016-C37 transactions include 15% (seven loans),
14.4% (10 loans) and 13% (seven loans), respectively.
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 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 or
are expected to occur.
Downgrades to classes rated in the 'AAAsf', 'AAsf' and 'Asf'
categories, which have Negative Outlooks, may occur should
performance of the FLOCs deteriorate further or if more loans than
expected default at or prior to maturity. These FLOCs include
Princeton Pike Corporate Center, Princeton South Corporate Center,
DoubleTree by Hilton - Cleveland, OH and Navy League Building in
MSBAM 2016-C28, Briarwood Mall, Bellevue Park Corporate Center,
Flagler Corporate Center, Simon Premium Outlets, Park Tower Long
Beach and West LA Office - 1950 Sawtelle Boulevard in MSBAM
2016-C30 and Simon Premium Outlets, One Stamford Forum and TEK park
in MSBAM 2016-C31.
Downgrades to classes rated in the 'BBBsf', 'BBsf', and 'Bsf'
categories could occur with higher than expected losses from
continued underperformance of the FLOCs, particularly the
aforementioned loans or if loans in special servicing experience
prolonged workouts resulting in value erosion and increased
exposures.
Downgrades to distressed ratings of 'CCCsf', 'CCsf' and 'Csf' would
occur as losses become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs. Upgrades of these classes to 'AAAsf' will
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 sustained improved performance
of the FLOCs, especially Princeton Pike Corporate Center, Princeton
South Corporate Center, DoubleTree by Hilton - Cleveland, OH and
Navy League Building in MSBAM 2016-C28; Briarwood Mall, Bellevue
Park Corporate Center, Flagler Corporate Center, Simon Premium
Outlets, Park Tower Long Beach and West LA Office - 1950 Sawtelle
Boulevard in MSBAM 2016-C30; and Simon Premium Outlets, One
Stamford Forum and TEK park in MSBAM 2016-C31.
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 a significant increase
in CE due to paydown and defeasance.
Upgrades to distressed ratings 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.
MORGAN STANLEY 2016-UBS11: Fitch Affirms CCC Rating on 2 Tranches
-----------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Morgan Stanley Capital I
Trust 2016-UBS11 (MSC 2016-UBS11) and 14 classes of Morgan Stanley
Capital I Trust 2016-UBS12(MSC 2016-UBS12). Fitch has revised the
Rating Outlooks for classes E and X-E in MSC 2016-UBS11 and A-S, B
and X-B in MSC 2016-UBS12 to Negative from Stable. The Outlook for
class C in MSC 2016-UBS12 remains Negative.
Entity/Debt Rating Prior
----------- ------ -----
MSC 2016-UBS11
A-3 61767FAZ4 LT AAAsf Affirmed AAAsf
A-4 61767FBA8 LT AAAsf Affirmed AAAsf
A-S 61767FBD2 LT AAAsf Affirmed AAAsf
A-SB 61767FAY7 LT AAAsf Affirmed AAAsf
B 61767FBE0 LT AA+sf Affirmed AA+sf
C 61767FBF7 LT Asf Affirmed Asf
D 61767FAJ0 LT BBB-sf Affirmed BBB-sf
E 61767FAL5 LT Bsf Affirmed Bsf
F 61767FAN1 LT CCCsf Affirmed CCCsf
X-A 61767FBB6 LT AAAsf Affirmed AAAsf
X-B 61767FBC4 LT Asf Affirmed Asf
X-D 61767FAA9 LT BBB-sf Affirmed BBB-sf
X-E 61767FAC5 LT Bsf Affirmed Bsf
X-F 61767FAE1 LT CCCsf Affirmed CCCsf
MSC 2016-UBS12
A-3 61691EAZ8 LT AAAsf Affirmed AAAsf
A-4 61691EBA2 LT AAAsf Affirmed AAAsf
A-S 61691EBD6 LT AAsf Affirmed AAsf
A-SB 61691EAY1 LT AAAsf Affirmed AAAsf
B 61691EBE4 LT A-sf Affirmed A-sf
C 61691EBF1 LT BBB-sf Affirmed BBB-sf
D 61691EAJ4 LT CCCsf Affirmed CCCsf
E 61691EAL9 LT CCsf Affirmed CCsf
F 61691EAN5 LT CCsf Affirmed CCsf
X-A 61691EBB0 LT AAAsf Affirmed AAAsf
X-B 61691EBC8 LT A-sf Affirmed A-sf
X-D 61691EAA3 LT CCCsf Affirmed CCCsf
X-E 61691EAC9 LT CCsf Affirmed CCsf
X-F 61691EAE5 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' ratings
case losses are 1.7% in MSC 2016-UBS11 and 11.8% in MSC 2016-UBS12.
Fitch Loans of Concerns (FLOCs) comprise of one loan (8.7% of the
pool) in MSC 2016-UBS11 and 13 loans (46.8%) in MSC 2016-UBS12
including two specially serviced loans (13.7%).
The affirmations of all classes in MSC 2016-UBS11 reflect overall
stable pool performance since Fitch's prior rating action. There
are no loans in special servicing. The Negative Outlooks for MSC
2016-UBS11 reflect upcoming maturity concentration risk and
potential credit enhancement (CE) erosion to lower rated classes in
the capital stack.
The affirmations of all classes in MSC 2016-UBS12 reflect stable
performance for the majority of the pool since the last rating
action. The Negative Outlooks for MSC 2016-UBS12 reflect continued
concerns surrounding larger loans and the high concentration of
FLOCs including six of the top 15 loans.
FLOCs; Largest Loss Contributors: The sole FLOC in MSC 2016-UBS11,
Irish Hills Plaza & Broadway Plaza, is secured by a 311,816-sf
grocery-anchored retail portfolio located in San Luis Obispo and
Santa Maria, CA. Major tenants include: Vallarta Supermarkets
(14.2%; lease expires January 2034), Santa Barbara County (13.8%;
lease expires October 2028) and In Shape Health Club (12.2%;
expires July 2025). As a YE 2023, servicer reported occupancy and
NOI DSCR were 99% and 1.47x respectively.
The loan was flagged as a FLOC due to upcoming rollover: 0% (2024);
25.5% (16.5% rent; 2025); 0% (2026). Fitch's 'Bsf' case loss of 2%
(prior to a concentration adjustment) is based on a 9% cap rate and
10% stress to YE 2023 due to upcoming rollover concerns. Fitch
requested a leasing update but did not receive a response.
The largest FLOC and largest contributor to loss expectations in in
MSC 2016-UBS12 is the specially serviced 681 Fifth Avenue loan
(11.4%). It transferred to the special servicer in September 2023
due to payment default. The loan, which is secured by a mixed-use
retail and office property located in the Manhattan Plaza District
in New York, NY, lost tenant Tommy Hilfiger (27.3% of the NRA, 78%
of total base rent) in 2023. Fitch's 'Bsf' case loss of 35.2%
(prior to a concentration adjustment) reflects a 9.5% cap rate and
June 2023 NOI following the loss of Tommy Hilfiger.
The second largest contributor to loss is the Wolfchase Galleria
loan (9.4%), which is secured by a 391,862-sf interest in a
regional mall located in Memphis, TN. The subject is anchored by
Macy's (non-collateral), Dillard's (non-collateral), J.C. Penney
(non-collateral) and Malco Theatres. The loan transferred to
special servicing in June 2020 due to a monetary default, but was
subsequently returned to the master servicer in May 2021.
Occupancy has steadily declined yoy at the collateral. As of
September 2023, occupancy was reported at 78%, which compares to
77.5% at YE 2021, 78.8% at YE 2020, 81.3% at YE 2019 and 84% at YE
2018. Upcoming rollover is as follows: 10.2% in 2024, 9.6% in 2025
and 18% in 2026. The servicer reported NOI debt service coverage
ratio was 1.75x at YE 2022 compared to 1.24x at YE 2021, 1.17x at
YE 2020, 1.29x at YE 2019 and 1.35x at YE 2018. While the subject
is the dominant mall in its trade area, it is also located in a
secondary market with fewer demand drivers. Fitch requested a
recent sales report from the servicer, but has not received one to
date.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 34.6% reflects a 15% cap rate and a 5% stress to YE 2021 NOI.
Fitch's analysis also recognized the heightened probability of
default due to sustained performance declines and expected
refinance challenges.
The third largest contributor to loss is the Arkansas Multifamily
Portfolio loan (2.3%), which is secured by a portfolio of four
multifamily properties totaling 428 units located in Arkansas. The
loan transferred to special in August 2020 and is in foreclosure.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 30.6% reflects a stress to the sum of the March 2023 appraisal
for each property.
Change to Credit Enhancement: As of the June 2024 remittance
report, the aggregate balances of the MSC 2016-UBS11 and MSC
2016-UBS12 have been reduced by approximately 22.3% and 14.9%,
respectively, since issuance. The MSC 2016-UBS11 transaction
includes 10 loans (15% of the pool) that have fully defeased, while
MSC 2016-UBS12 has no defeased loans.
Interest Shortfalls: Interest shortfalls of about $128,000 are
affecting the non-rated G class in MSC 2016-UBS11 and $374,000 are
affecting the distressed class F and non-rated G class in MSC
2016-UBS12.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to 'AAAsf' rated classes are not expected due to the
position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur.
