/raid1/www/Hosts/bankrupt/TCR_Public/240811.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, August 11, 2024, Vol. 28, No. 223
Headlines
37 CAPITAL 2: Moody's Assigns Ba3 Rating to $17.5MM Cl. E-R Notes
AGL CLO 32: Fitch Assigns 'BB+sf' Rating on Class E Notes
AMUR EQUIPMENT 2024-2: Moody's Assigns Ba3 Rating to Class E Notes
AMUR EQUIPMENT XIV: Fitch Assigns 'BBsf' Rating on Class E Notes
ANCHORAGE CREDIT 10: Moody's Ups Rating on $27.5MM E Notes to Ba1
ANCHORAGE CREDIT 11: Moody's Hikes Rating on $22MM E Notes to Ba1
ANCHORAGE CREDIT 2: Moody's Ups Rating on $25.3MM E-R Notes to Ba1
ANGEL OAK 2024-7: Fitch Assigns 'B(EXP)sf' Rating on Cl. B-2 Certs
ARES CLO XXXVIII: Moody's Raises Rating on $19MM E-R Notes to Ba3
ARES LOAN III: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
ARES LXXII: Fitch Assigns 'BB-sf' Final Rating on Class E Notes
ATLAS SENIOR XV: S&P Affirms 'BB- (sf)' Rating on Class E Notes
BAIN CAPITAL 2018-2: S&P Affirms B- (sf) Rating on Class F Notes
BAMLL COMMERCIAL 2024-BHP: S&P Assigns Prelim BB Rating on E Certs
BARINGS CLO 2018-I: Moody's Affirms Ba3 Rating on $22MM D Notes
BARINGS CLO 2018-II: S&P Assigns Prelim B-(sf) Rating on F-R Notes
BBCMS MORTGAGE 2024-C28: Fitch Gives B-(EXP) Rating on H-RR Certs
BENCHMARK 2020-B18: Fitch Lowers Rating on Two Tranches to 'B-sf'
BRSP 2024-FL2: Fitch Assigns 'B-(EXP)sf' Rating on Class G Notes
BSST 2021-1818: S&P Affirms BB+ (sf) Rating on Class C Certs
CARLYLE US 2017-5: S&P Affirms CCC+ (sf) Rating on Class E Notes
CATAMARAN CLO 2018-1: S&P Lowers Class E Notes Rating to 'B+ (sf)'
CENTEX HOME 2005-A: Moody's Hikes Class M-5 Debt Rating to Ba2
CIM TRUST 2024-R1: Fitch Assigns 'Bsf' Final Rating on Cl. B2 Notes
CITIGROUP MORTGAGE 2024-1: Moody's Assigns B3 Rating to B-5 Certs
COMM 2016-DC2: Fitch Affirms B- Rating on 2 Tranches
COMM 2017-PANW: Fitch Affirms 'BB' Rating on Class E Certs
COMM 2019-521F: S&P Affirms 'CCC- (sf)' rating on Class F Certs
CRESTLINE DENALI XIV: Moody's Affirms Caa2 Rating on F-R Notes
CSMC TRUST 2017-CALI: S&P Lowers Cl. X-B Certs Rating to 'B+ (sf)'
DBGS 2024-SBL: Fitch Assigns 'Bsf' Rating on Class HRR Certificates
DRYDEN 108: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
EATON VANCE 2020-1: S&P Assigns Prelim 'BB-' Rating on E-RR Notes
GCT COMMERCIAL 2021-GCT: Moody's Cuts Rating on Cl. C Certs to C
GLS AUTO 2024-3: S&P Assigns Prelim BB(sf) Rating on Class E Notes
GOLDENTREE LOAN 5: S&P Affirms B- (sf) Rating on Class F Notes
GOODLEAP SUSTAINABLE 2023-2: Fitch Affirms 'BB' Rating on C Debt
GS MORTGAGE 2018-RIVR: S&P Lowers Class A Certs Rating to 'CCC-'
GS MORTGAGE 2019-GC40: Fitch Lowers Rating on Two Tranches to B-sf
GSR TRUST 2007-HEL1: Moody's Hikes Rating on Class A Debt to B3
HENLEY CLO VII: S&P Assigns Prelim B- (sf) Rating on Cl. F-R Notes
HMH TRUST 2017-NSS: S&P Lowers Class D Certs Rating to 'CCC- (sf)'
JP MORGAN 2024-6: Moody's Assigns B3 Rating to Cl. B-5 Certs
JPMCC 2019-BROOK: Fitch Lowers Rating on Class F Certs to 'CCCsf'
JPMDB COMMERCIAL 2017-C7: Fitch Cuts Rating on Cl. F-RR Debt to CC
MAGNETITE XXII: Fitch Assigns 'BB+sf' Rating on Class E-RR Notes
MAGNETITE XXII: Moody's Assigns B3 Rating to $6MM Class F Notes
MORGAN STANLEY 2013-C9: Moody's Raises Rating on Cl. C Certs to B1
MORTGAGE LENDERS 2000-1: Moody's Cuts Rating on 2 Tranches to Ba1
NASSAU LTD 2019-I: Moody's Cuts Rating on $28.25MM D Notes to Caa1
NATIXIS COMMERCIAL 2019-NEMA: Moody's Lowers C Certs Rating to Ba2
NEUBERGER BERMAN 51: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
NRPL 2024-RPL2: Fitch Assigns 'Bsf' Final Rating on Class B-2 Notes
OBX TRUST 2021-J2: Moody's Upgrades Rating on Cl. B-5 Certs to Ba3
OCP CLO 2017-14: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
OCTAGON INVESTMENT 42: Fitch Assigns BB-sf Rating on Cl. E-RR Notes
OFSI BSL XIV: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
OHA CREDIT XIV: S&P Assigns BB- (sf) Rating on Class E Notes
OMI TRUST 1999-D: S&P Assigns 'CCC- (sf)' Rating on Class A1 Certs
RADIAN MORTGAGE 2024-J1: Fitch Assigns B- Rating on Cl. B-5 Certs
REALT 2019-1: Fitch Lowers Rating on Two Tranches to 'BBsf'
SEQUOIA MORTGAGE 2024-8: Fitch Gives B+(EXP) Rating on B4 Certs
SLM STUDENT 2007-6: Fitch Lowers Rating on Cl. A-5 Notes to 'BBsf'
TOWD POINT 2024-3: Fitch Assigns B-sf Final Rating on Cl. B2 Notes
VOYA CLO 2024-3: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
VOYA CLO 2024-3: Fitch Assigns 'BB-sf' Rating on Class E Notes
WELLMAN PARK: Fitch Assigns 'BBsf' Rating on Class E-R Notes
WELLS FARGO 2018-C46: Fitch Affirms CCC Rating on Class G-RR Debt
WELLS FARGO 2024-MGP: Moody's Assigns (P)Ba2 Rating to E-11 Certs
WFLD 2014-MONT: S&P Lowers Class C Notes Rating to 'B- (sf)'
[*] Moody's Raises Ratings on $50.3MM of US RMBS Issued 2017-2018
[*] Moody's Upgrades Ratings on $146MM of US RMBS Issued 2021-2022
[*] Moody's Upgrades Ratings on $98MM of US RMBS Issued 2021-2022
[*] S&P Takes Various Actions on 85 Classes From 33 U.S. RMBS Deals
*********
37 CAPITAL 2: Moody's Assigns Ba3 Rating to $17.5MM Cl. E-R Notes
-----------------------------------------------------------------
Moody's Ratings has assigned ratings to five classes of CLO
refinancing notes (the "Refinancing Notes") issued by 37 Capital
CLO 2, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$224,000,000 Class A1-R Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$42,000,000 Class B-R Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$19,250,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$19,250,000 Class D-R Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$17,500,000 Class E-R Junior Secured Deferrable Floating Rate
Notes due 2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
The Putnam Advisory Company, LLC (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's remaining
reinvestment period.
The Issuer previously issued one class of subordinated notes, which
will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the non-call period;
changes to certain collateral quality tests; and changes to the
overcollateralization test 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: $350,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 3009
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.70%
Weighted Average Coupon (WAC): 5.75%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 5.47 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
AGL CLO 32: Fitch Assigns 'BB+sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to AGL CLO
32 Ltd.
Entity/Debt Rating
----------- ------
AGL CLO 32 Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AA+sf New Rating
C LT A+sf New Rating
D-1 LT BBB-sf New Rating
D-2 LT BBB-sf New Rating
E LT BB+sf New Rating
F LT NRsf New Rating
Subordinated Notes LT NRsf New Rating
Transaction Summary
AGL CLO 32 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by AGL
CLO Credit Management LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first-lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.75% first-lien senior secured loans and has a weighted average
recovery assumption of 74.79%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Negative): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D-1,
between less than 'B-sf' and 'BB+sf' for class D-2, and between
less than 'B-sf' and 'BB-sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AA+sf' for class C, 'A+sf' for
class D-1, 'A-sf' for class D-2, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, 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 AGL CLO 32 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.
AMUR EQUIPMENT 2024-2: Moody's Assigns Ba3 Rating to Class E Notes
------------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to the Series
2024-2 notes issued by Amur Equipment Finance Receivables XIV LLC
(Amur 2024-2). Amur Equipment Finance, Inc. (Amur) is the sponsor
of the securitization, which is backed by fixed-rate loans and
leases secured by transportation, industrial, heavy machinery,
medical aesthetics, and construction equipment. Amur is also the
servicer of the securitized pool. Amur 2024-2 is Amur's fourteenth
transaction backed by similar collateral.
The complete rating actions are as follows:
Issuer: Amur Equipment Finance Receivables XIV LLC, Series 2024-2
Class A-1 Notes, Definitive Rating Assigned P-1 (sf)
Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned Aa2 (sf)
Class C Notes, Definitive Rating Assigned A1 (sf)
Class D Notes, Definitive Rating Assigned Baa3 (sf)
Class E Notes, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
The ratings for the notes are based on the credit quality of the
securitized equipment loan and lease pool and its expected
performance, the historical performance of Amur's managed portfolio
and that of its prior securitizations, the experience and expertise
of Amur as the originator and servicer of the underlying pool, the
back-up servicing arrangement with UMB Bank, N.A., the transaction
structure including the level of credit enhancement supporting the
notes, and the legal aspects of the transaction. Additionally, in
assigning a P-1 (sf) rating to the Class A-1 Notes, Moody's
considered the cash flows the underlying receivables are expected
to generate prior to the Class A-1 notes' legal final maturity
date.
Moody's median cumulative net loss expectation for the Amur 2024-2
collateral pool is 4.50% and loss at a Aaa stress is 28.00%.
Moody's cumulative net loss expectation and loss at a Aaa stress is
based on Moody's analysis of the credit quality of the underlying
collateral pool, as well as the potential movement in the pool
following the addition of assets during the prefunding period, and
the historical performance of similar collateral, including Amur's
managed portfolio performance, the track-record, ability and
expertise of Amur to perform the servicing functions, and current
expectations for the macroeconomic environment during the life of
the transaction.
The classes of notes will be paid sequentially. The Class A, Class
B, Class C, Class D, and Class E notes benefit from 27.85%, 23.35%,
17.70%, 11.70%, and 9.00% of hard credit enhancement, respectively.
Initial hard credit enhancement for the notes consists of (1)
subordination (except in the case of the Class E notes), (2)
initial over-collateralization of 8.00% that can build to a target
of 9.25% of the outstanding adjusted discounted pool balance, and
has a floor of 2.00%, and (3) a fully funded, non-declining reserve
account of 1.00% of the initial adjusted discounted pool balance.
The transaction can also benefit from excess spread. However,
similar to the most recent Amur sponsored deal, there is very
little excess spread available as the discount rate applied to the
underlying contracts is similar to the weighted average coupon rate
on the notes and the servicing fee. The sequential-pay structure
and non-declining reserve account will result in a build-up of
credit enhancement supporting the rated notes.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Equipment
Lease and Loan Securitizations" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings on the subordinate notes if
levels of credit protection are greater than necessary to protect
investors against current expectations of loss. Moody's then
current expectations of loss may be better than its original
expectations because of lower frequency of default by the
underlying obligors or slower depreciation in the value of the
equipment securing obligors' promise of payment. As the primary
drivers of performance, positive changes in the US macro economy
and the performance of various sectors in which the obligors
operate could also affect the ratings. This transaction has a
sequential pay structure and therefore credit enhancement will grow
as a percentage of the collateral balance as collections pay down
senior notes. Prepayments and interest collections directed toward
note principal payments will accelerate this build-up of
enhancement.
Down
Moody's could downgrade the notes if levels of credit protection
are insufficient to protect investors against current expectations
of portfolio losses. Credit enhancement could decline if excess
spread is not sufficient to cover losses in a given month. Losses
could rise above Moody's original expectations as a result of a
higher number of obligor defaults or deterioration in the value of
the equipment securing obligors' promise of payment. As the primary
drivers of performance, negative changes in the US macro economy
and the performance of various sectors in which the obligors
operate could also affect the ratings. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties and inadequate transaction
governance. Additionally, Moody's could downgrade the Class A-1
short term rating following a significant slowdown in principal
collections that could result from, among other reasons, high
delinquencies or a servicer disruption that impacts obligors'
payments.
AMUR EQUIPMENT XIV: Fitch Assigns 'BBsf' Rating on Class E Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings to the Amur Equipment Finance
Receivables XIV LLC (Series 2024-2) (AXIS 2024-2) notes. The
transaction is a securitization of mid-ticket commercial equipment
leases and loans originated or acquired by Amur Equipment Finance,
Inc. (Amur) and is Fitch's inaugural rating of the equipment
finance contract-backed notes issued under the AXIS platform. The
Rating Outlook for the AXIS 2024-2 notes is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Amur Equipment Finance
Receivables XIV LLC
(Series 2024-2)
A-1 03238BAA1 ST F1+sf New Rating F1+(EXP)sf
A-2 03238BAB9 LT AAAsf New Rating AAA(EXP)sf
B 03238BAC7 LT AAsf New Rating AA(EXP)sf
C 03238BAD5 LT Asf New Rating A(EXP)sf
D 03238BAE3 LT BBBsf New Rating BBB(EXP)sf
E 03238BAF0 LT BBsf New Rating BB(EXP)sf
KEY RATING DRIVERS
Collateral Performance: Consistent with prior AXIS transactions,
AXIS 2024-2 is focused on transportation, construction and
vocational equipment with low obligor concentration. A high 97.63%
of the pool is collateralized by contracts backed by personal
guarantees, with a weighted-average (WA) FICO score of 725. These
have been trending higher and are at the second-highest level for
the platform, consistent with 726 in 2024-1 (not rated).
Conventional trucks with sleeper transportation equipment are the
largest exposure, at 24.30%. The largest equipment type in prior
securitizations was long-haul transportation equipment, at 27.46%
for 2024-1 and 30.78% for 2023-1 (not rated). The transaction is
exposed to adverse pool selection risk from prefunding and
substitution, which can be as high as 20% and 15% of the initial
collateral pool, respectively.
Improving Performance; Forward-Looking Approach to Derive Rating
Case Loss Proxy: Amur's managed static pool continues to
demonstrate strong and stable cumulative net loss (CNL)
performance, with CNLs tracking well below those of peak
recessionary vintages. Fitch utilized the 2006-2009 and 2017-2019
managed portfolio vintages, prior ABS performance and, given the
ability to prefund and substitute collateral, worst case portfolio
mix to derive the rating case CNL proxy of 5.00%.
Concentration Risk — Concentrated Transportation Collateral, Low
Obligor Concentration: The pool has 45.2% exposure to the
transportation sector, higher than 40.5% for 2024-1, which has been
under stress for over a year. The top-20 obligors represent 6.16%
of the 2024-2 pool, up from 4.01% in 2024-1; no obligors represent
more than 1.00% of the pool. Initial credit enhancement (CE) to the
class A through E notes is adequate to support the default of the
top 20, 17, 14, 11 and eight obligors on a net coverage basis at
close under Fitch's modeling scenario.
Structural Analysis — Sufficient Credit Enhancement: CE for
2024-2 is lower than 2024-1 and 2023-1, but higher than historical
transactions since 2015. Total initial hard CE for AXIS 2024-2
class A, B, C, D and E notes is 27.85%, 23.35%, 17.70%, 11.70% and
9.00%, respectively, comprising subordination, a non-declining
reserve account funded at 1.00% of the initial adjusted discounted
pool balance and initial overcollateralization equal to 8.00% of
the initial discounted pool balance.
Additionally, all classes benefit from 1.42% per annum of excess
spread. At a 5.00% rating case CNL proxy, the transaction structure
is able to support 5.0x, 4.0x, 3.0x, 2.0x and 1.5x loss multiples
for class A, B, C, D and E notes, respectively.
Operational and Servicing Risks — Stable Origination,
Underwriting and Servicing: Fitch believes Amur has demonstrated
adequate abilities as originator, underwriter and servicer, as
evidenced by historical delinquency and loss performance of
securitized term ABS transactions and the managed portfolio.
Fitch's base case CNL expectation, which does not include a margin
of safety and is not used in its quantitative analysis to assign
ratings, is 2.50%, based on its global economic outlook and asset
class outlook and Amur's managed pool and historical securitization
performance
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CNL levels higher than the rating case and would likely result in
declines of CE and the remaining net loss coverage levels available
to the notes. Additionally, unanticipated declines in recoveries
could result in a decline in net loss coverage. Decreased net loss
coverage may make certain note ratings susceptible to negative
rating action, depending on the extent of the decline in coverage.
Fitch conducted sensitivity analyses by stressing the transaction's
initial rating case CNL and recovery rate assumptions, and
examining the rating implications on all classes of issued notes.
The CNL sensitivity stresses the CNL proxy to the level necessary
to reduce each rating by one full category to non-investment grade
(BBsf) and to 'CCCsf', based on the breakeven loss coverage
provided by the CE supporting the notes.
Additionally, Fitch increased the CNL proxy by 1.5x and 2.0x,
representing moderate and severe stresses, respectively. Fitch also
evaluated the impact of stressed recovery rates on an equipment ABS
structure and rating impact with a 50% haircut. These analyses are
intended to indicate the rating sensitivity of notes to unexpected
deterioration of a transaction's performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance, driven by steady
delinquencies and defaults, would increase CE levels and possibly
lead to an upgrade. If CNL is 20% less than the projected proxy,
the expected ratings could be maintained for class A and D notes
and upgraded by one rating category for each of the class B, C and
E notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E), as
prepared by Deloitte & Touche. The third-party due diligence
described in Form 15E compared or re-computed certain information
with respect to 150 equipment contracts from the statistical asset
pool for the transaction. Fitch considered this information in its
analysis, and it did not have an effect on Fitch's analysis or
conclusions. A copy of the Form-15E received by Fitch in connection
with this transaction may be obtained through the link contained at
the bottom of the related rating action commentary.
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.
ANCHORAGE CREDIT 10: Moody's Ups Rating on $27.5MM E Notes to Ba1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Anchorage Credit Funding 10, Ltd.:
US$68,350,000 Class B Senior Secured Fixed Rate Notes due 2038 (the
"Class B Notes"), Upgraded to Aa1 (sf); previously on Mar 20, 2020
Definitive Rating Assigned Aa3 (sf)
US$27,500,000 Class C Mezzanine Secured Deferrable Fixed Rate Notes
due 2038 (the "Class C Notes"), Upgraded to A1 (sf); previously on
Mar 20, 2020 Definitive Rating Assigned A3 (sf)
US$27,500,000 Class D Mezzanine Secured Deferrable Fixed Rate Notes
due 2038 (the "Class D Notes"), Upgraded to Baa1 (sf); previously
on Mar 20, 2020 Definitive Rating Assigned Baa3 (sf)
US$27,500,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2038 (the "Class E Notes"), Upgraded to Ba1 (sf); previously on
Mar 20, 2020 Definitive Rating Assigned Ba3 (sf)
Anchorage Credit Funding 10, Ltd., issued in March 2020, is a
managed cashflow CBO. The notes are collateralized primarily by a
portfolio of corporate bonds and loans. The transaction's
reinvestment period will end in April 2025.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
RATINGS RATIONALE
These rating actions reflect the benefit of the shortening of the
portfolio's weighted average life (WAL) since July 2023, which
reduces the time the rated notes are exposed to the credit risk of
the underlying portfolio. In particular, Moody's modeled a
portfolio WAL of 5.81 years compared to 11 years assumed at initial
issuance in March 2020. Moody's also note that the transaction's
reported OC ratios have been stable since July 2023, and that the
deal will be exiting its reinvestment period in April 2025 after
which note repayments are expected to commence.
No action was taken on the Class A Notes because its expected loss
remain commensurate with its current rating, after taking into
account the CLO's latest portfolio information, its relevant
structural features and its actual over-collateralization and
interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations".
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $498,251,324
Defaulted par: $8,272,187
Diversity Score: 67
Weighted Average Rating Factor (WARF): 3230
Weighted Average Coupon (WAC): 5.66%
Weighted Average Recovery Rate (WARR): 35.04%
Weighted Average Life (WAL): 5.81 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 these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
ANCHORAGE CREDIT 11: Moody's Hikes Rating on $22MM E Notes to Ba1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Anchorage Credit Funding 11, Ltd.:
US$52,000,000 Class B Senior Secured Fixed Rate Notes Due 2038 (the
"Class B Notes"), Upgraded to Aa1 (sf); previously on Mar 25, 2020
Assigned Aa3 (sf)
US$23,000,000 Class C Mezzanine Secured Deferrable Fixed Rate Notes
Due 2038 (the "Class C Notes"), Upgraded to A1 (sf); previously on
Mar 25, 2020 Assigned A3 (sf)
US$22,000,000 Class D Mezzanine Secured Deferrable Fixed Rate Notes
Due 2038 (the "Class D Notes"), Upgraded to Baa1 (sf); previously
on Mar 25, 2020 Assigned Baa3 (sf)
US$22,000,000 Class E Junior Secured Deferrable Fixed Rate Notes
Due 2038 (the "Class E Notes"), Upgraded to Ba1 (sf); previously on
Mar 25, 2020 Assigned Ba3 (sf)
Anchorage Credit Funding 11, Ltd., issued in March 2020, is a
managed cashflow CBO. The notes are collateralized primarily by a
portfolio of corporate bonds and loans. The transaction's
reinvestment period will end in April 2025.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
RATINGS RATIONALE
These rating actions reflect the benefit of the shortening of the
portfolio's weighted average life (WAL) since July 2023, which
reduces the time the rated notes are exposed to the credit risk of
the underlying portfolio. In particular, Moody's modeled a
portfolio WAL of 5.83 years compared to 11 years assumed at initial
issuance in March 2020. Moody's also note that the transaction's
reported OC ratios have been stable since July 2023, and that the
deal will be exiting its reinvestment period in April 2025 after
which note repayments are expected to commence.
No action was taken on the Class A notes because its expected loss
remain commensurate with its current ratings, after taking into
account the CLO's latest portfolio information, its relevant
structural features and its actual over-collateralization and
interest coverage levels.
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: $398,613,611
Defaulted par: $6,785,475
Diversity Score: 68
Weighted Average Rating Factor (WARF): 3253
Weighted Average Coupon (WAC): 5.66%
Weighted Average Recovery Rate (WARR): 35.17%
Weighted Average Life (WAL): 5.83 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 these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
ANCHORAGE CREDIT 2: Moody's Ups Rating on $25.3MM E-R Notes to Ba1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Anchorage Credit Funding 2, Ltd.:
US$72,600,000 Class B-R Senior Secured Fixed Rate Notes due 2038
(the "Class B-R Notes"), Upgraded to Aa1 (sf); previously on
February 13, 2020 Definitive Rating Assigned Aa3 (sf)
US$24,800,000 Class C-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2038 (the "Class C-R Notes"), Upgraded to A1 (sf);
previously on February 13, 2020 Definitive Rating Assigned A3 (sf)
US$24,800,000 Class D-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2038 (the "Class D-R Notes"), Upgraded to Baa1 (sf);
previously on February 13, 2020 Definitive Rating Assigned Baa3
(sf)
US$25,300,000 Class E-R Junior Secured Deferrable Fixed Rate Notes
due 2038 (the "Class E-R Notes"), Upgraded to Ba1 (sf); previously
on February 13, 2020 Definitive Rating Assigned Ba3 (sf)
Anchorage Credit Funding 2, Ltd., originally issued in January 2016
and refinanced in February 2020, is a managed cashflow CBO. The
notes are collateralized primarily by a portfolio of corporate
bonds and loans. The transaction's reinvestment period will end in
April 2025.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
These rating actions reflect the benefit of the shortening of the
portfolio's weighted average life (WAL) since July 2023, which
reduces the time the rated notes are exposed to the credit risk of
the underlying portfolio. In particular, Moody's modeled a
portfolio WAL of 5.68 years compared to 11 years assumed at the
time of the transaction's refinancing in February 2020. Moody's
also note that the transaction's reported OC ratios have been
stable since July 2023, and that the deal will be exiting its
reinvestment period in April 2025 after which note repayments are
expected to commence.
No action was taken on the Class A-R notes because its expected
loss remains commensurate with its current rating, after taking
into account the CBO'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: $497,347,071
Defaulted par: $9,286,959
Diversity Score: 68
Weighted Average Rating Factor (WARF): 3329
Weighted Average Coupon (WAC): 5.67%
Weighted Average Recovery Rate (WARR): 35.3%
Weighted Average Life (WAL): 5.68 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 these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
ANGEL OAK 2024-7: Fitch Assigns 'B(EXP)sf' Rating on Cl. B-2 Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Angel Oak Mortgage
Trust 2024-7 (AOMT 2024-7).
Entity/Debt Rating
----------- ------
AOMT 2024-7
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB-(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
Transaction Summary
The AOMT 2024-7 certificates are supported by 843 loans with a
balance of $345.87 million as of the cutoff date. This represents
the 40th Fitch-rated AOMT transaction and the seventh Fitch-rated
AOMT transaction in 2024.
The certificates are secured by mortgage loans mainly originated
(76.0%) by Angel Oak Mortgage Solutions LLC (AOMS) and Angel Oak
Home Loans LLC (AOHL). The remaining 24.0% of the loans were
originated by various third-party originators (TPOs). Fitch
considers AOMS and AOHL to be average originators. The servicer of
the loans is Select Portfolio Servicing, Inc. (RPS1-/Negative).
Of the loans, 44.2% are designated as nonqualified mortgage
(non-QM) loans and 49.0% are exempted mortgage loans that were not
subject to the Ability to Repay (ATR) Rule. There are also 6.7%
safe harbor QM loans, and 0.1% QM rebuttable presumption loans in
the pool.
There are six ARM loans in the pool, none of which reference Libor.
The certificates do not have Libor exposure. Class A-1, A-2 and A-3
certificates are fixed rate, are capped at the net weighted average
coupon (WAC) and have a step-up feature. Class M-1 certificate is
based on the lower of a fixed rate and the net WAC rate for the
related distribution date and class B-1, B-2 and B-3 certificates
are based on the net WAC rate for the related distribution date.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.1% above a long-term sustainable level (versus
11.1% on a national level as of 4Q23, down 0% qoq). Housing
affordability is at its worst levels in decades, driven by both
high interest rates and elevated home prices. Home prices have
increased 5.5% yoy nationally as of February 2024, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
Non-QM Credit Quality (Mixed): The collateral consists of 843 loans
totaling $345.87 million and seasoned at about 11 months in
aggregate, according to Fitch, and nine months, per the transaction
documents. The borrowers have a relatively strong credit profile,
with a 748 nonzero FICO and a 45.8% debt-to-income ratio (DTI), as
determined by Fitch. They have relatively moderate leverage, with
an original combined loan-to-value (CLTV) ratio of 69.8%, as
determined by Fitch, which translates to a Fitch-calculated
sustainable LTV (sLTV) of 76.3%.