Downgrades to junior 'AAAsf' rated classes are possible with
continued performance deterioration of the specially serviced loans
or significant increases in exposure, limited to no improvement in
class CE, or if interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs and/or more loans than expected
experience performance deterioration and/or default at or prior to
maturity.
Downgrades to classes rated in the 'BBBsf' category are possible
with higher than expected losses from continued underperformance of
the FLOCs and/or with greater certainty of losses on the specially
serviced loans and/or FLOCs. Elevated risk loans include Irish
Hills Plaza & Broadway Plaza in MSC 2016-UBS11 and 681 Fifth Avenue
and Wolfchase Galleria in MSC 2016-UBS12.
Downgrades to classes rated in the 'Bsf' category would occur with
greater certainty of losses on the specially serviced loans or
FLOCs, should additional loans transfer to special servicing or
default.
Downgrades to distressed ratings would occur as losses are realized
and/or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE, coupled with
stable-to-improved pool-level loss expectations and improved
performance on the FLOCs, including Irish Hills Plaza & Broadway
Plaza in MSC 2016-UBS11 and Wolfchase Galleria and the specially
serviced loans in MSC 2016-UBS12.
Upgrades to classes rated in the 'BBBsf' category would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'AA+sf' if there
is a likelihood of interest shortfalls.
Upgrades to the 'Bsf' category rated class are not likely until the
later years in a transaction and only if the performance of the
remaining pool is stable, recoveries on the FLOCs and specially
serviced loans are better than expected and there is sufficient CE
to the classes.
Upgrades to distressed ratings are not expected but possible with
better than expected recoveries on specially serviced loans and/or
performance improvement of the 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.
MOSAIC SOLAR 2022-2: Fitch Lowers Rating on Class D Notes to 'Bsf'
------------------------------------------------------------------
Fitch Ratings has downgraded Mosaic Solar Loan Trust 2022-2's
(Mosaic 2022-2) class C notes to 'BBsf' from 'BBBsf' and class D
notes to 'Bsf' from 'BBsf'. The Rating Outlooks for the C and D
notes are Negative following the downgrades. Fitch has affirmed the
class A and B notes' ratings with Stable Outlooks.
Entity/Debt Rating Prior
----------- ------ -----
Mosaic Solar Loan
Trust 2022-2
A 61946UAA0 LT AA-sf Affirmed AA-sf
B 61946UAB8 LT A-sf Affirmed A-sf
C 61946UAC6 LT BBsf Downgrade BBBsf
D 61946UAD4 LT Bsf Downgrade BBsf
TRANSACTION SUMMARY
Mosaic 2022-2 is a securitization of consumer loans backed by
residential solar equipment. The originator is Solar Mosaic, LLC,
one of the longest-established solar lenders in the U.S. It has
advanced solar loans since 2014 and financed them through public
securitizations since 2017.
KEY RATING DRIVERS
Prepayments Exacerbate Negative Excess Spread: The annualized
monthly constant prepayment rate (CPR) has decreased from 8.2%
since last review. It reached a trough of 3.0% as of the February
2024 payment date because most loans in the portfolio passed the
period for applying prepayments related to tax credits. Since then
CPR has slowly recovered to 5.3% as of the June IPD.
Borrowers are disincentivized to prepay their loans in the short
term due to the current interest rate environment. The weighted
average interest rate of 2.19% paid by borrowers in the portfolio
is several percentage points below the cost of refinancing. It is
also below rates available on certificates of deposit or similar
low-risk investments. In the long term Fitch believes prepayment
rates will return to higher levels driven by borrower mobility
(i.e. housing sales). This would be further supported by any
monetary policy easing. Fitch therefore expects a CPR of 7.5% for
the remaining life of the transaction, down from 10% as of the last
review.
The current weighted average cost of funds for the class A to D
notes is 4.21% of the stated portfolio balance. This compares with
a weighted average portfolio yield of 2.19%. To overcome the
inherent negative excess spread the transaction purchased the loans
in the portfolio at a discount. Lower realized prepayments extend
the life of the rated notes, compounding losses due to negative
excess spread.
Differentiated Prepayment Impact: The impact of lower prepayments
is negative for all notes as prior to a breach of the cumulative
net default trigger interest payments on all classes of notes rank
senior to the target credit enhancement test. However, the
magnitude varies by each class of notes.
The affirmations of the class A and B notes reflect its view that
these notes benefit the most from structural protections in the
transaction. Lack of take-up of the tax credit-related prepayment
option leads to an increase in distributions due to the target
credit enhancement mechanism, which repays classes A and B pro
rata. Ten years after closing the target credit enhancement
mechanism will be replaced by fully sequential note repayment using
all available funds. Additionally, following a breach of the
cumulative net default trigger payments of class C and D interest
will be subordinated, increasing the amount of funds available to
redeem class A.
The downgrades of the class C and D notes reflect their
vulnerability to the effects of lower prepayment rates as these
classes do not receive any principal distributions until the class
A and B notes reach the target credit enhancement level. The class
C and D notes were locked out from principal distributions up to
the November 2023 payment date, after which the target credit
enhancement level as a percentage of the pool balance net of the
yield supplement overcollateralization amount (YSOA) dropped from
100% to 18.25%.
The class A and B notes have not been able to reach the target
credit enhancement level, with the value standing at 12.4% as of
June 2024. Class C and D repayment prospects are further challenged
by the subordination following either a breach of the cumulative
net default trigger or following the tenth anniversary of
transaction closing.
The Negative Outlook for the class C and D notes reflects their
vulnerability to lower than expected prepayment rates. It also
reflects their volatile performance, caused by the interaction of
the transaction's triggers related to cumulative net default,
remaining outstanding balance and time from closing and the deal's
target OC mechanism, which alter the principal payment positions of
classes C and D in the waterfall.
Stable Defaults and Recoveries: Default and recovery performance of
the portfolio since the last review has been in line with its
expectations. Cumulative defaults since closing stood at 3.28% of
the initial par balance as of the June 2024 payment date compared
to 1.22% at the last review one year ago. Fitch expects a base case
default rate of 11.2% for the remaining life of the transaction
(vs. 9% at the last review). Fitch applied a 'AA-sf' default rate
multiple of 3.44x (vs. 4.03x at the last review). The updated base
case default rate assumption and default rate multiples reflect
additional FICO-based performance data received since the last
review as well as its macro-economic outlook.
Cumulative recoveries on defaulted loans represent 5.83% of the
balance of all defaults as of June 2024 (vs. 2.30% at the last
review). The low observations are consistent with the low seasoning
of the transaction and the typically long recovery for
photovoltaics loans. Fitch has therefore maintained a base case
recovery assumption of 30%, a 'AA-sf' recovery haircut of 36.7% and
a recovery lag assumption of 48 months.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Asset performance worsening, or sustained low prepayments without
expectation of future increases may put pressure on the rating or
lead to a Negative Outlook for the class A notes.
Material changes in policy support, the economics of purchasing and
financing photovoltaic panels and batteries, and/or ground-breaking
technological advances that make the existing equipment obsolete
may also affect the ratings negatively.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch currently caps this transaction's ratings in the 'AAsf'
category due to limited performance history, while the assigned
'AA-sf' rating is further constrained by the level of credit
enhancement (CE). As a result, a positive rating action could
result from an increase of CE due to deleveraging, underpinned by
low defaults and sustained high prepayments.
CRITERIA VARIATION
Fitch applied a variation from its Consumer ABS Rating Criteria to
deviate upwards from the Model Implied Rating by more than three
notches for the B, C and D notes. The ultimate ratings were
informed by the sensitivity analysis due to the sensitivity of the
ratings to model assumptions and conventions, repayment timing and
tranche thickness.
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.
OCP CLO 2019-17: S&P Assigns 'BB- (sf)' Rating on Cl. E-R2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R2, B-R2,
C-R2, D-1R2, D-2R2, and E-R2 replacement debt from OCP CLO 2019-17
Ltd./OCP CLO 2019-17 LLC, a CLO managed by Onex Credit Partners LLC
that was originally issued in July 2019 and underwent a refinancing
in July 2021. At the same time, S&P withdrew its ratings on the
previous class A-1R, A-2R, B-R, C-R, D-R, and E-R debt following
payment in full on the July 9, 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 class A-R2 debt replaces the previous A-1R and A-2R
classes.
-- The replacement class B-R2, C-R2, D-1R2, and E-R2 debt has a
lower spread over the three-month CME term SOFR than the July 2021
debt.
-- The class D-2R2 debt is structurally subordinate to the
replacement class D-1R2 debt and has a fixed coupon.
-- The stated maturity, reinvestment period, and non-call period
are extended five years, five years, and four years, respectively.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
OCP CLO 2019-17 Ltd./OCP CLO 2019-17 LLC
Class A-R2, $320.00 million: 'AAA (sf)'
Class B-R2, $60.00 million: 'AA (sf)'
Class C-R2 (deferrable), $30.00 million: 'A (sf)'
Class D-1R2 (deferrable), $30.00 million: 'BBB- (sf)'
Class D-2R2 (deferrable), $5.00 million: 'BBB- (sf)'
Class E-R2 (deferrable), $15.00 million: 'BB- (sf)'
Preference shares, $33.69 million: Not rated
Subordinated notes, $28.31 million: Not rated
Ratings Withdrawn
OCP CLO 2019-17 Ltd./OCP CLO 2019-17 LLC
Class A-1R to not rated from 'AAA (sf)'
Class A-2R to not rated from 'AA+ (sf)'
Class B-R to not rated from 'AA (sf)'
Class C-R to not rated from 'A (sf)'
Class D-R to not rated from 'BBB- (sf)'
Class E-R to not rated from 'BB- (sf)'
Other Outstanding Debt
OCP CLO 2019-17 Ltd./OCP CLO 2019-17 LLC
Subordinated notes, $20 million: Not rated
Preferred shares, $25 million: Not rated
OCP CLO 2022-25: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-1-R, B-2-R, C-R, D-1-R, D-2-R, and E-R replacement
debt from OCP CLO 2022-25 Ltd./OCP CLO 2022-25 LLC, a CLO
originally issued in September 2022 that is managed by Onex Credit
Partners LLC.