Its analysis of the pool shows that 51.0% represents loans in which
the borrower maintains a primary or secondary residence, while the
remaining 49.0% comprises investor properties. Its analysis
considers the 26 loans to foreign nationals to be investor
occupied, which explains the discrepancy between the
Fitch-determined figures and those in the transaction documents for
investor and owner occupancy. Fitch determined that 12.6% of the
loans were originated via a retail channel.
Additionally, 44.2% of the pool is designated as non-QM, while the
remaining 49.0% is exempt from QM status. There are also 6.7% Safe
Harbor QM loans, and 0.1% QM Rebuttable Presumption loans in the
pool. The pool contains 56 loans over $1.00 million, with the
largest amounting to $3.19 million. Loans on investor properties
represent 49.0% of the pool, as determined by Fitch, including
13.2% underwritten to the borrower's credit profile and 35.9%
investor cash flow loans.
Fitch views only 1.7% of the borrowers as having a prior credit
event within the past seven years, and 0.5% of the loans have a
junior lien in addition to the first lien mortgage. There are no
second lien loans in the pool, as 100% of the pool consists of
first lien mortgages. In Fitch's analysis, loans with deferred
balances are considered to have subordinate financing. None of the
loans in this transaction have a deferred balance; therefore, Fitch
views 0.5% of the loans in the pool as having subordinate financing
due to the borrower taking out additional financing on the home
that ranks subordinate to the mortgage in the pool. Fitch views the
limited subordinate financing as a positive aspect of the
transaction.
Fitch determined that 26 loans in the pool are to foreign
nationals. Fitch only considers a loan to be made to a foreign
national if both the borrower and co-borrower are both foreign
nationals. Fitch treats loans to foreign nationals as investor
occupied, coded as no documentation for employment and income
documentation, and remove the liquid reserves. If a credit score is
not available, Fitch uses a credit score of 650 for such
borrowers.
Although the borrowers' credit quality is higher than that of AOMT
transactions securitized in 2023 and 2022, the pool's
characteristics resemble those of nonprime collateral; therefore,
the pool was analyzed using Fitch's nonprime model.
The largest concentration of loans is in Florida (29.9%), followed
by California (19.6%) and Texas (11.0%). The largest MSA is Miami
(14.0%), followed by Los Angeles (10.4%) and New York (6.9%). The
top three MSAs account for 31.4% of the pool. There was no
geographical concentration risk in the pool; as such, Fitch did not
apply a penalty and losses were not impacted.
Loan Documentation (Negative): Fitch determined that 95.2% of the
loans in the pool were underwritten to borrowers with less than
full documentation. Fitch may consider a loan to be less than a
full documentation loan based on its review of the loan program and
the documentation details provided in the loan tape, which may
explain any discrepancy between Fitch's percentage and figures in
the transaction documents.
Of the loans underwritten to borrowers with less than full
documentation, Fitch determined that 55.6% were underwritten to a
12-month or 24-month business or personal bank statement program
for verifying income, which is not consistent with the previously
applicable Appendix Q standards and Fitch's view of a full
documentation program.
To reflect the added risk, Fitch increases the probability of
default (PD) by 1.5x on bank statement loans. In addition to loans
underwritten to a bank statement program, 35.9% constitute a debt
service coverage ratio (DSCR) product and 1.4% are an asset
qualifier product.
No loans in the pool are no-ratio DSCR loans.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent principal and interest (P&I). The
limited advancing reduces loss severities, as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside is the additional stress on the
structure, as liquidity is limited in the event of large and
extended delinquencies (DQs).
Modified Sequential-Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A
certificates while excluding the mezzanine and subordinate
certificates from principal until all three A classes are reduced
to zero. To the extent that either a cumulative loss trigger event
or a DQ trigger event occurs in a given period, principal will be
distributed sequentially to class A-1, A-2 and A-3 certificates
until they are reduced to zero. There is limited excess spread in
the transaction available to reimburse for losses or interest
shortfalls should they occur.
However, excess spread will be reduced on and after the
distribution date in August 2028, since the class A certificates
have a step-up coupon feature, whereby the coupon rate will be the
lower of (i) the applicable fixed rate plus 1.000% and (ii) the net
WAC rate.
Additionally, on any distribution date occurring on or after the
distribution date in August 2028 on which the aggregate unpaid cap
carryover amount for the class A certificates is greater than zero,
payments to the cap carryover reserve account will be prioritized
over the payment of interest and unpaid interest payable to class
B-3 certificates in both the interest and principal waterfalls.
This feature is supportive of the class A-1 certificate being paid
timely interest at the step-up coupon rate under Fitch's stresses
and classes A-2 and A-3 being paid ultimate interest at the step-up
coupon rate under Fitch's stresses. Fitch rates to timely interest
for 'AAAsf' rated classes and to ultimate interest for all other
rated classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20% and 30% in addition to the
model-projected 41.6% at 'AAAsf'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses were conducted at the state and national
levels to assess the effect of higher MVDs for the subject pool as
well as lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Canopy, Clarifii, Clayton, Consolidated Analytics,
Covius, Infinity, Inglet Blair, Recovco, and Selene. The
third-party due diligence described in Form 15E focused on three
areas: compliance review, credit review and valuation review. Fitch
considered this information in its analysis and, as a result, did
not make any negative adjustments to its analysis due to no
material due diligence findings. Based on the results of the 100%
due diligence performed on the pool with no material findings, the
overall expected loss was reduced by 0.48%
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria." The sponsor
engaged Canopy, Clarifii, Clayton, Consolidated Analytics, Covius,
Infinity, Inglet Blair, Recovco, and Selene to perform the review.
Loans reviewed under these engagements were given compliance,
credit and valuation grades and assigned initial grades for each
subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than the guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format.
The ASF data tape layout was established with input from various
industry participants, including rating agencies, issuers,
originators, investors and others, to produce an industry standard
for the pool-level data to support the U.S. RMBS securitization
market. The data contained in the data tape layout were populated
by the due diligence company and no material discrepancies were
noted.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
ARES CLO XXXVIII: Moody's Raises Rating on $19MM E-R Notes to Ba3
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Ares XXXVIII CLO Ltd.:
US$40,000,000 Class B-R Senior Floating Rate Notes due 2030 (the
"Class B-R Notes"), Upgraded to Aaa (sf); previously on July 28,
2023 Upgraded to Aa1 (sf)
US$20,000,000 Class C-R Mezzanine Deferrable Floating Rate Notes
due 2030 (the "Class C-R Notes"), Upgraded to Aa1 (sf); previously
on March 13, 2018 Definitive Rating Assigned A2 (sf)
US$26,000,000 Class D-R Mezzanine Deferrable Floating Rate Notes
due 2030 (the "Class D-R Notes"), Upgraded to Baa1 (sf); previously
on July 28, 2023 Upgraded to Baa3 (sf)
US$19,000,000 Class E-R Mezzanine Deferrable Floating Rate Notes
due 2030 (the "Class E-R Notes"), Upgraded to Ba3 (sf); previously
on August 14, 2020 Downgraded to B1 (sf)
Ares XXXVIII 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 rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since July 2023.
The Class A-1-R notes have been paid down by approximately 56.31%
or $128.93 million since July 2023. Based on Moody's calculation,
the Class A/B, Class C, Class D and Class E Overcollateralization
Test ratios are currently 149.18%, 133.32%, 117.12% and 107.58%,
respectively, versus their July 2023 levels of 128.85%, 120.72%,
111.57% and 105.71%, respectively.
No actions were taken on the Class A-1-R and Class A-2-R 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: $250,529,420
Defaulted par: $510,763
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2996
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.29%
Weighted Average Coupon (WAC): 11.00%
Weighted Average Recovery Rate (WARR): 46.74%
Weighted Average Life (WAL): 3.75 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 these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
ARES LOAN III: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Ares Loan
Funding III, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Ares Loan
Funding III, Ltd.
A-1 04009BAA6 LT PIFsf Paid In Full AAAsf
A-1R LT NRsf New Rating
A-2R LT AAAsf New Rating
B-R LT AAsf New Rating
C-1 04009BAG3 LT PIFsf Paid In Full A+sf
C-1R LT A+sf New Rating
C-2 04009BAL2 LT PIFsf Paid In Full Asf
C-2R LT Asf New Rating
D 04009BAJ7 LT PIFsf Paid In Full BBB-sf
D-1R LT BBB-sf New Rating
D-2R LT BBB-sf New Rating
E-R LT BB-sf New Rating
Transaction Summary
Ares Loan Funding III, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by Ares CLO
Management LLC that originally closed in June 2022. The CLO's
secured notes will be refinanced on Aug. 6, 2024 from the proceeds
of new secured notes. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.79, versus a maximum covenant, in accordance with
the initial expected matrix point of 24. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
95.79% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74% versus a
minimum covenant, in accordance with the initial expected matrix
point of 64.7%. Portfolio Composition (Positive): The largest three
industries may comprise up to 39.0% 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 three-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-2R, between
'BBB-sf' and 'A+sf' for class B-R, between 'BB+sf' and 'A-sf' for
class C-1R, between 'BB-sf' and 'BBB+sf' for class C-2R, between
less than 'B-sf' and 'BB+sf' for class D-1R, between less than
'B-sf' and 'BB+sf' for class D-2R, 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-2R 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-1R, 'AAsf'
for class C-2R, 'Asf' for class D-1R, 'A-sf' for class D-2R, and
'BBBsf' 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 Ares Loan Funding
III. 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.
ARES LXXII: Fitch Assigns 'BB-sf' Final Rating on Class E Notes
---------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Ares LXXII CLO Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Ares LXXII
CLO Ltd.
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
Transaction Summary
Ares LXXII CLO Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Ares
CLO Management LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $700 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.29, versus a maximum covenant, in accordance with
the initial expected matrix point of 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
98.17% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.16% versus a
minimum covenant, in accordance with the initial expected matrix
point of 68.24%.
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.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by clicking the link to the Appendix. Offering documents for this
market sector do not typically include RW&Es that are available to
investors and that relate to the asset pool underlying the
security. However, the offering document for this transaction
included a draft of the indenture as an appendix, which contains
RW&Es related to the underlying asset pool. For further
information, please see Fitch's Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions'.
ESG Considerations
Fitch does not provide ESG relevance scores for Ares LXXII CLO Ltd.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
ATLAS SENIOR XV: S&P Affirms 'BB- (sf)' Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
C-R, and D-R replacement debt from Atlas Senior Loan Fund XV
Ltd./Atlas Senior Loan Fund XV LLC, a CLO originally issued in
October 2019 that is managed by Crescent Capital Group L.P. At the
same time, S&P withdrew its ratings on the original class A, C, and
D debt following payment in full on the Aug. 2, 2024, refinancing
date. S&P also affirmed its ratings on the class B-1, B-2, and E
debt, which were 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 Aug. 2, 2025.
-- No additional assets were purchased on the Aug. 2, 2024
refinancing date. The first payment date following the refinancing
is Oct. 23, 2024.
-- The original class A debt is being split into separate
sequential pay A-1-R and A-2-R debt.
-- No additional subordinated notes were issued on the refinancing
date.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1-R, $239.50 million: Three-month CME term SOFR +
1.22%
-- Class A-2-R, $12.50 million: Three-month CME term SOFR + 1.75%
-- Class C-R, $24.00 million: Three-month CME term SOFR + 2.30%
-- Class D-R (deferrable), $22.00 million: Three-month CME term
SOFR + 4.45%
Original debt
-- Class A, $252.00 million: Three-month CME term SOFR + 1.39% +
CSA(i)
-- Class C (deferrable), $24.00 million: Three-month CME term SOFR
+ 3.01% + CSA(i)
-- Class D (deferrable), $22.00 million: Three-month CME term SOFR
+ 4.45% + 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
Atlas Senior Loan Fund XV Ltd./Atlas Senior Loan Fund XV LLC
Class A-1-R, $239.50 million: AAA (sf)
Class A-2-R, $12.50 million: AAA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-R (deferrable), $22.00 million: BBB- (sf)
Ratings Withdrawn
Atlas Senior Loan Fund XV Ltd./Atlas Senior Loan Fund XV LLC
Class A to NR from 'AAA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Ratings Affirmed
Atlas Senior Loan Fund XV Ltd./Atlas Senior Loan Fund XV LLC
Class B-1: 'AA (sf)'
Class B-2: 'AA (sf)'
Class E: 'BB- (sf)'
Other Debt
Atlas Senior Loan Fund XV Ltd./Atlas Senior Loan Fund XV LLC
Subordinated notes, $35.25 million: NR
NR--Not rated.
BAIN CAPITAL 2018-2: S&P Affirms B- (sf) Rating on Class F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, B-R,
C-R, and D-R replacement debt from Bain Capital Credit CLO 2018-2
Ltd./Bain Capital Credit CLO 2018-2 LLC, a CLO originally issued in
July 2018 that is managed by Bain Capital Credit CLO Advisers L.P.
At the same time, S&P withdrew its ratings on the original class
A-1, B, C, and D debt following payment in full on the Aug. 6,
2024, refinancing date. S&P also affirmed its ratings on the class
E and F debt, which were 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 Feb. 6, 2025.
-- No additional assets were purchased on the Aug. 6, 2024,
refinancing date, and the first payment date following the
refinancing is Oct. 19, 2024.
-- No additional subordinated notes were issued on the refinancing
date.
S&P said, "On a standalone basis, our cash flow analysis indicated
a lower rating on the class F debt (which was not refinanced) than
the rating action on the debt reflects. However, we affirmed our
'B- (sf)' rating on the class F debt after considering the margin
of failure, the relatively stable overcollateralization ratio since
our last rating action on the transaction, and that the transaction
is in its amortization phase. Based on the latter, we expect the
credit support available to all rated classes to increase as
principal is collected and the senior debt is paid down. In
addition, we believe the payment of principal or interest on the
class F debt when due does not depend on favorable business,
financial, or economic conditions. Therefore, this class does not
fit our definition of 'CCC' risk in accordance with our guidance
criteria."