The preliminary ratings are based on information as of July 8,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the July 22, 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 class A-1-R, A-2-R, B-1-R, B-2-R, C-R, D-1-R,
D-2-R, and E-R debt is expected to be issued at a lower spread over
three-month CME term SOFR than the original debt.
The replacement class B-2-R debt is expected to be issued at a
fixed coupon, replacing the current floating spread.
The stated maturity, reinvestment period, and non-call period will
be extended two, three, and two years respectively.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
OCP CLO 2022-25 Ltd./OCP CLO 2022-25 LLC
Class A-1-R, $240.00 million: AAA (sf)
Class A-2-R, $10.00 million: AAA (sf)
Class B-1-R, $15.00 million: AA (sf)
Class B-2-R, $20.00 million: AA (sf)
Class C-R (deferrable), $22.50 million: A (sf)
Class D-1-R (deferrable), $22.50 million: BBB- (sf)
Class D-2-R (deferrable), $3.75 million: BBB- (sf)
Class E-R (deferrable), $11.25 million: BB- (sf)
Other Debt
OCP CLO 2022-25 Ltd./OCP CLO 2022-25 LLC
Preference shares, $35.50 million: Not rated
OCTAGON 52: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
-----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Octagon
52, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Octagon 52, Ltd.
A 67577KAA5 LT PIFsf Paid In Full AAAsf
A-1-R LT AAAsf New Rating
A-2-R LT AAAsf New Rating
B-R LT AAsf New Rating
C-R LT Asf New Rating
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E-R LT BB-sf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
Octagon 52, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Octagon Credit Investors, LLC that originally closed on March 12,
2021. The secured notes will be refinanced in whole on July 3,
2024. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $500 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.1, versus a maximum covenant, in accordance with
the initial expected matrix point of 26. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
95.2% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.64% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 44% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-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 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, 'AAsf' for class C-R, 'Asf'
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.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Octagon 52, 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.
OCTAGON 69: Fitch Assigns 'BB-sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Octagon
69, Ltd.
Entity/Debt Rating
----------- ------
Octagon 69, Ltd.
A-1 LT AAAsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Octagon 69, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Octagon Credit Investors, LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $500 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.87, 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
98.1% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.17% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.6%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 44% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'BBB+sf' and 'AA+sf' for class A-2, between 'BB+sf' and 'A+sf' for
class B, between 'B+sf' and 'BBB+sf' for class C, between less than
'B-sf' and 'BB+sf' for class D, and between less than 'B-sf' and
'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1 and class A-2
notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'Asf' for
class D, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Octagon 69, 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.
REGATTA FUNDING XIII: Moody's Ups Rating on $35MM D Notes to Ba3
----------------------------------------------------------------
Moody's Ratings has assigned ratings to four classes of CLO
refinancing notes (the "Refinancing Notes") issued by Regatta XIII
Funding Ltd. (the "Issuer").
Moody's rating action is as follows:
US$290,008,465 Class A-1-R Senior Secured Floating Rate Notes due
2031 (the "Class A-1-R Notes"), Assigned Aaa (sf)
US$60,250,000 Class A-2-R Senior Secured Floating Rate Notes due
2031 (the "Class A-2-R Notes"), Assigned Aaa (sf)
US$27,250,000 Class B-R Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class B-R Notes"), Assigned Aa1 (sf)
US$35,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C-R Notes"), Assigned A3 (sf)
Additionally, Moody's have taken rating action on the following
outstanding notes originally issued by the Issuer on July 16, 2018
(the "Original Closing Date"):
US$35,000,000 Class D Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class D Notes"), Upgraded to Ba3 (sf); previously on
January 11, 2024 Downgraded to B1 (sf)
A comprehensive review of all credit ratings for the respective
transactions have been conducted during a rating committee.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure, and Moody's expectation that the
notes will continue to be repaid given the end of the reinvestment
period in July 2023.
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.
Napier Park Global Capital (US) LP (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer.
The Issuer previously issued two 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: extensions of the non-call period.
Moody's rating action on the Class D Notes is primarily a result of
the refinancing, which increases excess spread available as credit
enhancement to the rated notes.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on Moody's
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: $465,150,990
Defaulted par: $3,863,548
Diversity Score: 81
Weighted Average Rating Factor (WARF): 2681
Weighted Average Spread (WAS): 3.22%
Weighted Average Recovery Rate (WARR): 47.11%
Weighted Average Life (WAL): 3.72 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, and 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 a Downgrade of the
Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
ROCKFORD TOWER 2017-3: Moody's Affirms Ba3 Rating on Class E Notes
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Rockford Tower CLO 2017-3, Ltd.:
US$55M Class B Senior Secured Floating Rate Notes, Upgraded to Aaa
(sf); previously on Jan 20, 2023 Upgraded to Aa1 (sf)
US$25M Class C Mezzanine Secured Deferrable Floating Rate Notes,
Upgraded to Aa2 (sf); previously on Jan 20, 2023 Upgraded to A1
(sf)
US$32.5M Class D Mezzanine Secured Deferrable Floating Rate Notes,
Upgraded to Baa2 (sf); previously on Sep 23, 2020 Confirmed at Baa3
(sf)
Moody's have also affirmed the ratings on the following notes:
US$320M (Current outstanding amount US$198,580,000) Class A Senior
Secured Floating Rate Notes, Affirmed Aaa (sf); previously on Dec
19, 2017 Assigned Aaa (sf)
US$27.5M Class E Junior Secured Deferrable Floating Rate Notes,
Affirmed Ba3 (sf); previously on Sep 23, 2020 Confirmed at Ba3
(sf)
Rockford Tower CLO 2017-3, Ltd., issued in December 2017, is a
collateralised loan obligation (CLO) backed by a portfolio of
mostly high-yield senior secured US loans. The portfolio is managed
by Rockford Tower Capital Management, L.L.C. The transaction's
reinvestment period ended in January 2023.
RATINGS RATIONALE
The rating upgrades on the Class B, Class C and Class D notes are
primarily a result of the deleveraging of the Class A notes
following amortisation of the underlying portfolio over the last 12
months. The Class A notes have paid down by approximately USD 106.6
million (33.3%) in the last 12 months.
The affirmations on the ratings on the Class A and Class E 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 key model inputs Moody's use in Moody's 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 Moody's base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: USD364.6m
Defaulted Securities: USD3.0m
Diversity Score: 64
Weighted Average Rating Factor (WARF): 3162
Weighted Average Life (WAL): 3.69 years
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.4%
Weighted Average Coupon (WAC): 8.0%
Weighted Average Recovery Rate (WARR): 47.1%
Par haircut in OC tests and interest diversion test: 2.0%
Moody's note that the June 2024 trustee report was published at the
time it was completing its analysis of the May 2024 data. The
increase in WARF has been incorporated in the analysis. The other
key portfolio metrics such as diversity score, weighted average
spread and life, and OC ratios exhibit little or no change between
these dates.
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 incorporate 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 assume 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. Recoveries higher
than Moody's expectations would have a positive impact on the
notes' ratings.
-- Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes that, at transaction maturity, the
liquidation value of such an asset will depend on the nature of the
asset as well as the extent to which the asset's maturity lags that
of the liabilities. Liquidation values 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.
SEQUOIA MORTGAGE 2024-7: Fitch Gives B+(EXP) Rating on Cl. B4 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to the residential
mortgage-backed certificates to be issued by Sequoia Mortgage Trust
2024-7 (SEMT 2024-7).
Entity/Debt Rating
----------- ------
SEMT 2024-7
A1 LT AAA(EXP)sf Expected Rating
A2 LT AAA(EXP)sf Expected Rating
A3 LT AAA(EXP)sf Expected Rating
A4 LT AAA(EXP)sf Expected Rating
A5 LT AAA(EXP)sf Expected Rating
A6 LT AAA(EXP)sf Expected Rating
A7 LT AAA(EXP)sf Expected Rating
A8 LT AAA(EXP)sf Expected Rating
A9 LT AAA(EXP)sf Expected Rating
A10 LT AAA(EXP)sf Expected Rating
A11 LT AAA(EXP)sf Expected Rating
A12 LT AAA(EXP)sf Expected Rating
A13 LT AAA(EXP)sf Expected Rating
A14 LT AAA(EXP)sf Expected Rating
A15 LT AAA(EXP)sf Expected Rating
A16 LT AAA(EXP)sf Expected Rating
A17 LT AAA(EXP)sf Expected Rating
A18 LT AAA(EXP)sf Expected Rating
A19 LT AAA(EXP)sf Expected Rating
A20 LT AAA(EXP)sf Expected Rating
A21 LT AAA(EXP)sf Expected Rating
A22 LT AAA(EXP)sf Expected Rating
A23 LT AAA(EXP)sf Expected Rating
A24 LT AAA(EXP)sf Expected Rating
A25 LT AAA(EXP)sf Expected Rating
AIO1 LT AAA(EXP)sf Expected Rating
AIO2 LT AAA(EXP)sf Expected Rating
AIO3 LT AAA(EXP)sf Expected Rating
AIO4 LT AAA(EXP)sf Expected Rating
AIO5 LT AAA(EXP)sf Expected Rating
AIO6 LT AAA(EXP)sf Expected Rating
AIO7 LT AAA(EXP)sf Expected Rating
AIO8 LT AAA(EXP)sf Expected Rating
AIO9 LT AAA(EXP)sf Expected Rating
AIO10 LT AAA(EXP)sf Expected Rating
AIO11 LT AAA(EXP)sf Expected Rating
AIO12 LT AAA(EXP)sf Expected Rating
AIO13 LT AAA(EXP)sf Expected Rating
AIO14 LT AAA(EXP)sf Expected Rating
AIO15 LT AAA(EXP)sf Expected Rating
AIO16 LT AAA(EXP)sf Expected Rating
AIO17 LT AAA(EXP)sf Expected Rating
AIO18 LT AAA(EXP)sf Expected Rating
AIO19 LT AAA(EXP)sf Expected Rating
AIO20 LT AAA(EXP)sf Expected Rating
AIO21 LT AAA(EXP)sf Expected Rating
AIO22 LT AAA(EXP)sf Expected Rating
AIO23 LT AAA(EXP)sf Expected Rating
AIO24 LT AAA(EXP)sf Expected Rating
AIO25 LT AAA(EXP)sf Expected Rating
AIO26 LT AAA(EXP)sf Expected Rating
B1 LT AA-(EXP)sf Expected Rating
B2 LT A-(EXP)sf Expected Rating
B3 LT BBB-(EXP)sf Expected Rating
B4 LT B+(EXP)sf Expected Rating
B5 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 542 loans with a total balance of
approximately $650.3 million as of the cutoff date. The pool
consists of prime jumbo fixed-rate mortgages acquired by Redwood
Residential Acquisition Corp. from various mortgage originators.
Distributions of principal and interest (P&I) and loss allocations
are based on a senior-subordinate, shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
542 loans totaling approximately $650.3 million and seasoned at
approximately three months in aggregate, as determined by Fitch.
The borrowers have a strong credit profile, with a weighted-average
Fitch model FICO score of 775 and 35.5% debt-to-income (DTI) ratio
and moderate leverage, with an 82.8% sustainable loan-to-value
(sLTV) ratio, and 73.5% mark-to-market combined LTV (cLTV) ratio.
Overall, the pool consists of 94.7% in loans where the borrower
maintains a primary residence, while 5.3% are of a second home;
64.3% of the loans were originated through a retail channel.
Additionally, 99.6% of the loans are designated as qualified
mortgage (QM) loans, while 0.4% are HPQM.
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.7% above a long-term sustainable level (versus
11.1% on a national level as of 4Q23, which remained unchanged
since the prior quarter). Home prices increased 5.5% yoy nationally
as of February 2024, despite modest regional declines, but are
still supported by limited inventory.
Shifting-Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years.
The lockout feature helps to maintain subordination for a longer
period should losses occur later in the life of the transaction.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained.
After the credit support depletion date, principal will be
distributed sequentially to the senior classes, which is more
beneficial for the super-senior classes (A-9, A-12 and A-18).
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent: a stop-advance loan. Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps to limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in high
delinquency scenarios.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the 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%, 20% and 30%, in addition to the
model-projected 42.0% at 'AAAsf'. The analysis indicates there is
some potential rating migration with higher MVDs compared to the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national level
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Clayton and Consolidated Analytics. The
third-party due diligence described in Form 15E focused on: credit,
property valuation and compliance review. Fitch considered this
information in its analysis and, as a result, Fitch made the
following adjustment to its analysis: a 5% reduction in its loss
analysis. This adjustment resulted in a 18bp reduction to 'AAAsf'
expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 95.9% of the pool by loan
count. The third-party due diligence was consistent with Fitch's
"U.S. RMBS Rating Criteria." Clayton, AMC, and Consolidated
Analytics were engaged to perform the review. Loans reviewed under
this engagement were given credit, compliance and valuation grades
and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the Third-Party Due Diligence section of the presale
report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive.
The ASF data tape layout was established with input from various
industry participants, including rating agencies, issuers,
originators, investors and others, to produce an industry standard
for the pool-level data in support of the U.S. RMBS securitization
market. The data contained in the ASF layout data tape were
reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
SEMT 2024-7 has an ESG Relevance Score of '4'[+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in SEMT 2024-7 and includes strong R&W and transaction due
diligence as well as a strong aggregator, which resulted in a
reduction in the expected losses. This has a positive impact on the
credit profile and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SLM PRIVATE 2003-B: Fitch Lowers Rating on Cl. B Notes to 'Bsf'
---------------------------------------------------------------
Fitch Ratings has affirmed 14 tranches, upgraded two tranches, and
downgraded 10 tranches from 10 SLM Private Credit Student Loan
Trusts. Fitch has also affirmed five tranches from two Navient
Private Education Loan Trusts.
The affirmations reflect Fitch's assessment of the available credit
enhancement (CE) appropriate for each note's rating level, while
considering both heightened credit and maturity risk. CE has been
increasing for all of the notes, but asset performance has reverted
to or exceeded pre-coronavirus pandemic levels, with increasing
delinquencies and defaults. The remaining term to maturity for all
of the affirmed transactions has remained relatively flat or
increased due to loan modifications and forbearance, which
increases maturity risk on the liability side.
The upgrades of SLM 2006-C class C and 2007-A class A-4 also
reflect increased CE but improved model results, stable asset
performance, and more limited maturity risk. Following its upgrade,
Fitch has assigned a Positive Outlook to 2007-A class A-4 due to
the senior position of the notes and particularly rapid CE growth.
The downgrades of 2003-A class A-3, A-4, and B, 2003-B class A-3,
A-4, and B and 2003-C class A-3, A-4, A-5, and B reflect heightened
credit and maturity risk. The high interest rate environment,
exacerbated by the senior auction rate-indexed notes, has
negatively affected the transactions, and the remaining term to
maturity of the underlying asset pool has continued to increase.
The pool factor for these three deals is below 10%, increasing the
risk of negative credit selection in the asset pool.
Entity/Debt Rating Prior
----------- ------ -----
SLM Private Credit
Student Loan Trust
2004-A
A-3 78443CBH6 LT AAsf Affirmed AAsf
SLM Private Credit
Student Loan Trust
2007-A
A-4 78443DAD4 LT Asf Upgrade A-sf
B 78443DAF9 LT BBBsf Affirmed BBBsf
C-1 78443DAH5 LT BB+sf Affirmed BB+sf
C-2 78443DAJ1 LT BB+sf Affirmed BB+sf
SLM Private Credit
Student Loan Trust
2003-B
A-3 78443CAN4 LT B+sf Downgrade BBB-sf
A-4 78443CAP9 LT B+sf Downgrade BBB-sf
B 78443CAQ7 LT Bsf Downgrade BBsf
C 78443CAR5 LT CCsf Affirmed CCsf
SLM Private Credit
Student Loan Trust
2003-A
A-3 78443CAJ3 LT B+sf Downgrade BBB-sf
A-4 78443CAK0 LT B+sf Downgrade BBB-sf
B 78443CAG9 LT Bsf Downgrade BB+sf
C 78443CAH7 LT CCsf Affirmed CCsf
SLM Private Credit
Student Loan Trust
2006-C
A-5 78443JAE9 LT AA-sf Affirmed AA-sf
B 78443JAF6 LT Asf Affirmed Asf
C 78443JAG4 LT BBBsf Upgrade BBB-sf
SLM Private Credit
Student Loan Trust
2003-C
A-3 78443CBA1 LT B+sf Downgrade BBB-sf
A-4 78443CBB9 LT B+sf Downgrade BBB-sf
A-5 78443CBC7 LT B+sf Downgrade BBB-sf
B 78443CBD5 LT Bsf Downgrade BBsf
C 78443CBE3 LT CCsf Affirmed CCsf
SLM Private Credit
Student Loan Trust
2005-A
A-4 78443CBV5 LT A+sf Affirmed A+sf
SLM Private Credit
Student Loan Trust
2006-B
A-5 78443CCU6 LT Asf Affirmed Asf
A-5W 78443CCY8 LT Asf Affirmed Asf
Navient Private
Education Loan
Trust 2015-A
A3 63939EAD5 LT AAAsf Affirmed AAAsf
B 63939EAE3 LT AAsf Affirmed AAsf
Navient Private
Education Loan
Trust 2016-A
A-2A 63939NAB9 LT AAAsf Affirmed AAAsf
A-2B 63939NAC7 LT AAAsf Affirmed AAAsf
B 63939NAD5 LT AAsf Affirmed AAsf
SLM Private Credit
Student Loan Trust
2006-A
A-5 78443CCL6 LT A+sf Affirmed A+sf
SLM Private Credit
Student Loan Trust
2005-B
A-4 78443CCB8 LT A+sf Affirmed A+sf
KEY RATING DRIVERS
Collateral Performance: All of the trusts are collateralized by
private student loans that are originated by SLM Corp.