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1-R, $246.55 million: Three-month CME term SOFR +
1.08%
-- Class A-2-R, $33.00 million: Three-month CME term SOFR + 1.35%
-- Class B-R, $69.00 million: Three-month CME term SOFR + 1.55%
-- Class C-R (deferrable), $39.00 million: Three-month CME term
SOFR + 1.95%
-- Class D-R (deferrable), $31.50 million: Three-month CME term
SOFR + 2.95%
Original debt
-- Class A-1, $246.55 million: Three-month CME term SOFR + 1.08% +
CSA(i)
-- Class A-2, $33.00 million: Three-month CME term SOFR + 1.30% +
CSA(i)
-- Class B, $69.00 million: Three-month CME term SOFR + 1.60% +
CSA(i)
-- Class C (deferrable), $39.00 million: Three-month CME term SOFR
+ 1.90% + CSA(i)
-- Class D (deferrable), $31.50 million: Three-month CME term SOFR
+ 2.85% + 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
Bain Capital Credit CLO 2018-2 Ltd./
Bain Capital Credit CLO 2018-2 LLC
Class A-1-R, $246.55 million: AAA (sf)
Class B-R, $69.00 million: AA (sf)
Class C-R (deferrable), $39.00 million: A (sf)
Class D-R (deferrable), $31.50 million: BBB- (sf)
Ratings Withdrawn
Bain Capital Credit CLO 2018-2 Ltd./
Bain Capital Credit CLO 2018-2 LLC
Class A-1 to not rated from 'AAA (sf)'
Class B to not rated from 'AA (sf)'
Class C to not rated from 'A (sf)'
Class D to not rated from 'BBB- (sf)'
Ratings Affirmed
Bain Capital Credit CLO 2018-2 Ltd./
Bain Capital Credit CLO 2018-2 LLC
Class E: B+ (sf)
Class F: B- (sf)
Other Debt
Bain Capital Credit CLO 2018-2 Ltd./
Bain Capital Credit CLO 2018-2 LLC
Class A-2-R, $33.00 million: Not rated
Subordinated notes, $50.70 million: Not rated
BAMLL COMMERCIAL 2024-BHP: S&P Assigns Prelim BB Rating on E Certs
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BAMLL
Commercial Mortgage Securities Trust 2024-BHP's commercial mortgage
pass-through certificates.
The note issuance is a CMBS transaction backed by a commercial
mortgage loan secured by the borrowers' fee simple and/or leasehold
interests and the assignment of the operating lessees' leasehold
interests, as applicable, in five full-service hotel properties in
Florida, California, and St. Thomas, U.S. Virgin Islands.
The preliminary ratings are based on information as of Aug. 5,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect our view of the collateral's
historical and projected performance, the sponsor's and manager's
experience, the trustee-provided liquidity, the mortgage loan
terms, and the transaction's structure.
Preliminary Ratings Assigned
BAMLL Commercial Mortgage Securities Trust 2024-BHP(i)
Class A, $183,160,000(ii): AAA (sf)
Class B, $59,185,000(ii): AA- (sf)
Class C, $43,890,000(ii): A- (sf)
Class D, $58,178,000(ii): BBB- (sf)
Class E, $42,237,000(ii): BB (sf)
RR interest(iii), $20,350,000(ii): Not rated
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(ii)Approximate; subject to a variance of plus or minus 5.0%.
(iii)Eligible vertical residual interest.
BARINGS CLO 2018-I: Moody's Affirms Ba3 Rating on $22MM D Notes
---------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Barings CLO Ltd. 2018-I:
USD60,500,000 Class A-2 Senior Secured Floating Rate Notes,
Upgraded to Aaa (sf); previously on Mar 30, 2023 Upgraded to Aa1
(sf)
USD33,000,000 Class B Senior Secured Deferrable Floating Rate
Notes, Upgraded to Aa2 (sf); previously on Mar 30, 2023 Upgraded to
A1 (sf)
Moody's have also affirmed the ratings on the following notes:
USD357,500,000 (current outstanding amount USD241,458,206.54)
Class A-1 Senior Secured Floating Rate Notes, Affirmed Aaa (sf);
previously on Apr 5, 2018 Assigned Aaa (sf)
USD33,000,000 Class C Secured Deferrable Mezzanine Floating Rate
Notes, Affirmed Baa3 (sf); previously on Sep 10, 2020 Confirmed at
Baa3 (sf)
USD22,000,000 Class D Secured Deferrable Mezzanine Floating Rate
Notes, Affirmed Ba3 (sf); previously on Sep 10, 2020 Confirmed at
Ba3 (sf)
Barings CLO Ltd. 2018-I, issued in April 2018, is a collateralised
loan obligation (CLO) backed by a portfolio of mostly high-yield
senior secured US loans. The portfolio is managed by Barings LLC.
The transaction's reinvestment period ended in April 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 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 USD116.04
million (32.46%) since the last rating action in March 2023. As a
result of the deleveraging, over-collateralisation (OC) has
increased. According to the Moody's recalculated OC ratios, taking
into account the July 2024 payments, the Class A, Class B, Class C
and Class D OC ratios are 137.34%, 123.81%, 112.70% and 106.34%
compared to March 2023 levels of 127.88%, 118.52%, 110.44% and
105.64%, respectively.
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: USD414.69m
Defaulted Securities: USD0.76m
Diversity Score: 72
Weighted Average Rating Factor (WARF): 2799
Weighted Average Life (WAL): 3.45 years
Weighted Average Spread (WAS): 3.17%
Weighted Average Coupon (WAC): 8.0%
Weighted Average Recovery Rate (WARR): 47.54%
Par haircut in OC tests and interest diversion test: 1.31%
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, 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.
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.
BARINGS CLO 2018-II: S&P Assigns Prelim B-(sf) Rating on F-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, B-R, C-R, D-1-R, and D-2-R debt and the proposed new class
E-R and F-R debt from Barings CLO Ltd. 2018-II/ Barings CLO 2018-II
LLC, a CLO originally issued in May 2018 that is managed by Barings
LLC, a subsidiary of MassMutual.
The preliminary ratings are based on information as of Aug. 1,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
S&P said, "On the Sept. 1, 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 X-R, A-1-R, A-2-R, B-R, C-R, D-1-R, and
D-2-R debt is expected to be issued at a floating spread, replacing
the current floating spread.
-- New class E-R, F-R, and X-R debt will be issued at a floating
spread. The class X-R debt is expected to be paid down using
interest proceeds during the first ten payment dates beginning with
the payment date in January 2025.
-- The stated maturity, reinvestment period, and non-call period
will be extended 6.25 years.
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
Barings CLO Ltd. 2018-II/ Barings CLO 2018-II LLC
Class A-1-R, $246.00 million: AAA (sf)
Class B-R, $44.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-1-R (deferrable), $24.00 million: BBB- (sf)
Class D-2-R (deferrable), $4.00 million: BBB- (sf)
Class E-R (deferrable), $11.00 million: BB- (sf)
Class F-R (deferrable), $3.00 million: B- (sf)
Other Debt
Barings CLO Ltd. 2018-II/ Barings CLO 2018-II LLC
Class X-R, $2.50 million: Not rated
Class A-2-R, $14.00 million: Not rated
Subordinated notes, $49.00 million: Not rated
BBCMS MORTGAGE 2024-C28: Fitch Gives B-(EXP) Rating on H-RR Certs
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BBCMS Mortgage Trust 2024-C28 commercial mortgage pass-through
certificates series C28.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
- $8,444,000 class A-1 'AAAsf'; Outlook Stable;
- $52,500,000 class A-3 'AAAsf'; Outlook Stable;
- $80,000,000 class A-3-BP 'AAAsf'; Outlook Stable;
- $180,000,000a class A-4 'AAAsf'; Outlook Stable;
- $231,500,000a class A-5 'AAAsf'; Outlook Stable;
- $11,000,000 class A-SB 'AAAsf'; Outlook Stable;
- $563,444,000b class X-A 'AAAsf'; Outlook Stable;
- $153,941,000bc class X-B 'A-sf'; Outlook Stable;
- $96,590,000 class A-S 'AAAsf'; Outlook Stable;
- $36,222,000 class B 'AA-sf'; Outlook Stable;
- $21,129,000 class C 'A-sf'; Outlook Stable;
- $8,049,000bc class X-D 'BBB+sf'; Outlook Stable;
- $8,049,000c class D 'BBB+sf'; Outlook Stable;
- $12,074,000cd class E-RR 'BBBsf'; Outlook Stable;
- $9,055,000cd class F-RR 'BBB-sf'; Outlook Stable;
- $17,105,000cd class G-RR 'BB-sf'; Outlooks Stable;
- $12,074,000cd class H-RR 'B-sf'; Outlook Stable;
Fitch does not expect to rate the following class:
- $29,178,408cd class 'J-RR'
Notes:
(a) The exact initial certificate balances of class A-4 and class
A-5 certificates are unknown and will be determined based on the
final pricing of these classes. The respective initial certificate
balances of these classes are expected to be within the following
ranges and $411,500,000 in the aggregate, subject to a variance of
plus or minus 5.0%. The certificate balances will be determined
based on the final pricing of these classes of certificates. The
expected class A-4 balance range is $0-$180,000,000, and the
expected class A-5 balance range is $231,500,000-$411,500,000.
Balances for classes A-4 and A-5 reflect the midpoints of each
range.
(b) Notional Amount and interest only.
(c) Privately Placed and pursuant to Rule 144A.
(d) Horizontal Risk Retention.
NR-Not Rated.
Transaction Summary
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 37 loans secured by 41
commercial properties having an aggregate principal balance of
$804,920,408 as of the cut-off date. The loans were contributed to
the trust by Barclays Capital Real Estate Inc., Goldman Sachs
Mortgage Company, German American Capital Corp., UBS AG New York
Branch, Starwood Mortgage Capital, Wells Fargo Bank, N.A., Societe
Generale Financial Corporation, Zions Bancorporation, N.A., BSPRT
CMBS Finance, LLC and Ladder Capital Finance LLC. The master
servicer is expected to be Wells Fargo Bank, N.A. and the special
servicer is expected to be LNR Partners, LLC.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analysis on 27 loans
totaling 91.5% of the pool by balance. Fitch's resulting net cash
flow (NCF) of $205.4 million represents an 14.2% decline from the
issuer's underwritten NCF of $239.3 million.
Lower Fitch Leverage: The pool has lower leverage compared to
recent U.S. Private Label Multiborrower transactions rated by
Fitch. The pool's Fitch loan to value ratio (LTV) of 85.3% is lower
than the YTD 2024 and 2023 averages of 89.7% and 88.3%,
respectively. The pool's Fitch NCF debt yield (DY) of 11.6% is
higher than the YTD 2024 and 2023 averages of 11.2% and 10.9%,
respectively.
Investment-Grade Credit Opinion Loans: Three loans representing
28.3% of the pool received an investment-grade credit opinion.
Bridge Point Rancho Cucamonga (9.9% of the pool) received a
standalone credit opinion of 'BBB+sf*', St Johns Town Center (9.7%
of the pool) received a standalone credit opinion of 'Asf*', and
Arizona Grand Resort and Spa (8.7% of the pool) received a
standalone credit opinion of 'A-sf*'. The pool's total credit
opinion percentage is higher than the YTD 2024 and 2023 averages of
14.0% and 17.8%, respectively. The pool's Fitch LTV and DY,
excluding credit opinion loans, are 92.9% and 10.8%, respectively.
High Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 68.5% of the pool, higher than the YTD 2024 and 2023
averages of 59.3% and 63.7%, respectively. The pool's effective
loan count of 17.3 is below the YTD 2024 and 2023 average of 23.1
and 20.6, respectively.
Higher Amortization: Based on the scheduled balances at maturity,
the pool will pay down 2.5%, which is above the YTD 2024 and 2023
averages of 0.9% and 1.4%, respectively. The pool has 27
interest-only loans, or 80.6% of pool by balance, which is below
the YTD 2024 average of 88.5% and higher than the 2023 average
84.5%.
Property Type Concentration and Low Office Concentration: The pool
has higher property type diversity compared to recent Fitch
transactions. The pool's effective property type count of 4.8 is
higher than the YTD 2024 and 2023 averages of 4.1 and 4.0,
respectively. The largest property type concentration is retail
(33.5% of the pool), which is slightly higher than the YTD 2024 and
2023 retail averages of 30.6% and 31.2%, respectively. However, the
transaction has a low concentration of office properties. The
pool's office concentration (6.5% of the pool) is lower than both
the YTD 2024 and 2023 office concentration of 19.4% and 27.6%,
respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB+sf' / 'BBBsf'
/ 'BBB-sf' / 'BB-sf' / B-sf';
- 10% NCF Decline: 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' / 'BB+sf'
/ 'BBsf' / 'B-sf' / '
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB+sf' / 'BBBsf'
/ 'BBB-sf' / 'BB-sf' / B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAsf' / 'Asf' / 'A-sf' / 'BBB+sf' /
'BBBsf' / 'BBsf' / 'Bsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage
loans.. Fitch considered this information in its analysis and it
did not have an effect on Fitch's analysis or conclusions.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by clicking the link to the Appendix. The appendix also contains a
comparison of these RW&Es to those Fitch considers typical for the
asset class as detailed in the Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions'.
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool is available
by clicking the link to the appendix. The appendix also contains a
comparison of these RW&Es to those Fitch considers typical for the
asset class as detailed in the special report "Representations,
Warranties and Enforcement Mechanisms in Global Structured Finance
Transactions".
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BENCHMARK 2020-B18: Fitch Lowers Rating on Two Tranches to 'B-sf'
-----------------------------------------------------------------
Fitch Ratings has downgraded three and affirmed 18 classes of
Benchmark 2020-B18 Mortgage Trust (BMARK 2020-B18). Negative Rating
Outlooks were assigned to classes F and X-F following their
downgrades. The Outlooks for affirmed classes C, X-B, D, E and X-D
have been revised to Negative from Stable.