(BB+/Stable/B) or Navient Corp. (BB-/Stable/B). Loans in the SLM
trusts were originated under the Signature Education Loan Program,
LAWLOANS program, MBA Loans program, and MEDLOANS program. The SLM
2007-A and Navient trusts also included loans originated under the
Direct to Consumer and Private Credit Consolidation programs. The
Navient Trusts also comprise Navient's Smart Option program,
launched in 2009.
For transactions modelled for this surveillance review, Fitch's
remaining cumulative default assumptions (as a percentage of the
outstanding non-defaulted pool balance as of the most recent
reporting date) are as follows:
SLM 2003-A: 10.2%
SLM 2003-B: 10.7%
SLM 2003-C: 10.4%
SLM 2004-A: 10.4%
SLM 2005-A: 13.9%
SLM 2005-B: 14.0%
SLM 2006-A: 14.5%
SLM 2006-B: 15.6%
SLM 2006-C: 15.7%
SLM 2007-A: 16.3%
Navient 2015-A: 16.9%
Navient 2016-A: 16.2%
The recovery assumption is 18.0% of defaulted amounts for all
transactions, based on observed recovery data in the transactions
and unchanged from previous surveillance reviews.
For SLM 2003-A, SLM 2003-B, SLM 2003-C, SLM 2004-A, SLM 2005-A, and
SLM 2005-B, Fitch applied a 'Low' default stress multiple in the
multiple range from Fitch's Private Student Loan Criteria,
resulting in a 3.5x multiple at 'AAAsf'. Rating stress multiples at
other rating levels are in line with 'Low' multiples for the
relevant rating level in accordance with Fitch's 'U.S. Private
Student Loan ABS Rating Criteria'.
For SLM 2006-A, SLM 2006-B, SLM 2006-C, 2007-A, Navient 2015-A, and
Navient 2016-A, Fitch applied a 'Median-Low' default stress
multiple of 3.75x multiple at 'AAAsf'. The assumed multiples are
unchanged from the previous surveillance review. Rating stress
multiples at other rating levels are in line with 'Median-Low'
multiples for the relevant rating level in accordance with Fitch's
'U.S. Private Student Loan ABS Rating Criteria'.
Payment Structure: For all of the transactions, available CE is
sufficient to provide loss coverage in line with the assigned
rating category. CE is provided by a combination of
overcollateralization (OC; the excess of the trust's asset balance
over the bond balance), excess spread, and subordination of more
junior notes. As reflected in the ratings, the class C notes for
SLM 2003-A, 2003-B and 2003-C are currently under collateralized.
OC for SLM 2004-A was $37.20 million as of June 2024 vs. a floor of
$26.86 million, 2005-A was $37.19 million vs. a floor of $33.18
million, and 2007-A was $45.03 million vs a floor of $45.01
million. All other deals are at their OC floor level.
Operational Capabilities: Navient Solutions LLC is the servicer for
all the loans in the trust. This year Navient announced that it has
entered into a binding letter of intent to transfer its student
loan servicing to MOHELA in the coming months. Fitch has reviewed
the servicing operations of Navient and MOHELA and considers both
to be adequate private student loan servicers for the transaction
based on their historical performance servicing student loan
collateral.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
As Fitch's default assumptions are derived primarily from
historical collateral performance, actual performance may differ
from the expected performance, resulting in higher loss levels than
the base case. This will result in a decline in available CE and
the remaining loss coverage levels available to the notes.
Therefore, note ratings may be susceptible to potential negative
rating actions depending on the extent of the decline in the
coverage.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable-to-improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels. However, improved
performance on the underlying collateral would not necessarily
result in positive rating action, depending on the maturity risk
present in the transaction.
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.
SOUND POINT 39: Fitch Assigns 'BB-sf' Rating on Class E Notes
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Sound
Point CLO 39, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Sound Point
CLO 39 Ltd.
A1 LT NRsf New Rating NR(EXP)sf
A2 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D1 LT BBBsf New Rating BBB(EXP)sf
D2 LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Sound Point CLO 39, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Sound
Point CLO C-MOA, LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.37, versus a maximum covenant, in accordance with
the initial expected matrix point of 25.5. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.2% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.84% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.23%.
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 9% of the portfolio balance
in aggregate. The level of diversity resulting from the industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio 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 A2, 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 D1, between
less than 'B-sf' and 'BB+sf' for class D2, 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 A2 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 D1, 'A-sf' for class D2, 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 Sound Point CLO 39,
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.
SOUND POINT VI-R: Moody's Cuts Rating on $12MM Cl. F Notes to Caa2
------------------------------------------------------------------
Moody's Ratings has downgraded the ratings on the following notes
issued by Sound Point CLO VI-R, Ltd.:
US$33,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes, Downgraded to Ba1 (sf); previously on Sep 11, 2020 Confirmed
at Baa3 (sf)
US$30,000,000 Class E Junior Secured Deferrable Floating Rate
Notes, Downgraded to B1 (sf); previously on Sep 11, 2020 Confirmed
at Ba3 (sf)
US$12,000,000 Class F Junior Secured Deferrable Floating Rate
Notes, Downgraded to Caa2 (sf); previously on Sep 11, 2020
Downgraded to Caa1 (sf)
Moody's have also affirmed the ratings on the following notes:
US$390,000,000 Class A Senior Secured Floating Rate Notes,
Affirmed Aaa (sf); previously on Oct 22, 2018 Assigned Aaa (sf)
US$66,000,000 Class B Senior Secured Floating Rate Notes, Affirmed
Aa2 (sf); previously on Oct 22, 2018 Assigned Aa2 (sf)
US$33,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes, Affirmed A2 (sf); previously on Oct 22, 2018 Assigned A2
(sf)
Sound Point CLO VI-R, Ltd., issued in October 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 October 2023.
RATINGS RATIONALE
The rating downgrades on the Class D, E and F notes are primarily a
result of the deterioration in over-collateralisation (OC) ratios
since the last deal review in October 2023.
The affirmations on the ratings on the Class A, B and C 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 OC ratios.
The OC ratios of the rated notes have deteriorated since the deal
review in October 2023. According to the trustee report dated June
2024 [1] the Class A/B, Class C, Class D and Class E OC ratios are
reported at 124.74%, 116.33%, 108.97% and 103.05% compared to
September 2023 [2] levels, on which the last review was based, of
127.14%, 118.56%, 111.07% and 105.03% respectively. Class E OC test
is currently in breach and while the transaction doesn't have an
explicit Class F OC ratio, its implicit level has decreased
following the loss of par.
The credit quality has also deteriorated as reflected in the
deterioration in the average credit rating of the portfolio
(measured by the weighted average rating factor, or WARF) and an
increase in the proportion of securities from issuers with ratings
of Caa1 or lower. According to the trustee report dated June 2024
[1], the WARF was 3284, compared with 3067 in the September 2023
[2] report. Securities with ratings of Caa1 or lower currently make
up approximately 15.5% of the underlying portfolio.
The key model inputs Moody's use in Moody's analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on Moody's published methodology
and could differ from the trustee's reported numbers.
In Moody's base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: USD566.8m
Defaulted Securities: USD7.6m
Diversity Score: 72
Weighted Average Rating Factor (WARF): 3035
Weighted Average Life (WAL): 3.86 years
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.59%
Weighted Average Recovery Rate (WARR): 46.7%
Par haircut in OC tests and interest diversion test: 0.8%
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 incorporate these default and recovery
characteristics of the collateral pool into Moody's 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.
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 assume 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.
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
Moody's other analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
STRATA CLO II: S&P Affirms BB- (sf) Rating on Class E Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, A-L, B-R,
C-R, and D-R replacement debt from Strata CLO II Ltd./Strata CLO II
LLC, a CLO originally issued in October 2021 that is managed by HPS
Investment Partners LLC. At the same time, S&P withdrew its ratings
on the original class A-1, A-2, B, C, and D debt following payment
in full on the July 9, 2024, refinancing date. S&P also affirmed
its ratings on the class E debt, which was not refinanced.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period was extended to April 9, 2025.
-- No additional subordinated notes were issued on the refinancing
date.
-- On a standalone basis, our cash flow analysis indicated a lower
rating on the class E debt. However, we affirmed our 'BB- (sf)'
rating on the class E debt after considering the margin of failure
and the adequate credit support available to the tranche.
Replacement And Original
Replacement debt
-- Class A-R, $146.50 million: Three-month CME term SOFR + 1.38%
-- Class A-L loans, $73.50 million: Three-month CME term SOFR +
1.38%
-- Class B-R, $52 million: Three-month CME term SOFR + 2.00%
-- Class C-R (deferrable), $39.00 million: Three-month CME term
SOFR + 2.90%
-- Class D-R (deferrable), $26.00 million: Three-month CME term
SOFR + 4.41%
Original debt
-- Class A-1, $200.00 million: Three-month CME term SOFR + 1.59% +
CSA(i)
-- Class A-2, $20.00 million: Three-month CME term SOFR + 1.75% +
CSA(i)
-- Class B, $52.00 million: Three-month CME term SOFR + 2.05% +
CSA(i)
-- Class C (deferrable), $39.00 million: Three-month CME term SOFR
+ 2.85% + CSA(i)
-- Class D (deferrable), $26.00 million: Three-month CME term SOFR
+ 4.35% + 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
Strata CLO II Ltd./Strata CLO II LLC
Class A-R, $146.50 million: AAA (sf)
Class A-L loans, $73.50 million: AAA (sf)
Class B-R, $52.00 million: AA (sf)
Class C-R, $39.00 million: A (sf)
Class D-R, $26.00 million: BBB- (sf)
Ratings Withdrawn
Strata CLO II Ltd./Strata CLO II LLC
Class A-1 to NR from 'AAA (sf)'
Class A-2 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Rating Affirmed
Strata CLO II Ltd./Strata CLO II LLC
Class E: BB- (sf)
Other Debt
Strata CLO II Ltd./Strata CLO II LLC
Subordinated notes, $55.6 million: NR
NR--Not rated.