Fitch has also downgraded four classes and affirmed 14 classes of
Benchmark 2020-B19 Mortgage Trust (BMARK 2020-B19). Classes F and
X-F were assigned Negative Outlooks following their downgrades. The
Outlooks for affirmed classes D, E and X-D have been revised to
Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
BMARK 2020-B18
A-1 08163AAA1 LT AAAsf Affirmed AAAsf
A-2 08163AAK9 LT AAAsf Affirmed AAAsf
A-3 08163AAB9 LT AAAsf Affirmed AAAsf
A-4 08163AAD5 LT AAAsf Affirmed AAAsf
A-5 08163AAE3 LT AAAsf Affirmed AAAsf
A-M 08163AAG8 LT AAAsf Affirmed AAAsf
A-SB 08163AAC7 LT AAAsf Affirmed AAAsf
AGN-D 08163ABM4 LT BBB-sf Affirmed BBB-sf
AGN-E 08163ABP7 LT BB-sf Affirmed BB-sf
AGN-F 08163ABR3 LT B-sf Affirmed B-sf
AGN-X 08163ABK8 LT B-sf Affirmed B-sf
B 08163AAH6 LT AA-sf Affirmed AA-sf
C 08163AAJ2 LT A-sf Affirmed A-sf
D 08163AAT0 LT BBBsf Affirmed BBBsf
E 08163AAV5 LT BBB-sf Affirmed BBB-sf
F 08163AAX1 LT B-sf Downgrade BB-sf
G-RR 08163AAZ6 LT CCCsf Downgrade B-sf
X-A 08163AAF0 LT AAAsf Affirmed AAAsf
X-B 08163AAM5 LT A-sf Affirmed A-sf
X-D 08163AAP8 LT BBB-sf Affirmed BBB-sf
X-F 08163AAR4 LT B-sf Downgrade BB-sf
BMARK 2020-B19
A-1 08162WAY2 LT AAAsf Affirmed AAAsf
A-2 08162WAZ9 LT AAAsf Affirmed AAAsf
A-3 08162WBA3 LT AAAsf Affirmed AAAsf
A-4 08162WBB1 LT AAAsf Affirmed AAAsf
A-5 08162WBC9 LT AAAsf Affirmed AAAsf
A-AB 08162WBD7 LT AAAsf Affirmed AAAsf
A-S 08162WBE5 LT AAAsf Affirmed AAAsf
B 08162WBG0 LT AA-sf Affirmed AA-sf
C 08162WBH8 LT A-sf Affirmed A-sf
D 08162WBJ4 LT BBBsf Affirmed BBBsf
E 08162WAA4 LT BBB-sf Affirmed BBB-sf
F 08162WAC0 LT Bsf Downgrade BB-sf
G 08162WAE6 LT CCCsf Downgrade B-sf
X-A 08162WBF2 LT AAAsf Affirmed AAAsf
X-B 08162WAJ5 LT A-sf Affirmed A-sf
X-D 08162WAL0 LT BBB-sf Affirmed BBB-sf
X-F 08162WAN6 LT Bsf Downgrade BB-sf
X-G 08162WAQ9 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Deal-level 'Bsf' rating case
losses have increased since Fitch's prior rating action to 5.13% in
BMARK 2020-B18 and 4.29% in BMARK 2020-B19. Fitch Loans of Concern
(FLOCs) comprise seven loans (18.7% of the pool) in BMARK 2020-B18,
including one loan in special servicing (3.5%), and six loans
(10.0%) in the BMARK 2020-B19, including one loan in special
servicing (1.1%).
BMARK 2020-B18: The downgrades in the BMARK 2020-B18 transaction
reflect higher overall pool losses since the prior rating action,
driven by performance deterioration of office FLOCs, including 3000
Post Oak (3.9%), 84 14th Street (1.4%) and specially serviced loan,
Brass Professional Center (3.5%).
The Negative Outlooks on classes C through F in BMARK 2020-B18
reflect the concentration of office loans within the pool (39.1%)
and the potential for downgrades should performance of the FLOCs,
Brass Professional Center (3.5%), 3000 Post Oak (3.9%), 84 14th
Street (1.4%), 1725 N Commerce Parkway (1.0%), Apollo Education
Group HQ Campus (2.9%) and 711 Fifth Avenue (5.0%), fail to
stabilize, and/or with additional declines in performance.
BMARK 2020-B19: The downgrades in the BMARK 2020-B19 transaction
reflect higher overall pool losses since the prior rating action,
driven by performance deterioration of office and retail FLOCs,
including Bridgewater Place (3.4%), 112 7th Avenue (2.0%),
Peninsula Town Center (1.5%) and specially serviced loan, Brass
Professional Center (1.1%).
The Negative Outlooks in BMARK 2020-B19 reflect the high office
concentration of 54.6% and the potential for downgrades without
performance stabilization of the FLOCs, Brass Professional Center
(1.1%), Bridgewater Place (3.4%), 112 7th Avenue (2.0%), Peninsula
Town Center (1.5%), 675 Creekside Way (2.3%) and 711 Fifth Avenue
(0.9%).
Largest Contributors to Loss: The overall largest contributor to
loss in both the BMARK 2020-B18 and BMARK 2020-B19 transactions is
Brass Professional Center, an 11-building, 575,771-sf, multi-tenant
office park built in various phases between 1968 and 1998, and
located in NW San Antonio, TX.
The asset transferred to special servicing in May 2023 for payment
default after the borrower stopped paying in March 2023 and became
REO in October 2023. The property is currently not listed for sale.
Property performance has declined since issuance, with May 2024
occupancy declining to 61% from 85% at issuance. The most recently
reported NOI as of TTM September 2022 reflected an NOI 29% below YE
2020 NOI and down 20% from the originator's underwritten NOI at
issuance.
Fitch's 'Bsf' rating case loss of 53.2% (prior to concentration
adjustments) reflects a discount to the most recent appraisal value
reflecting a stressed value of $53.2 psf.
The largest increase in loss expectations since the prior rating
action and the second largest contributor to overall pool loss
expectations in the BMARK 2020-B18 transaction is the 3000 Post Oak
loan (3.9%), secured by a 19-story, 441,523-sf office building
located in Houston, TX. The loan has an upcoming maturity in March
2025.
The single tenant, Bechtel (98.9% of the NRA) is expected to vacate
at lease expiration in July 2024. According to media reports, the
tenant will be relocating to another office property for
approximately half the size of its current space by the end of this
year. The Galleria/Uptown submarket of Houston reported an elevated
vacancy rate of 29.7% according to Costar as of 2Q24.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 25.7% reflects a 10.25% cap rate, 15% stress to the YE 2023 NOI
and factors a higher probability of default to account for the
departure of the single tenant, high submarket vacancy and
anticipated maturity default concerns.
The third largest increase in loss expectations since the prior
rating action in the BMARK 2020-B18 transaction is the 84 14th
Street loan (1.4%), secured by a 19,838-sf office property located
in Brooklyn, NY. While occupancy has remained at 100% based on the
March 2024 rent roll, property performance has deteriorated with YE
2023 NOI DSCR declining to 0.92x from 1.95x at issuance. The June
2024 property inspection indicated that the property is 33.3%
occupied.
According to CoStar, 11,500 sf (58.0% of the NRA) is listed as
available for direct lease, 6,500 sf of which is from space
previously occupied by tenant, Human Care. The remaining available
space was formerly occupied by the Joyland Group. Due to the
vacancies, occupancy is expected to decline to 42%.
Fitch's 'Bsf' rating case loss of 34.1% (prior to concentration
adjustments) reflects an elevated 9.75% cap rate (100 bps higher
than issuance) on the YE 2023 NOI and factors a higher probability
of default due to the performance decline, high availability and
term default risk.
The largest increase in loss expectations since the prior rating
action in the BMARK 2020-B19 transaction is the Bridgewater Place
loan (3.4%), secured by a 353,356-sf office located in Grand
Rapids, MI. Major tenant, Spectrum Health (19.8% of the NRA)
vacated the property at lease expiration in February 2024. The TTM
March 2024 occupancy declined to 73% and is expected to fall
further to 71% due to the downsize of New York Life in November
2024 by 2.2% of the NRA. CoStar reports an availability rate of
31.9% (130,739 sf) at the property.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 13.6% reflects a 10% cap rate, 15% stress to the TTM March 2023
NOI to account for the departure of a major tenant, high
availability and imminent refinance risk with loan maturity in
September 2025.
The second largest increase in loss expectations since the prior
rating action in the BMARK 2020-B19 transaction is the 112 7th
Avenue loan (2.0%), secured by a 16,097-sf retail building located
in the Chelsea neighborhood of Manhattan, NY. The largest tenant at
the property, EQ3 (87.0% of the NRA) with lease expiration in
October 2029, was in default due to failure to pay rent beginning
in August 2023. The borrower reported that the tenant is paying
approximately half of the rental amount per the lease agreement.
The NOI DSCR would fall to 1.16x with the reduction in rent.
Fitch's 'Bsf' rating case loss of 21.5% (prior to concentration
adjustments) reflects a 25% stress to the YE 2023 NOI and factors a
higher probability of default to account for the potential for term
default with the substantial reduction in rent of the largest
tenant.
The fourth largest increase in loss expectations since the prior
rating action in the BMARK 2020-B19 transaction is the Peninsula
Town Center loan (1.5%), secured by two office condominiums
totaling 130,573-sf located in Hampton, VA. As of March 2024,
occupancy improved to 93.5% due to the execution of two new leases
with 13,304 sf for 10.1% of the NRA. However, the largest tenant,
Faneuil (25.8%) with lease expiration in June 2026, has listed
their space as available for sublease according to CoStar.
Costar also reflects an availability rate of 30.8% for the entire
property. Additionally, rollover progressively increases over the
next three years, which includes 6.1% of leases in 2024, 18.9% in
2025 and 27.7% in 2026.
Fitch's 'Bsf' rating case loss of 17.8% (prior to concentration
adjustments) reflects 20% stress to the TTM March 2024 NOI and
factors a higher probability of default to account for the
heightened risk of term due to the possible occupancy and cashflow
declines.
Changes in Credit Enhancement (CE): As of the July 2024
distribution date, the aggregate balances of the BMARK 2020-B18 and
BMARK 2020-B19 transactions have been paid down by 3.2% and 2.0%,
respectively, since issuance.
The BMARK 2020-B18 transaction includes one loan (0.6% of the pool)
that has fully defeased and BMARK 2020-B19 has one (0.8%) fully
defeased loan. Cumulative interest shortfalls of $541,513 are
affecting the non-rated class H-RR in BMARK 2020-B18 and $222,447
is affecting the non-rated class H in BMARK 2020-B19.
Agellan Portfolio Non-Pooled Rake Bonds: The AGN classes associated
with the BMARK 2020-B18 transaction are related to a non-pooled
B-Note secured by the Agellan Portfolio loan, secured by a
46-property portfolio of industrial and office properties totaling
6.1 million sf across nine states. Portfolio performance has
improved since issuance, with YE 2023 NOI rising to $41.4 million,
4% higher than YE 2022 NOI and 14% above the originator's
underwritten NOI at issuance.
However, several of the largest properties by allocated loan
balance have elevated availability or impending lease expirations.
High availability was noted at Beltway III and IV and Sarasota
Distribution Hub and near-term expirations include 100% of space
expiring for both 4405 Continental Drive and Supervalu in August
2024 and September 2025, respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur or
are expected to occur.
Downgrades to junior 'AAAsf' rated classes with Negative Outlooks
are possible with continued performance deterioration of the FLOCs,
increased expected losses and limited to no improvement in class
credit enhancement (CE), or if interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur should performance of the FLOCs, most notably 3000 Post
Oak, 84 14th Street and Brass Professional Center in BMARK 2018-B5,
and Bridgewater Place, 112 7th Avenue, Peninsula Town Center and
Brass Professional Center in BMARK 2018-B6, deteriorate further or
if more loans than expected default at or prior to maturity.
Downgrades for the 'BBBsf' and 'Bsf' categories are likely with
higher than expected losses from continued underperformance of the
FLOCs, particularly the aforementioned office loans with
deteriorating performance and with greater certainty of losses on
the specially serviced loans or other FLOCs.
Downgrades to distressed 'CCCsf' ratings would occur should
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' category may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance on the FLOCs. This includes
3000 Post Oak, 84 14th Street and Brass Professional Center in
BMARK 2018-B5, and Bridgewater Place, 112 7th Avenue, Peninsula
Town Center and Brass Professional Center in BMARK 2018-B6.
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 'CCCsf' 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.
BRSP 2024-FL2: Fitch Assigns 'B-(EXP)sf' Rating on Class G Notes
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooked to
BRSP 2024-FL2, Ltd. as follows:
- $367,875,000a class A 'AAAsf'; Outlook Stable;
- $74,250,000a class A-S 'AAAsf'; Outlook Stable;
- $55,687,000a class B 'AA-sf'; Outlook Stable;
- $43,875,000a class C 'A-sf'; Outlook Stable;
- $27,000,000a class D 'BBBsf'; Outlook Stable;
- $15,188,000b class E 'BBB-sf'; Outlook Stable;
- $30,375,000b class F 'BB-sf'; Outlook Stable;
- $18,562,000b class G 'B-sf'; Outlook Stable.
The following class is not expected to be rated by Fitch:
- $42,188,000b Preferred Shares.
(a) Privately placed and pursuant to Rule 144A.
(b) Horizontal risk retention interest, estimated to be 13.500% of
the notional amount of the notes.
The approximate collateral interest balance as of the cutoff date
is $590,177,364 and does not include future funding.
The expected ratings are based on information provided by the
issuer as of July 29, 2024.
Transaction Summary
Totaling $675 million, the notes represent the beneficial ownership
in the trust, the primary assets of which are 22 loans secured by
25 commercial properties, with an aggregate principal balance of
$590,177,364 as of the cutoff date and cash of held to fund the
acquisition of additional loans and participation interests of
$84,822,636 to fund the acquisition of additional loans and
participation interests. The loans were contributed to the trust by
BRSP 2024-FL2, LLC.