TRALEE CLO IV: S&P Lowers Class E Notes Rating to 'B+ (sf)'
-----------------------------------------------------------
S&P Global Ratings raised its ratings on the class B, C, and D
notes from Tralee CLO IV Ltd. and removed the class B and C notes
from CreditWatch, where S&P placed them with positive implications
in April 2024. At the same time, S&P lowered its ratings on the
class E and F notes and removed them from CreditWatch, where S&P
placed them with negative implications in April 2024. S&P also
affirmed its ratings on the class A notes from the same
transaction.
The rating actions follow its review of the transaction's
performance using data from the May 2024 trustee report. Although
the same portfolio backs all of the tranches, there can be
circumstances, such as this one, where the ratings on the tranches
may move in opposite directions due to support changes in the
portfolio. This transaction is experiencing opposing rating
movements because it experienced both principal paydowns, which
increased the senior credit support, and an increase in defaults
and a decline in credit quality, which decreased the junior credit
support.
The transaction has paid down $161.3 million to the class A notes
since our June 2023 rating actions. The reported
overcollateralization (O/C) ratios changed since the May 2023
trustee report, which S&P used for its previous rating actions:
-- The class A/B O/C ratio improved to 157.57% from 127.17%.
-- The class C O/C ratio improved to 128.82% from 116.40%.
-- The class D O/C ratio improved to 112.70% from 109.15%.
-- The class E O/C ratio declined to 101.86% from 103.66%.
While the senior O/C ratios experienced positive movement due to
the lower balances of the senior notes, the junior class E O/C
ratio declined due to a combination of an increase in defaults and
increased haircuts following an increase in the portfolio's
exposure to 'CCC' or lower quality assets. Also, the class E O/C is
below its threshold level of 104.7%, and therefore interest
proceeds are being diverted to pay down the class A notes, and the
class F notes are deferring interest.
Collateral obligations with ratings in the 'CCC' category have
decreased in dollar value but have increased in percentage with
12.3% ($22.5 million) reported May 2024 trustee report, compared
with 9.2% (32.8 million) reported as of the May 2023 trustee
report. Over the same period, the par amount of defaulted
collateral has increased to $12.09 million from $4.25 million.
The upgraded ratings reflect the improved credit support available
to the notes at the prior rating levels.
The lowered ratings reflect deteriorated credit quality of the
underlying portfolio and the decrease in credit support available
to the class E and F notes. Additionally, the class F notes have
accumulated $1.40 million in deferred interest, resulting of a
current balance of $9.40 million compared to the original $8.00
million.
The affirmed rating reflects adequate credit support at the current
rating level, though any further deterioration in the credit
support available to the notes could results in further ratings
changes.
On a standalone basis, the results of the cash flow analysis
indicated some different rating levels than these rating actions
suggest. The cash flows indicated a higher rating on the class C
and D notes. S&P said, "However, because the transaction currently
has higher-than-average exposure to 'CCC' and 'D' rated collateral
obligations, we limited the upgrade on these classes to offset
future potential credit migration and concentration risk in the
underlying collateral. Our rating actions also reflect additional
sensitivity runs that consider the CLO's exposure to these
lower-quality assets and those currently at distressed prices, and
our preference for more cushion to offset any future potential
negative credit migration in the underlying collateral. The results
of the cash flow analysis of class E notes indicated a positive
cushion at the prior rating level. However, because the
transaction's increased exposure to 'CCC' and 'D' rated collateral
obligations and collateral obligations trading at a distress
prices, the failing O/C test of this class, the reliance on excess
spread to pass the top obligor test at 'BB' category, and the
available current credit support, we instead lowered the rating on
class E by one notch to 'B+ (sf)'."
The results of the cash flow analysis also pointed to a lower
rating on the class F debt than today's rating action suggests. At
this time, the lowered rating on class F is limited to two notches,
to 'CCC- (sf)', as it continues to be dependent upon favorable
business, financial, and economic conditions for the obligor to
meet its financial commitment of the obligation and the potential
for monetizing equity. At this time, S&P did not further downgrade
this class to 'CC' category, as indicated by the cash flows, as we
don't consider its default to be virtually certain.
S&P said, "In line with our criteria, our cash flow scenarios
applied forward-looking assumptions on the expected timing and
pattern of defaults, and recoveries upon default, under various
interest rate and macroeconomic scenarios. In addition, our
analysis considered the transaction's ability to pay timely
interest and/or ultimate principal to each of the rated tranches.
The results of the cash flow analysis--and other qualitative
factors as applicable--demonstrated, in our view, that all of the
rated outstanding classes have adequate credit enhancement
available at the rating levels associated with these rating
actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and will take rating actions as we deem
necessary."
Ratings Raised And Removed From CreditWatch Positive
Tralee CLO IV Ltd.
Class B to 'AAA (sf)' from 'AA (sf)/Watch Pos'
Class C to 'AA+ (sf)' from 'A (sf)/Watch Pos'
Ratings Lowered And Removed From CreditWatch Negative
Tralee CLO IV Ltd.
Class E to 'B+ (sf)' from 'BB- (sf)/Watch Neg'
Class F to 'CCC- (sf)' from 'CCC+ (sf)/Watch Neg'
Rating Raised
Tralee CLO IV Ltd.
Class D to 'BBB+ (sf)' from 'BBB- (sf)'
Rating Affirmed
Tralee CLO IV Ltd.
Class A: AAA(sf)
UBS-BARCLAYS 2013-C5: Moody's Lowers Rating on Cl. E Certs to C
---------------------------------------------------------------
Moody's Ratings has affirmed the rating on one class and downgraded
the ratings on six classes of UBS-Barclays Commercial Mortgage
Trust 2013-C5, Commercial Mortgage Pass-Through Certificates,
Series 2013-C5, as follows:
Cl. B, Downgraded to Baa2 (sf); previously on Apr 6, 2023
Downgraded to Baa1 (sf)
Cl. C, Downgraded to B1 (sf); previously on Apr 6, 2023 Downgraded
to Ba3 (sf)
Cl. D, Downgraded to Caa3 (sf); previously on Apr 6, 2023
Downgraded to Caa2 (sf)
Cl. E, Downgraded to C (sf); previously on Apr 6, 2023 Affirmed
Caa3 (sf)
Cl. F, Affirmed C (sf); previously on Apr 6, 2023 Affirmed C (sf)
Cl. X-B*, Downgraded to Baa2 (sf); previously on Apr 6, 2023
Downgraded to Baa1 (sf)
Cl. EC, Downgraded to Ba2 (sf); previously on Apr 6, 2023
Downgraded to Ba1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on four P&I classes were downgraded due to the
potential for higher losses from the exposure to two remaining
troubled loan exposures (100% of the pool) which have been
previously modified and extended after failing to payoff at their
original maturity dates. The remaining loan exposures are the
Valencia Town Center loan (73.5% of the pool), a regional mall in
Valencia CA, and the Harborplace loan (26.5% of the pool), which
have both experienced significant cash flows declines from their
levels at securitization. Given the higher interest rate
environment and declines in performance, the remaining classes may
be at risk of increased losses and interest shortfalls should the
loan performance continue to decline or default on their loan
payments.
The rating on one P&I class was affirmed because the rating is
consistent with Moody's expected loss.
In the rating action Moody's also analyzed loss and recovery
scenarios to reflect the recovery value on the remaining exposures,
the current cash flow at the properties and the timing to ultimate
resolution.
The rating on one IO class, Cl. X-B, was downgraded based on the
decline in credit quality of its referenced classes.
The rating on the exchangeable class, Cl. EC, was downgraded based
on the credit quality of its referenced exchangeable classes and
the principal paydowns of higher quality reference classes. Cl. EC
originally referenced classes A-S, B and C, however, Cl. A-S has
previously paid off in full.
Moody's regard e-commerce competition as a social risk under
Moody's ESG framework. The rise in e-commerce and changing consumer
behavior presents challenges to brick-and-mortar discretionary
retailers.
Moody's rating action reflects a base expected loss of 59.2% of the
current pooled balance, compared to 54.1% at Moody's last review.
Moody's base expected loss plus realized losses is now 11.2% of the
original pooled balance, compared to 10.6% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the remaining loans, 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 Moody's have identified
troubled loans representing 100% of the pool. In this approach,
Moody's determine 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 apply
the aggregate loss from troubled loans to the most junior class(es)
and the recovery as a pay down of principal to the most senior
classes.
DEAL PERFORMANCE
As of the June 12, 2024 distribution date, the transaction's
aggregate certificate balance has decreased by 83% to $254 million
from $1.49 billion at securitization. The certificates are
collateralized by two loan exposures, both of which are current and
have been previously modified and extended.
Three loans have been liquidated from the pool, contributing to an
aggregate realized loss of $15.5 million (for an average loss
severity of 45%). Due the prior extensions and current performance,
Moody's have assumed a high default probability for the remaining
loans and has estimated an aggregate loss of $151 million (a 59%
expected loss on average).