The servicer is expected to be KeyBank, National Association and
the special servicer is expected to be BrightSpire Capital Asset
Management, LLC. The trustee is expected to be Wilmington Trust,
National Association, and the note administrator is expected to be
Computershare Trust Company, N.A. The notes are expected to follow
a sequential-paydown structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch Ratings performed cash flow analysis on
17 loans totaling 85.2% of the pool by balance, including 15 of the
top 15 loans. Fitch's resulting net cash flow (NCF) of $36.3
million represents a 15.8% decline from the issuer's underwritten
NCF of $43.0 million.
Higher Fitch Leverage: The pool has higher leverage than recent
CRE-CLO transactions rated by Fitch. The pool's Fitch loan-to-value
ratio (LTV) of 149.1% is worse than the 2024 YTD CRE-CLO average of
145.4%, but improved from the 2023 CRE-CLO average of 171.2%. The
pool's Fitch NCF debt yield (DY) of 6.1% is in line with the 2024
YTD CRE-CLO average of 6.1%, but better than the 2023 CRE-CLO
average of 5.6%.
Lower Pool Concentration: The pool is less concentrated than the
pools of recent Fitch-rated CRE-CLO transactions. The top 10 loans
make up 60.6% of the pool, lower than the 2024 YTD CRE-CLO average
of 77.9% and the 2023 CRE-CLO average of 62.5%. Fitch measures loan
concentration risk via an effective loan count, which accounts for
both the number and size of loans in the pool. The pool's effective
loan count is 19.6. Fitch views diversity as a key mitigant to
idiosyncratic risk. Fitch raises the overall loss for pools with
effective loan counts below 40.
Property Type Concentration: The pool consists of 74.3%
multifamily, 10.6% office, 7.1% hotel, 5.9% mixed use and 2.0%
industrial. The pool has an effective property type count of 1.7,
which is lower than the property type count of comparable
transactions VMC 2023-PV1 and BSPRT 2023-FL10, at 2.0 and 2.1,
respectively, but higher than that of MF2024-FL14, RCMF 2023-FL12
and MF1 2024-FL15, at 1.1, 1.5 and 1.0, respectively. This pool's
property type count is higher than the 2023 CRE-CLO average of
1.5.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Decline: 'AAAsf' / 'AAsf' / 'Asf' / 'BBBsf' / 'BBB-sf' /
'BBsf' / 'Bsf' / 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / 'AAsf' / 'Asf' / 'BBB+sf' /
'BBBsf' / 'BBsf' / 'B+sf'.
SUMMARY OF FINANCIAL ADJUSTMENTS
In accordance with Fitch's "U.S. and Canadian Multiborrower CMBS
Criteria," Fitch modeled different stress scenarios using the
Global Cash Flow model as a tool. These stresses include different
interest rate, default and default timing" scenarios. The deal's
liabilities structure passed all of the hypothetical stress
scenarios.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by KPMG LLP. The third-party due diligence described in
Form 15E focused on a comparison and re-computation of certain
characteristics with respect to each of the mortgage loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BSST 2021-1818: S&P Affirms BB+ (sf) Rating on Class C Certs
------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from BSST 2021-1818
Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P
affirmed its rating on the class C certificates from the
transaction.
This U.S. standalone (single-borrower) CMBS transaction is backed
by a floating-rate, interest-only (IO) mortgage loan secured by the
borrower's fee-simple and leasehold interests in a 1972-built,
37-story, 999,828 sq. ft. class A office building located at 1818
Market Street in the Philadelphia central business district.
Rating Actions
The downgrades on classes A and B and affirmation on class C
reflect the following:
-- S&P said, "Our revised expected-case valuation, which is 8.4%
lower than the value we derived in our February 2024 review because
it factored in the $5.0 million in exposure to date as well as the
potential for an additional $8.0 million of exposure we estimate
over the next year as the special servicer pursues either a loan
workout or foreclosure."
-- The property's reported net cash flow (NCF) and occupancy,
which have not materially improved.
-- S&P's view that the lack of meaningful workout terms and
protracted resolution timing--as well as the continued increase in
loan exposure due primarily to servicer advances for loan debt
service, real estate taxes, and insurance--may further reduce
liquidity and recovery of the $222.9 million loan, which has a
reported nonperforming matured balloon payment status. Since
February 2024, the reported loan exposure increased $1.5 million to
$227.9 million as of the July 2024 reporting period. According to
the transaction's payment waterfall, advances are repaid to the
servicer prior to any distributions to the bondholders.
The downgrade on the class X-EXT IO certificates reflects S&P's
criteria for rating IO securities, in which the rating on the IO
securities would not be higher than that of the lowest-rated
reference class. The notional amount of the class X-EXT
certificates references class A.
At the time of S&P's Feb. 1, 2024, review, the loan, which had
transferred to special servicing for imminent monetary default on
Sept. 28, 2023, had a 60-days-delinquent payment status. It had
outstanding advances and accruals totaling $3.5 million, which
comprised the following:
-- Interest advances totaling $3.3 million;
-- Other expense advances totaling $126,431; and
-- Accrued unpaid interest totaling $10,525.
The special servicer, Rialto Capital Advisors LLC, stated that it
was in discussions with the borrower for a potential loan
modification; however, no terms have yet been agreed upon. Rialto
had expected the special servicing workout to be resolved by April
2024.
Since S&P's last review, according to the July 15, 2024, trustee
remittance report, the loan exposure increased $1.5 million to
$227.9 million. The loan matured March 9, 2024 (after the borrower
exercised the first of its three extension options in March 2023)
and amassed an additional $1.5 million in exposure. The outstanding
advances and accruals totaled $5.0 million and comprised the
following:
-- Interest advances totaling $3.3 million;
-- Other expense advances totaling $518,565;
-- Real estate taxes and insurance advances totaling $1.1 million;
and
-- Cumulative accrued unpaid interest totaling $49,254.
Rialto has not provided any meaningful updates on the resolution
strategy and timing other than that negotiations are still ongoing
with the borrower. The expected resolution date was updated to
year-end 2024.
S&P will continue to monitor the asset resolution, including the
anticipated timing and trajectory of future increases in exposure,
and will revise its analysis and take additional rating actions as
it determines necessary.
Updates To Property-Level Analysis
As of the March 31, 2024, rent roll, the property was 74.0% leased,
which was in line with S&P's last review, and had a reported NCF of
$17.3 million as of year-end 2023. Per CoStar, the Market Street
West office submarket, where the property sits, had 15.6% vacancy
and 19.4% availability rates for 3- to 5-star properties as of
year-to-date July 2024.
S&P said, "Based on our $12.0 million S&P Global Ratings NCF and
the loan's $19.8 million annual debt service obligation--reflecting
current one-month SOFR and the 3.554% loan spread (the loan
currently lacks an interest rate cap agreement)--a one-year workout
or foreclosure timeframe could result in an additional $8.0 million
of exposure (including tax and insurance expenses and accounting
for $3.5 million currently held in reserves, as reported in the
July 2024 investor reporting package), for a total $13.0 million of
exposure senior to the outstanding trust debt.
"Given the minimal change in reported occupancy and NCF, we
maintained our NCF of $12.0 million derived from our last review.
Using an S&P Global Ratings capitalization rate of 7.75% (unchanged
from the last review) and deducting $13.0 million for existing and
future projected advances (discussed above), we arrived at a net
recovery value of $142.3 million, or $142 per sq. ft., down from
$155.2 million, or $155 per sq. ft., at the last review. This is
49.6% below the issuance appraisal value of $282.1 million ($282
per sq. ft.)."
Ratings Lowered
BSST 2021-1818 Mortgage Trust
Class A to 'AA- (sf)' from 'AAA (sf)'
Class B to 'BBB+ (sf)' from 'A (sf)'
Class X-EXT to 'AA- (sf)' from 'AAA (sf)'
Rating Affirmed
BSST 2021-1818 Mortgage Trust
Class C: BB+ (sf)
CARLYLE US 2017-5: S&P Affirms CCC+ (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings raised four ratings and affirmed seven on 11
classes of notes from Carlyle US CLO 2017-5 Ltd. and Carlyle Global
Market Strategies CLO 2014-2-R Ltd., U.S. broadly syndicated CLO
transactions managed by Carlyle CLO Management LLC. Two of the
ratings were placed on CreditWatch negative on May 31, 2024, due to
a combination of an increase in defaults/CCCs and indicative cash
flow results at that point in time. Since then, some of the
defaults have returned to performing, and, as a result of more
paydowns, the credit enhancements levels have improved for each
transaction. Of those placed on CreditWatch, S&P affirmed two
ratings, removing both from CreditWatch negative.
S&P said, "The rating actions follow our review of each
transaction's performance using data from the June 2024, trustee
reports. In S&P's review, we analyzed each transaction's
performance and cash flows, and applied our global corporate CLO
criteria in our rating decisions. The ratings list at the end of
this report highlights the key performance metrics behind the
specific rating actions.
"Both transactions have exited their reinvestment periods and are
paying down the notes in the order specified in their respective
documents. As a result of paydowns and support changes in their
respective portfolios, CLOs in their amortization phase may have
ratings on tranches move in opposite directions. While principal
paydowns increase senior credit support, principal losses and/or
declines in portfolio credit quality may decrease junior credit
support."
The portfolios of each transaction reviewed have significant
exposure to collateral obligations rated in the 'CCC' category, as
well as elevated exposure to assets with distressed prices. As the
notes continue to pay down, these exposures may become more
concentrated in each portfolio and could further deteriorate junior
credit support. Despite this, trustee overcollateralizations (O/Cs)
maintain compliance with test levels as of the latest trustee
report.
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."
While each class's indicative cash flow results are a primary
factor, S&P also incorporates other considerations into its
decision to raise, lower, affirm, or limit rating movements. These
considerations typically include:
-- Whether the CLO is reinvesting or paying down its notes;
-- Existing subordination or O/C and recent trends;
-- The cushion available for coverage ratios and comparative
analysis with other CLO classes with similar ratings;
-- Forward-looking scenarios for 'CCC' and 'CCC-' rated
collateral, as well as collateral with stressed market values;
-- Current concentration levels;
-- The risk of imminent default or dependence on favorable market
conditions to meet obligations; and
-- Additional sensitivity runs to account for any of the above.
-- The upgrades primarily reflect the class's increased credit
support due to the senior note paydowns, improved O/C levels, and
passing cash flow results at higher rating levels.
-- The affirmations reflect S&P's view that the available credit
enhancement for each respective class is still commensurate with
the assigned ratings.
S&P said, "Although our cash flow analysis indicated a different
rating for some classes of notes, we affirmed the ratings after
considering one or more qualitative factors listed above.
"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
Carlyle US CLO 2017-5 Ltd.
Class A-2: To AA+ (sf) from AA (sf)
Class B: To A+ (sf) from A (sf)
Carlyle Global Market Strategies CLO 2014-2-R Ltd.
Class A-3: To AA+ (sf) from AA (sf)
Class B: To A+ (sf) from A (sf)
Ratings Affirmed And Removed From CreditWatch Negative
Carlyle US CLO 2017-5 Ltd.
Class D: to BB- (sf) from BB- (sf)/Watch Neg
Carlyle Global Market Strategies CLO 2014-2-R Ltd.
Class D: to BB- (sf) from BB- (sf)/Watch Neg
Ratings Affirmed
Carlyle US CLO 2017-5 Ltd.
Class A-1a: AAA (sf)
Class C: BBB- (sf)
Carlyle Global Market Strategies CLO 2014-2-R Ltd.
Class A-1: AAA (sf)
Class C: BBB- (sf)
Class E: CCC+ (sf)
CATAMARAN CLO 2018-1: S&P Lowers Class E Notes Rating to 'B+ (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its rating on the class E debt from
Catamaran CLO 2018-1 Ltd. and removed it from CreditWatch, where
S&P placed it with negative implications in May 2024. At the same
time, S&P affirmed its ratings on the class A-1-R, B-R, C, and D
debt from the same transaction.
Catamaran CLO 2018-1 Ltd. is a U.S. CLO that originally closed in
2018 and was partially refinanced in July 2021. It is managed by
Trimaran Advisors LLC.
The rating actions follow S&P's review of the transaction's
performance using data from the trustee's July 2024 monthly and
payment reports.
Since S&P's July 2021 rating actions, the transaction has exited
its reinvestment period and has received approximately 25% in debt
paydowns to the senior class. As a result of the lower balance of
the senior notes, all overcollateralization (O/C) ratios
increased.
Following are the changes observed in the trustee-reported O/C
ratios since the March 2024 trustee report, which S&P used when
placing its rating on the class E debt on CreditWatch with negative
implications in May 2024:
-- The senior classes' O/C ratio improved to 128.81% from
127.07%.
-- The class C O/C ratio improved to 118.57% from 117.49%.
-- The class D O/C ratio improved to 111.21% from 110.54%.
-- The class E O/C ratio improved to 104.94% from 104.59%.
The class E note rating was placed on CreditWatch Negative
primarily due to its indicative cash flows, decline in its credit
quality, decrease in its O/C ratio (which was 107.41% in June
2021), and increase in the 'CCC' category collateral.
The lowered rating primarily reflects the continuing failure of the
class E debt's cash flows at its previous rating and the decrease
in its credit support. Though its cash flows point to a lower
rating, S&P limited the downgrade to one notch, considering that
its O/C has started to improve and is likely to improve further if
deleveraging continues. However, any deterioration to its credit
support could result in further downgrades.
The affirmed ratings reflect adequate credit support at the current
rating level. On a standalone basis, the results of the cash flow
analysis indicated a higher rating on the class B-R, C, and D debt.
S&P said, "However, our rating actions reflect our qualitative
consideration of additional sensitivity runs that evaluated the
CLO's exposure to assets rated both in the 'CCC' category and to
those currently trading at distressed prices, and our preference
for more cushion to offset any future potential negative credit
migration in the underlying collateral."
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 take rating actions as we deem
necessary."
Rating Lowered And Removed From CreditWatch
Catamaran CLO 2018-1 Ltd.
Class E to 'B+ (sf)' from 'BB- (sf)/Watch Neg'
Ratings Affirmed
Catamaran CLO 2018-1 Ltd.