As of the June 2024 remittance statement cumulative interest
shortfalls were $3.9 million. Moody's anticipate interest
shortfalls may increase if the performance of the remaining loans
does not improve.
The largest loan is the Valencia Town Center Loan ($186.7 million
– 73.5% of the pool), which is secured by a 646,121 SF portion of
a 1.1 million SF super-regional mall located in Valencia,
California. The mall is currently anchored by Macy's and JC Penney.
A former anchor, Sears (122,000 SF), vacated in 2018 and the space
remains vacant. The three anchor units are not included as
collateral for the loan. Major collateral tenants include a
12-screen Edward's Theater (68,780 SF; lease expiration in May
2034) and Gold's Gym (29,100 SF; lease expiration in July 2027).
The property benefits from strong demographics and being the only
mall serving the Santa Clarita Valley submarket. The collateral was
79% leased as of December 2023, compared to 92% leased as of
December 2022, 82% in December 2021 and 97% at securitization. The
property's NOI generally improved from securitization through
year-end 2018, but has since significantly declined. The property's
2023 NOI was 10% lower than in 2022 and approximately 36% lower
than in 2013. The loan transferred to special servicing in
September 2022 due to imminent maturity default and has passed its
original maturity date in January 2023. The property was sold in
September 2023 for $199 million, slightly above the outstanding
loan balance and the appraisal value of $181 million in March 2023.
As part of the sale and loan assumption, the loan was extended to
September 2027. Servicer commentary indicated that the loan was
returned to master servicer in November 2023 was current on its
debt service payments as of the June 2024 remittance report.
The second largest loan exposure is the Harborplace Loan (an
aggregate balance of $67.5 million – 26.5% of the pool), which is
secured by a leasehold interest in an approximately 149,000 SF
lifestyle retail center in Baltimore, Maryland. The property is
located on the harbor waterfront near the Baltimore central
business district (CBD). Several major tenants have vacated the
property since securitization eventually triggering co-tenancy
provisions which resulted in additional tenant departures. The
property was only 59% leased in December 2023, compared to 51% as
of December 2022 and 95% at securitization. The loan's DSCR has
been below 1.00X since 2017 and has been negative since 2019. The
loan transferred to special servicing in February 2019 due to
payment default and subsequently in June 2023, MCB Real Estate
purchased the subject property with the intention of redeveloping
it along the city's waterfront. As part of the sale and assumption
the loan was modified to include an A / B Note with current
balances of $56.5 million and $10.9 million, respectively, a
maturity date extension to July 2026 and conversion to
interest-only payments. The most recent appraised value in June
2023 was 57% lower than the securitization value and below the
outstanding combined loan amount. The loan has been returned to
master Servicer in November 2023 as a corrected mortgage and as of
the June 2024 remittance report loan was classified as current
under the modified terms.
WELLS FARGO 2024-5C1: Fitch Assigns B-(EXP)sf Rating on G-RR Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Wells Fargo Commercial Mortgage Trust 2024-5C1 commercial mortgage
pass-through certificates, series 2024-5C1 as follows:
- $9,174,000a class A-1 'AAAsf'; Outlook Stable;
- $219,937,000ae class A-2 'AAAsf'; Outlook Stable;
- $271,666,000ae class A-3 'AAAsf'; Outlook Stable;
- $500,779,000b class X-A 'AAAsf'; Outlook Stable;
- $67,068,000a class A-S 'AAAsf'; Outlook Stable;
- $36,665,000a class B 'AA-sf'; Outlook Stable;
- $27,720,000a class C 'A-sf'; Outlook Stable;
- $131,454,000b class X-B 'A-sf'; Outlook Stable;
- $16,990,000ac class D 'BBBsf'; Outlook Stable;
- $8,048,000ac class E 'BBB-sf'; Outlook Stable;
- $25,039,000bc class X-D 'BBB-sf'; Outlook Stable;
- $16,096,000ac class F 'BB-sf'; Outlook Stable;
- $16,096,000bc class X-F 'BB-sf'; Outlook Stable;
- $10,730,000acd class G-RR 'B-sf'; Outlook Stable.
Fitch does not expect to rate the following classes:
- $31,298,359acd class J-RR;
- $16,474,000f class Combined vertical risk retention (VRR)
Interest.
Notes:
(a) Class balances, excluding the Combined VRR Interest, are net of
their proportionate share of the vertical risk retention interest,
totaling 2.25% of the notional amount of the certificates.
(b) Net of its proportionate share of the vertical risk retention
interest, and interest only. The total notional amount for X-A is
$512,306,000, for X-B is $134,480,000, for X-D is $25,616,000 and
for X-F is $16,467,000.
(c) Privately placed and pursuant to Rule 144A.
(d) Class G-RR and J-RR certificates comprise the transaction's
horizontal risk retention interest.
(e) The expected class A-2 balance range is $0-$219,937,000, and
the expected class A-3 balance range is $271,666,000-$491,604,000,
both net of their proportionate share of the Combined VRR Interest.
The balance for class A-2 reflects the top point of its range, and
the balance for class A-3 reflects the bottom point of its range,
net of their proportionate share of the Combined VRR Interest. In
the event the class A-3 certificates are issued at $491,604,000,
the class A-2 certificates will not be issued.
(f) The Combined VRR Interest comprises the transaction's vertical
risk retention interest, and the certificate balance is subject to
change based on the final pricing of all classes.
The expected ratings are based on information provided by the
issuer as of July 8, 2024.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, the primary assets of which are 32 fixed-rate, commercial
mortgage loans with an aggregate principal balance of $731,866,360,
as of the cutoff date. The mortgage loans are secured by the
borrowers' fee and leasehold interests in 48 commercial
properties.
The loans were contributed to the trust by Wells Fargo Bank,
National Association, Argentic Real Estate Finance 2 LLC, Citi Real
Estate Funding Inc., LMF Commercial, LLC, Goldman Sachs Mortgage
Company, UBS AG, BSPRT CMBS Finance, LLC.
The master servicer is expected to be Wells Fargo Bank, National
Association and the special servicer is expected to be Argentic
Services Company LP. The trustee and certificate administrator is
expected to be Computershare Trust Company, National Association.
These certificates are expected to follow a sequential paydown
structure. The transaction's closing date is expected to be July 8,
2024.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 24 loans
totaling 91.6% of the pool by balance. Fitch's resulting net cash
flow (NCF) of $122.7 million represents a 17.8% decline from the
issuer's underwritten NCF of $149.3 million.
Higher Fitch Leverage: The pool has higher leverage compared to
recent multiborrower transactions rated by Fitch. The pool's Fitch
loan-to-value ratio (LTV) of 99.8% is higher than both the 2024 YTD
and 2023 averages of 88.4% and 88.3%, respectively. The pool's
Fitch NCF debt yield (DY) of 9.58% is worse than both the 2024 YTD
and 2023 averages of 11.4% and 10.9%, respectively.
Investment Grade Credit Opinion Loans: Two loans representing 10.0%
of the pool balance received an investment grade credit opinion.
640 5th Avenue (6.9% of the pool) received a standalone credit
opinion of 'BBB+sf*'. Park Parthenia (3.1%) received a standalone
credit opinion of 'Asf*'. The pool's total credit opinion
percentage of 10.0% is below the YTD 2024 average of 14.1% and the
2023 average of 17.8%.
High Pool Concentration: The largest 10 loans constitute 61.8% of
the pool, which is in-line with the 2024 YTD of 60.0% and better
than the 2023 average of 63.7%. 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 20.3. Fitch views diversity as a key mitigant to
idiosyncratic risk. Fitch raises the overall loss for pools with
effective loan counts below 40.
Multifamily Concentration: The pool has less property type
diversity compared to recently rated Fitch transactions. The pool's
effective property type count of 3.3 is worse than the YTD 2024 and
2023 averages of 4.1 and 4.0, respectively. The largest property
type concentration is multifamily (45.5% of the pool), which is
significantly higher than the YTD 2024 and 2023 averages of 17.0%
and 9.3%, respectively. The second largest property type
concentration is office (27.8% of the pool), which is higher than
the YTD 2024 average of 18% and in line with the 2023 average of
27.6%.
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'/'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Decline:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BB+sf'/'BBsf'/'B-sf'/
[*] Moody's Takes Action on $16MM of US RMBS Issued 2003-2005
-------------------------------------------------------------
Moody's Ratings has upgraded the ratings of four bonds and
downgraded the ratings of three bonds from five US residential
mortgage-backed transactions (RMBS), backed by scratch and dent
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 Asset-Backed Securities Trust 2004-SD1
Cl. M-1, Downgraded to Caa1 (sf); previously on Apr 24, 2020
Downgraded to B2 (sf)
Issuer: Bear Stearns Asset Backed Securities Trust 2004-SD3
Cl. M-3, Downgraded to Caa1 (sf); previously on Jan 29, 2019
Upgraded to B2 (sf)
Issuer: Bear Stearns Asset Backed Securities Trust 2005-4
Cl. M-3, Downgraded to Caa1 (sf); previously on Apr 20, 2018
Upgraded to B1 (sf)
Issuer: GMACM Mortgage Loan Trust 2003-GH2
Cl. A-4, Upgraded to Aaa (sf); previously on Dec 29, 2017 Upgraded
to Aa1 (sf)
Cl. M-1, Upgraded to Aa3 (sf); previously on May 20, 2019
Downgraded to A3 (sf)
Issuer: GMACM Mortgage Loan Trust 2004-GH1
Cl. M-1, Upgraded to Aaa (sf); previously on Mar 7, 2022 Upgraded
to Aa1 (sf)
Cl. M-2, Upgraded to A3 (sf); previously on Mar 7, 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 an increase in credit enhancement available
to the bonds. Each of the upgraded transactions Moody's reviewed
continue to display stable collateral performance, with cumulative
losses for each transaction under 3.5%. The upgraded bonds have
seen strong growth in credit enhancement, averaging approximately
9.5% over the last 12 months.