Class A-1-R: AAA (sf)
Class B-R: AA (sf)
Class C: A (sf)
Class D: BBB- (sf)
CENTEX HOME 2005-A: Moody's Hikes Class M-5 Debt Rating to Ba2
--------------------------------------------------------------
Moody's Ratings has upgraded the ratings of six bonds from two US
residential mortgage-backed transactions (RMBS), backed by subprime
mortgages issued by multiple issuers.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Centex Home Equity Loan Trust 2005-A
Cl. M-1, Upgraded to Baa1 (sf); previously on Jun 9, 2020
Downgraded to Ba2 (sf)
Cl. M-2, Upgraded to Ba1 (sf); previously on Jun 9, 2020 Downgraded
to Ba2 (sf)
Cl. M-3, Upgraded to Ba1 (sf); previously on Jun 9, 2020 Downgraded
to Ba2 (sf)
Cl. M-4, Upgraded to Ba1 (sf); previously on Nov 20, 2018 Upgraded
to Ba3 (sf)
Cl. M-5, Upgraded to Ba2 (sf); previously on Nov 20, 2018 Upgraded
to B1 (sf)
Issuer: Citigroup Mortgage Loan Trust 2006-HE3
Cl. A-1, Upgraded to Aa1 (sf); previously on Jan 5, 2023 Upgraded
to Baa3 (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 bonds has seen strong growth in credit
enhancement, in the form of overcollateralization and/or
subordination, since Moody's last review. For example, the Cl. A-1
from Citigroup Mortgage Loan Trust 2006-HE3 has seen its
enhancement level grow to 59%. The increase in credit enhancement,
along with the steady collateral performance, has led to large
upgrade for this bond. Moody's analysis also considered the
existence of historical interest shortfalls. While all shortfalls
have since been recouped, the size and length of the past
shortfalls, as well as the potential for recurrence, were analyzed
as part of the upgrades.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
strategies regarding borrower relief programs and the impact those
programs may have on collateral performance and transaction
liquidity, through servicer advancing. Moody's recent analysis has
found that in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features and credit enhancement.
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.
CIM TRUST 2024-R1: Fitch Assigns 'Bsf' Final Rating on Cl. B2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings to CIM Trust 2024-R1 (CIM
2024-R1).
Entity/Debt Rating Prior
----------- ------ -----
CIM 2024-R1
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAsf New Rating AA(EXP)sf
M1 LT Asf New Rating A(EXP)sf
M2 LT BBBsf New Rating BBB(EXP)sf
B1 LT BBsf New Rating BB(EXP)sf
B2 LT Bsf New Rating B(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
B4 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
C LT NRsf New Rating NR(EXP)sf
PRA LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
Transaction Summary
Fitch has rated the residential mortgage-backed notes issued by CIM
2024-R1 as indicated above. The notes are supported by one
collateral group that consists of 2,055 loans with a total balance
of approximately $468.1 million, which includes $14.7 million, or
3.13%, of the aggregate pool balance in non-interest-bearing
deferred principal amounts as of the cutoff date. The pool
generally consists of seasoned performing loans (SPLs) and
reperforming loans (RPLs). Approximately 38.4% of the pool loans
were seasoned at less than 24 months as of the cutoff date and,
therefore, were considered to be new origination by Fitch.
Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicer will not be advancing delinquent monthly payments of P&I.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to its updated view
on sustainable home prices, Fitch views the home price values of
this pool as 11.2% above a long-term sustainable level (versus
11.1% on a national level as of 4Q23, unchanged since the prior
quarter). Housing affordability is the worst it has been in
decades, driven by both high interest rates and elevated home
prices. Home prices increased 5.5% YOY nationally as of February
2024, despite modest regional declines, but are still being
supported by limited inventory.
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage loans, SPLs and RPLs. Of the
pool, 8.4% of the loans were 30 days delinquent as of the cutoff
date. Approximately 22.3% of the loans have been paying on time for
at least the past 24 months (defined as clean current by Fitch);
33.3% are new originations that have been paying on time since
origination; and 36.1% of the loans are current, but have missed
one or more payments over the past 24 months (defined as dirty
current by Fitch). Roughly 30.6% of the loans have been modified.
Low Leverage (Positive): The pool consists of loans with a weighted
average (WA) original combined loan-to-value ratio (CLTV) of 79.4%,
as calculated by Fitch. All seasoned loans received an updated
property valuation, and 78.6% of these loans received a broker
price opinion (BPO) valuation. The remining 1.2% received form
2055, an HDI or an automated valuation model (AVM) value. AVMs were
haircut based on the provider and confidence score thresholds, per
Fitch criteria. This translates to a WA sustainable LTV (sLTV) of
72.4% in the base case. This indicates low-leverage borrowers and
added strength compared to recently rated RPL transactions.
No Servicer P&I Advancing (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduces liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' rated class.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to reallocate principal to pay interest
on the 'AAAsf' rated notes prior to other principal distributions
is highly supportive of timely interest payments to those classes
in the absence of servicer advancing.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0%, in addition to the model-projected 42.3% at 'AAAsf'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
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 the rated classes. Specifically,
a 10% gain in home prices would result in a full category upgrade
for the rated class excluding those being assigned ratings of
'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC and Clayton. A third-party regulatory
compliance review was completed on 100% of the loans in the
transaction pool and testing scope is consistent with Fitch
criteria for RPL RMBS. Fitch considered 349 loans seasoned less
than 24 months as new originations and those loans received a full
new origination due diligence, which includes 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: increased the
LS due to HUD-1 issues, increased liquidation timelines for loans
missing modification agreements, increased LS due to outstanding
delinquent property taxes or liens and material TRID exception.
These adjustments resulted in an increase in the 'AAAsf' expected
loss of approximately 25bps.
ESG Considerations
CIM 2024-R1 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to increased operational risk
considering the non-investment-grade R&W provider and the Tier 3
framework treatment on newly originated loans, which represents
38.4% of the pool by UPB, as newly originated loans are subject to
additional R&Ws, which were not included in the transaction
framework. This 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.
CITIGROUP MORTGAGE 2024-1: Moody's Assigns B3 Rating to B-5 Certs
-----------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to 57 classes of
residential mortgage-backed securities (RMBS) issued by Citigroup
Mortgage Loan Trust 2024-1, and sponsored by Citigroup Global
Markets Realty Corp.
The securities are backed by a pool of prime jumbo (89.4% by
balance) and GSE-eligible (10.6% by balance) residential mortgages
aggregated by Citigroup Global Markets Realty Corp., originated by
multiple entities and serviced by Fay Servicing, LLC and PennyMac
Loan Services, LLC.
The complete rating actions are as follows:
Issuer: Citigroup Mortgage Loan Trust 2024-1
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-1-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-1-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-1-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Definitive Rating Assigned Aaa (sf)
Cl. A-1B, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-2-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-2-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-2-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-2A, Definitive Rating Assigned Aaa (sf)
Cl. A-2B, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-3-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-3-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-3A, Definitive Rating Assigned Aaa (sf)
Cl. A-3B, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-4-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-4-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-4-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-4A, Definitive Rating Assigned Aaa (sf)
Cl. A-4B, Definitive Rating Assigned Aaa (sf)
Cl. A-5-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-5-IO2X*, Definitive Rating Assigned Aaa (sf)
Cl. A-5-IOX*, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-6-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-6-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-6A, Definitive Rating Assigned Aaa (sf)
Cl. A-6B, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-7-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-7-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-7A, Definitive Rating Assigned Aaa (sf)
Cl. A-7B, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-8-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-8-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-8-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-8A, Definitive Rating Assigned Aaa (sf)
Cl. A-8B, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11-IO*, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-IO*, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-2A, Definitive Rating Assigned A2 (sf)
Cl. B-2-IO*, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.41%, in a baseline scenario-median is 0.20% and reaches 5.18% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
COMM 2016-DC2: Fitch Affirms B- Rating on 2 Tranches
----------------------------------------------------
Fitch Ratings has affirmed 12 classes of COMM Mortgage Trust,
commercial mortgage pass-through certificates, series 2016-DC2
(COMM 2016-DC2). The Rating Outlooks for classes C, D, E, F, X-C
and X-D were revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2016-DC2
Mortgage Trust
A-4 12594CBE9 LT AAAsf Affirmed AAAsf
A-5 12594CBF6 LT AAAsf Affirmed AAAsf
A-M 12594CBH2 LT AAAsf Affirmed AAAsf
A-SB 12594CBD1 LT AAAsf Affirmed AAAsf
B 12594CBJ8 LT AA-sf Affirmed AA-sf
C 12594CBK5 LT A-sf Affirmed A-sf
D 12594CAL4 LT BBsf Affirmed BBsf
E 12594CAN0 LT Bsf Affirmed Bsf
F 12594CAQ3 LT B-sf Affirmed B-sf
X-A 12594CBG4 LT AAAsf Affirmed AAAsf
X-C 12594CAC4 LT BBsf Affirmed BBsf
X-D 12594CAE0 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Elevated Loss Expectations: The affirmations of senior rated
classes reflect improving credit enhancement and defeasance along
with stable performance across the majority of loans in the pool.
The Negative Outlooks to classes C, D, E, F, X-C and X-D reflect
refinance concerns of Fitch Loans of Concern (FLOCs), namely North
Point Center East, Williamsburg Premium Outlets, Columbus Park
Crossing, Promenade Gateway and the specially serviced Colony
Square Atascadero. Fitch identified 16 loans (48.3% of the pool) as
FLOCs, which includes one loan (1.1%) in special servicing. Fitch's
current ratings incorporate a 'Bsf' rating case loss of 7.9%.
Due to the expected concentrated nature of the pool with upcoming
maturities (100% of the pool matures by February 2026), Fitch's
analysis includes a sensitivity and liquidation analysis which
groups the remaining loans based on current status and collateral
quality, and ranked them by their perceived likelihood of repayment
and/or loss expectations. Higher probabilities of default were
assigned to FLOCs including Columbus Park Crossing (5.8%),
Promenade Gateway (4.9%), Shutterfly (3.9%) Coral Island Shopping
Center (2.0%), River Valley Plaza (1.8%), PetSmart Sunnyvale
(1.1%), Mil-Pine Plaza (0.7%) and Cypress Grove Plaza (0.7%), which
are factored into the Negative Rating Outlooks.
Largest Contributors to Loss: The largest increase since the prior
rating action and largest contributor to overall loss expectations
is the North Point Center East (9.6% of the pool), which is secured
by a portfolio of four office buildings totaling 540,747-sf located
in Alpharetta, GA. The largest tenants include Savista Group
Holdings (20.0% of the NRA) and SL Alpharetta (4.8%) with lease
expirations in February 2031 and June 2032, respectively. As of
March 2024, occupancy for the property was reported at 92%, in line
with YE 2023 and below occupancy of 100% in 2022.
While the property has exhibited stable performance since issuance,
the loan was identified as a FLOC due to high availability across
the collateral. According to the servicer, availability rates at
each of the buildings are 9% of the NRA in building one, 75% in
building two, 58% in building three and 31.3% of the NRA in
building five. The total availability rate across the collateral is
approximately 37.3%.
Fitch's 'Bsf' ratings case loss of 24.4% (prior to concentration
adjustments) reflects a 10% cap rate, 15% stress to the YE 2023 NOI
and an increased probability of default to account for the loan's
heightened maturity default risk.
The second largest increase in loss since the prior rating action
is the Promenade Gateway loan (4.9%), which is secured by a
132,443-sf mixed-use (multifamily and office) property located in
Santa Monica, CA. As of March 2024, the multifamily portion was
93.8% occupied, while the office was 83.5%. The office portion of
the collateral has experienced declines due to WeWork, which
occupied 13.7% of the property, vacating their space.
Fitch requested leasing updates for theater tenant American
Multi-Cinema Inc. (21.4% of the NRA) with a lease expiration in
October 2024, but received no response. Additionally, approximately
11% of the office space expires in 2025, coinciding with the loan's
maturity date in December 2025.
Fitch's 'Bsf' ratings case loss of 18.5% (prior to concentration
adjustments) includes a 9.00% cap rate, a 20% stress to the YE 2023
NOI and an increased probability of default to account for the
loan's heightened maturity default concerns.
The next largest increase to loss expectations is the Shutterfly
loan (3.9%), which is secured by a 237,000-sf flex property located
in Tempe, AZ and is fully leased to Shutterfly. Overall performance
has remained stable with a YE 2023 and YE 2022 NOI DSCR of 1.63x
and 1.58x, respectively. The tenant contains a lease expiration in
June 2025, ahead of the loan's December 2025 maturity.
Fitch's 'Bsf' ratings case loss of 10.7% (prior to concentration
adjustments) reflects a 9.00% cap rate and a 20% stress to the YE
2023 NOI, as well as an increased probability of default due to the
loan's heightened maturity default concerns.
The third largest contributor to overall loss expectations is the
Columbus Park Crossing loan (5.8% of the pool), which is secured by
a 632,111-sf anchored retail center located in Columbus, GA. The
largest tenants include AMC Classic Columbus (13.2% of the NRA),
which is under a ground lease, Haverty's (5.2%) and Ross Dress For
Less (4.7%). Occupancy declined to 70% after Sears (previously
22.2% of the NRA) and Toys R Us (7.7%) vacated in 2017 and 2018,
respectively.
Per the April 2024 rent roll, occupancy was 78.5% and is expected
to improve to 87.1% once the new lease with Floor & Décor (8.6% of
the NRA) commences in October 2024. Despite the improvements in
occupancy, cash flow remains constrained with the loan reporting an
NOI DSCR of 1.27x as of YE 2023 and 1.07x at YE 2022.
Fitch's 'Bsf' rating case loss of 30.5% (prior to concentration
adjustments) reflects a 15% cap rate on the YE 2023 NOI and factors
an increased probability of default due to the loan's heightened
maturity default concerns.
The Colony Square Atascadero loan (1.1%), secured by a 47,543-sf
retail property located in Atascadero, CA, transferred to special
servicing in May 2020 due to imminent monetary default. According
to the servicer, the largest tenant, Galaxy Theater (73% of the
NRA), vacated in 2022 and was replaced by a new theater tenant
which stabilized occupancy at 85%.