The downgraded bonds have outstanding interest shortfalls and a
weak reimbursement mechanism per the transactions' documents. While
interest shortfalls can be reimbursed from excess interest after
overcollateralization builds to the target amount, the
overcollateralization amount for these transactions are currently
below their target levels. As such, the interest shortfalls on
these bonds are expected to remain outstanding and to continue to
increase until excess interest becomes available. In addition,
certain bonds in this review are currently impaired or expected to
become impaired. Moody's ratings on those bonds also reflect any
losses to date as well as Moody's expected future loss.
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 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. This includes interest risk from
current or potential missed interest that remain unreimbursed.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Takes Action on $30MM of US RMBS Issued 2004-2007
-------------------------------------------------------------
Moody's Ratings has upgraded the ratings of seven bonds and
downgraded the ratings of three bonds from seven US residential
mortgage-backed transactions (RMBS), 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: Bayview Financial Mortgage Pass-Through Trust, Series
2004-A
Cl. M-4, Upgraded to Aa2 (sf); previously on Mar 7, 2022 Upgraded
to Aa3 (sf)
Issuer: Bayview Financial Mortgage Pass-Through Trust 2006-B
Cl. M-3, Upgraded to Ba1 (sf); previously on Mar 7, 2022 Upgraded
to Caa2 (sf)
Issuer: Credit Suisse Mortgage Capital Trust 2006-CF1
Cl. B-1, Upgraded to Ba2 (sf); previously on Oct 16, 2018 Upgraded
to B1 (sf)
Cl. B-2, Upgraded to Ba3 (sf); previously on Oct 16, 2018 Upgraded
to B1 (sf)
Cl. B-3, Downgraded to Caa1 (sf); previously on Oct 16, 2018
Upgraded to B2 (sf)
Cl. M-2, Upgraded to Ba1 (sf); previously on Nov 12, 2019
Downgraded to B1 (sf)
Issuer: CSFB Mortgage Pass-Through Certificates, Series 2004-CF2
Cl. I-M-2, Downgraded to Caa1 (sf); previously on Jun 19, 2017
Upgraded to B3 (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2007-SEA1
Cl. 2-A-1, Upgraded to Ba1 (sf); previously on Jul 11, 2017
Upgraded to B3 (sf)
Issuer: GSAMP Trust 2006-SD1
Cl. M-1, Downgraded to Caa1 (sf); previously on Aug 25, 2016
Upgraded to B1 (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2004-SD2
Cl. M-2, Upgraded to B2 (sf); previously on Jun 19, 2017 Downgraded
to Caa1 (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.
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 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 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 Ratings on $72MM of US RMBS Issued 2004-2006
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 15 bonds from eight US
residential mortgage-backed transactions (RMBS), backed by second
lien mortgages issued by multiple issuers. In addition, three of
the bonds Moody's upgraded are also the underlying bonds of a
repackaged transaction, namely CWHEQ Revolving Home Equity Loan
Resecuritization Trust 2006-RES. Therefore, Moody's have upgraded
the ratings of the linked bonds 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: CWABS Revolving Home Equity Asset-Backed Notes, Series
2004-O
Cl. 2-A, Upgraded to B3 (sf); previously on Jun 10, 2010 Downgraded
to Ca (sf)
Issuer: CWABS Revolving Home Equity Loan Trust, Series 2004-T
Cl. 1-A, Upgraded to B3 (sf); previously on Aug 21, 2018 Upgraded
to Caa1 (sf)
Cl. 2-A, Upgraded to Ba1 (sf); previously on Aug 21, 2018 Upgraded
to B3 (sf)
Issuer: CWABS Revolving Home Equity Loan Trust, Series 2004-U
Cl. 1-A, Upgraded to A2 (sf); previously on Aug 21, 2018 Upgraded
to Caa1 (sf)
Cl. 2-A, Upgraded to Caa1 (sf); previously on Aug 21, 2018 Upgraded
to Caa3 (sf)
Issuer: CWHEQ Revolving Home Equity Loan Trust, Series 2005-B
Cl. 2-A, Upgraded to A2 (sf); previously on Dec 5, 2019 Upgraded to
B3 (sf)
Issuer: CWHEQ Revolving Home Equity Loan Trust, Series 2005-F
Cl. 1-A, Upgraded to B3 (sf); previously on Aug 29, 2018 Upgraded
to Caa2 (sf)
Cl. 2-A, Upgraded to Caa1 (sf); previously on Aug 29, 2018 Upgraded
to Caa2 (sf)
Issuer: CWHEQ Revolving Home Equity Loan Trust, Series 2005-K
Cl. 1-A, Upgraded to Caa2 (sf); previously on Aug 13, 2010
Downgraded to Caa3 (sf)
Issuer: CWHEQ Revolving Home Equity Loan Trust, Series 2006-D
Cl. 1-A, Upgraded to Caa2 (sf); previously on May 18, 2018 Upgraded
to Caa3 (sf)
Cl. 2-A, Upgraded to Caa2 (sf); previously on May 18, 2018 Upgraded
to Caa3 (sf)
Issuer: CWHEQ Revolving Home Equity Loan Resecuritization Trust
2006-RES
Cl. 04T-1a, Upgraded to B3 (sf); previously on Jun 4, 2019 Affirmed
Caa1 (sf)
Cl. 04T-1b, Upgraded to B3 (sf); previously on Jun 4, 2019 Affirmed
Caa1 (sf)
Cl. 04U-1b, Upgraded to A2 (sf); previously on Jun 4, 2019 Affirmed
Caa1 (sf)
Cl. 05F-1b, Upgraded to B3 (sf); previously on Jun 4, 2019 Affirmed
Caa2 (sf)
RATINGS RATIONALE
The rating upgrades 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 benefits from a financial guaranty
insurance policy. In most instances, the bond insurer, who provides
the financial guaranty insurance policy, is no longer rated by us.
As such, each of the upgrades reflects Moody's forward looking view
of the performance of the underlying assets in relation to the
available credit enhancement, without giving credit to the
financial guaranty insurance policy.
Each of the upgraded bonds has seen strong growth in credit
enhancement, in the form of overcollateralization and/or
subordination, since Moody's last review. For example, Class 1-A
from CWABS Revolving Home Equity Loan Trust, Series 2004-U has seen
its enhancement level grow by almost 39% since Moody's last review
in September 2023. Similarly, Class 2-A from CWHEQ Revolving Home
Equity Loan Trust, Series 2005-B has experienced growth in credit
enhancement of approximately 23% since Moody's last review, also in
September 2023. The significant increase in credit enhancement,
along with the steady collateral performance, has led to large
upgrades for each of these bonds.
In addition, the rating actions on the bonds from the repackaged
transaction, CWHEQ Revolving Home Equity Loan Resecuritization
Trust 2006-RES, reflect the rating actions on the bonds underlying
that transaction.
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 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 deals except CWHEQ
Revolving Home Equity Loan Resecuritization Trust 2006-RES was "US
RMBS Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades Ratings on $72MM of US RMBS Issued 2005-2007
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of eight bonds from eight
US residential mortgage-backed transactions (RMBS), backed by
scratch and dent 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 Asset Backed Securities Trust 2007-2
Cl. A-3, Upgraded to Aa1 (sf); previously on Sep 12, 2023 Upgraded
to A3 (sf)
Issuer: RAAC Series 2005-RP2 Trust
Cl. M-5, Upgraded to Aaa (sf); previously on Dec 7, 2022 Upgraded
to Aa2 (sf)
Issuer: RAAC Series 2005-RP3 Trust
Cl. M-2, Upgraded to Aa2 (sf); previously on Aug 31, 2023 Upgraded
to Baa3 (sf)
Issuer: RAAC Series 2007-RP1 Trust
Cl. M-1, Upgraded to Baa1 (sf); previously on Dec 7, 2022 Upgraded
to B1 (sf)
Issuer: RAAC Series 2007-RP2 Trust
Cl. A, Upgraded to Aaa (sf); previously on Sep 12, 2023 Upgraded to
Aa1 (sf)
Issuer: Structured Asset Securities Corporation 2006-GEL1
Cl. M2, Upgraded to Aaa (sf); previously on Mar 7, 2022 Upgraded to
Aa2 (sf)
Issuer: Structured Asset Securities Corporation 2006-GEL4
Cl. M1, Upgraded to A1 (sf); previously on Sep 12, 2023 Upgraded to
Ba1 (sf)
Issuer: Structured Asset Securities Corporation 2007-GEL2
Cl. A3, Upgraded to A1 (sf); previously on Aug 31, 2023 Upgraded to
Baa3 (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.
Each of the upgraded bonds has seen strong growth in credit
enhancement, averaging growth of approximately 10% over the last 12
months. The growth in credit enhancement is a key driver for these
upgrades.
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.
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 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 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.
*********
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