However, the new lease with the theater was not approved by the
lender due to non-viable lease provisions and inconsistent rental
payments. The borrower filed for bankruptcy in 2021 and a March
2024 court ruling rendered the borrower's bankruptcy plan as
unconfirmable. A receiver was appointed in June 2024 and the loan
is progressing toward foreclosure.
The 'Bsf' rating case loss of 72.9% is based on a stress to a
servicer-reported appraisal value which equates to recovery of
$37.90 psf.
Regional Mall Loan Concerns: The pool includes two regional mall
FLOCs secured by the Williamsburg Premium Outlets (8.2% of the
pool) and the Birch Run Premium Outlets (3.3%).
The Williamsburg Premium Outlets loan is secured by 522,133-sf
outlet center located in Williamsburg, VA. Major tenants include
Food Lion (6% of the NRA), Nike Factory Store (2.6%), and Polo
Ralph Lauren (2.4%). Occupancy has declined to 78% as of March
2024, down from 86% at YE 2020 and 95% at issuance. Despite the
decline in occupancy, the loan has maintained a DSCR of 2.27x as of
YE 2023 in-line with YE 2022. Tenancy at the property is granular,
with the most recent rent roll reporting rollover of 15.9% in 2024,
15.9% in 2025, and 16.0% in 2026.
'Bsf' rating case losses of 7.0% (prior to concentration
adjustments) reflects a 12% cap rate and a 15% stress to the YE
2023 NOI.
The Birch Run Premium Outlets loan, identified as a FLOC due to
occupancy declines, is secured by a 680,003-sf outlet center
located in Birch Run, MI. Occupancy has improved to 77% as of YE
2023 from a trough of 63% at YE 2021, but remains below occupancy
of 87% at issuance. Cash flow has improved with YE 2023 NOI 7.8%
above YE 2022, but remains 10.8% below the originator's
underwritten NOI at issuance. As of YE 2023, NOI DSCR was 2.76x
which compares with 2.57x as of YE 2022.
The Birch Run Premium Outlets 'Bsf' rating case losses of 3.5%
(prior to concentration adjustments) reflects a 12% cap rate and a
10% stress to the YE 2023 NOI.
Improvements in Credit Enhancement: As of the July 2024
distribution date, the pool's aggregate balance has been reduced by
24.1% to $612.25 million from $806.2 million at issuance. There are
23 loans (29.6% of the pool) that are fully defeased. All loans are
scheduled to mature between June 2025 and February 2026. Realized
losses and interest shortfalls of $772,130 and $527,872 are
impacting the non-rated class H.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes in the 'AAAsf' and 'AAsf' categories are
unlikely due to continued improvements in credit enhancement and
defeasance, but may occur should deal level losses increase
significantly and/or interest shortfalls occur or are expected to
occur. Should performing loans that are anticipated to pay off at
maturity default, these classes could be exposed to prolong
workouts and increased risk of interest shortfalls and/or reduced
credit enhancement.
Downgrades to classes in the 'Asf' and 'BBBsf' categories which are
on Negative Outlook may occur with further performance declines or
transfer to special servicing of the FLOCs, including the North
Point Center East, Williamsburg Premium Outlets, Columbus Park
Crossing, Promenade Gateway and Birch Run Premium Outlets and/or
more loans than expected default at or prior to maturity.
Downgrades to classes in the 'BBsf' and 'Bsf' categories may occur
with higher than expected losses from the continued performance
declines of the FLOCs, particularly of the aforementioned loans
and/or more loans transfer to special servicing prior to or at
maturity.
Downgrades to distressed rated classes would occur as losses are
realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes in the 'AAsf' category may occur with continued
improvements in CE from amortization and/or defeasance of loans,
coupled with stable performance of loans in the pool.
Upgrades to classes in the 'Asf' and 'BBBsf' categories may occur
with performance stabilization of the FLOCs, namely the North Point
Center East, Williamsburg Premium Outlets, Columbus Park Crossing,
Promenade Gateway and Birch Run Premium Outlets.
Upgrades to classes in the 'BBsf' and 'Bsf' categories are not
likely until later years in a transaction and only if performance
of the remaining pool is stable, recoveries on the FLOCs are better
than expected and there is sufficient CE to the class.
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.
COMM 2017-PANW: Fitch Affirms 'BB' Rating on Class E Certs
----------------------------------------------------------
Fitch Ratings has affirmed five classes of COMM 2017-PANW Mortgage
Trust Commercial Mortgage Pass-Through Certificates. The Rating
Outlooks have been revised to Negative from Stable for classes D
and E.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2017-PANW
A 12595HAA6 LT AAAsf Affirmed AAAsf
B 12595HAC2 LT AA-sf Affirmed AA-sf
C 12595HAE8 LT A-sf Affirmed A-sf
D 12595HAG3 LT BBB-sf Affirmed BBB-sf
E 12595HAJ7 LT BBsf Affirmed BBsf
Transaction Summary
The certificates represent the beneficial interests in the $310
million, seven-year, fixed-rate, interest-only (IO) mortgage loan
securing the fee interest in The Campus @ 3333 Phase III, a
940,564-sf, four-building office campus located in Santa Clara, CA.
The certificates follow a sequential-pay structure.
KEY RATING DRIVERS
Stable Performance; Upcoming Maturity: The affirmations reflect
generally stable performance since issuance. However, Fitch's net
cash flow (NCF) is down from issuance primarily due to higher
vacancy and leasing cost assumptions. The updated Fitch sustainable
NCF is $28.6 million, which is 11.6% below Fitch's issuance NCF of
$32.3 million. The property is fully occupied with
servicer-reported NCF debt service coverage ratio (DSCR) at 3.50x
for YE 2023, 3.45x for YE 2022 and 3.34x for YE 2021, compared to
3.15x at issuance.
The loan has an upcoming maturity that is scheduled for October
2024. According the servicer, the borrower has not responded to
inquiries regarding plans for refinancing; Fitch will continue to
monitor.
The Negative Outlooks for classes D and E reflect the potential for
downgrades of up to one category if progress is not made toward
refinancing and the loan transfers to special servicing. The
Negative Outlooks also reflect potential interest shortfalls
stemming from servicer advances and fees and/or a prolonged workout
resulting in a value decline.
Creditworthy Tenancy: The property is 100% leased to Palo Alto
Networks, Inc. (PANW), which executed three separate, absolute
triple net leases, which expire in July 2028, 3.9 years beyond the
loan maturity. PANW provides security platform solutions to
enterprises, service providers and government entities worldwide,
and the company reported 2023 revenues of $7.8 billion.
Asset Quality and Strong Location: Built in 2017, The Campus @ 3333
Phase III is an LEED Silver certified office complex located along
Tannery Way in Santa Clara, CA, in the heart of Silicon Valley.
PANW has invested over $80 million into outfitting the four
buildings. At issuance, Fitch assigned the property a collateral
quality grade of 'A-'.
Institutional Sponsorship: The loan is sponsored by The California
State Teachers' Retirement System (CalSTRS) and Korea Post (KP).
CalSTRS is the third largest retirement plan in the U.S., KP is
owned by the Republic of Korea government (rated AA-/F1+/Stable;
Country Ceiling of AA+); as a government entity, KP is considered a
sovereign wealth fund.
Fitch Leverage: The $310.0 million mortgage loan ($330psf) has a
Fitch DSCR and loan-to-value (LTV) of 0.97x and 92.3%,
respectively, compared to 1.09x and 81.8% at the prior review and
1.13x and 79.1% at issuance. Fitch incorporated a Fitch-stressed
capitalization rate of 8.50%, an increase from 8.25% at issuance to
factor increased office sector concerns.
Single-Tenant/Asset Exposure: The transaction is secured by a
single property and is, therefore, more susceptible to single-event
risk related to the market, sponsors or tenant. Although the
property is currently leased to one tenant, PANW, the four-building
campus can be divided to accommodate multiple tenants.
Full-Term, IO Loan: The fixed-rate loan is IO for the entire
seven-year loan term with a rate of 3.45%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades are possible with sustained and significant decline in
asset occupancy and/or a material deterioration in property NCF. A
downgrade to classes D and E are possible if interest shortfalls
affect the classes and/or there is a prolonged workout of the loan
leading to a value decline.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are not likely given the headwinds facing office
properties, single-event risk and the loan's upcoming maturity. The
current ratings reflect Fitch's view of sustainable performance.
However, upgrades are possible with more certain prospects for
refinancing/payoff.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
COMM 2017-PANW has an ESG Relevance Score of '4' [+] for Waste &
Hazardous Materials Management; Ecological Impacts due to the
collateral's sustainable building practices including Green
building certificate credentials, which has a positive impact on
the credit profile, and is relevant to the rating[s] in conjunction
with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
COMM 2019-521F: S&P Affirms 'CCC- (sf)' rating on Class F Certs
---------------------------------------------------------------
S&P Global Ratings lowered its ratings on five classes of
commercial mortgage pass-through certificates from COMM 2019-521F
Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P
affirmed its 'CCC- (sf)' rating on the class F certificates from
the transaction.
This is a U.S. stand-alone (single-borrower) CMBS transaction that
is backed by a $242.0 million, floating-rate (indexed to one-month
term SOFR plus a 1.46% adjusted spread), interest-only mortgage
loan, secured by the borrower's fee simple interest in a
1929-built, 39-story, 495,636-sq.-ft. class-A- art deco-designed,
LEED gold certified office building located at 521 Fifth Avenue (at
the corner of Fifth Ave. and 43rd St.), in midtown Manhattan's
Grand Central office submarket.
Rating Actions
The downgrades on the class A, B, C, D, and E certificates, and
affirmation on the class F certificates reflect the following:
-- The property's reported net cash flow (NCF) and occupancy have
not materially improved. It was 76.8% occupied as of the March 31,
2024, rent roll. The loan, which is currently unhedged against
rising interest rates, had a reported debt service coverage of
0.79x as of year-end 2023.
-- Since S&P's November 2023 review, the loan transferred to
special servicing on June 25, 2024, due to maturity default after
the borrower failed to pay off the loan. It matured on June 9,
2024, and is currently unhedged. The special servicer, LNR Partners
LLC (LNR), is working on a resolution strategy with the borrower
and timing is unknown currently. S&P considered that if the
resolution timing is protracted, it may result in reduced liquidity
and recovery to the trust.
-- S&P's expected-case valuation, while unchanged from its last
review, is 28.3% lower than the valuation S&P derived at issuance.
-- The downgrades on class D to 'CCC (sf)' and class E to 'CCC-
(sf)', and affirmation of class F at 'CCC- (sf)', also reflect
S&P's view that these classes are at a heightened risk of default
and losses, and are susceptible to reduced liquidity interruption
based on its analysis, the current market conditions, and their
positions in the payment waterfall.
As of the July 15, 2024, trustee remittance report, the specially
serviced loan was paid through July 2024 and there is about
$723,500 in lender-controlled reserve accounts. In addition,
classes F and VRR Interest (not rated by S&P Global Ratings) had
outstanding accumulated interest shortfalls totaling $3,105, which
we deemed de minimis.
LNR has stated that it is actively discussing resolution strategies
with the borrower, including a potential maturity extension.
However, it is also dual tracking foreclosure proceedings and has
ordered a new appraisal report. The resolution timing of the
special servicing transfer and finalization of the appraisal report
are uncertain currently. Moreover, S&P has not received an update
on the borrower's failure to submit real estate tax and insurance
payments, which is the other reason the loan was transferred to
special servicing according to the July 2024 CRE Finance Council
delinquent loan status report's comments, other than that the
special servicer is following up with the borrower.
S&P said, "We will continue to monitor the performance of the
property and loan, including the loan's payment status, and the
workout strategy and timing. If we receive information that differs
materially from our expectations, such as property performance that
is below our expectations or a workout strategy that negatively
affects the transaction's liquidity and recovery, we may revisit
our analysis and take additional rating actions as we determine
appropriate."
Property-Level Analysis Updates
S&P said, "As of the March 31, 2024, rent roll, the property was
76.8% leased, which was in line with our Nov. 7, 2023, review, and
had a reported NCF of $12.4 million as of year-end 2023. Since our
last review, according to CoStar, a new tenant signed a lease for
21,185 sq. ft. (4.2% of net rentable area [NRA]) on the 10th floor
in February 2024; however, tenants comprising 56,362 sq. ft. or
11.2% of NRA have marketed their spaces for sublease. In addition,
the vacancy and availability rates for four- and five-star
properties in the Grand Central office submarket, where the
property is situated, continue to be elevated at 17.4% and 15.6%,
respectively, as of year-to-date August 2024.
"Given the minimal change in reported occupancy and NCF, we
maintained our NCF of $12.3 million derived from the last review.
Using an S&P Global Ratings capitalization rate of 6.75% (unchanged
from last review), we arrived at an S&P Global Ratings
expected-case value of $182.2 million, or $368 per sq. ft. (the
same as in our last review), which is a decline of 28.3% from our
issuance value of $254.0 million or $513 per sq. ft., and 53.9%
below the issuance appraisal value of $395.0 million ($797 per sq.
ft.). This yields an S&P Global Ratings' loan-to-value ratio of
132.8%."
Ratings Lowered
COMM 2019-521F Mortgage Trust
Class A to 'BBB+ (sf)' from 'A+ (sf)'
Class B to 'BB (sf)' from 'BBB (sf)'
Class C to 'B- (sf)' from 'BB+ (sf)'
Class D to 'CCC (sf)' from 'B (sf)'
Class E to 'CCC- (sf)' from 'CCC (sf)'
Rating Affirmed
COMM 2019-521F Mortgage Trust
Class F: CCC- (sf)
CRESTLINE DENALI XIV: Moody's Affirms Caa2 Rating on F-R Notes
--------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Crestline Denali CLO XIV, Ltd:
USD46,800,000 Class B-R-2 Senior Secured Floating Rate Notes,
Upgraded to Aaa (sf); previously on Oct 24, 2023 Upgraded to Aa1
(sf)
USD19,500,000 Class C-R Senior Secured Deferrable Floating Rate
Notes, Upgraded to Aa2 (sf); previously on Oct 24, 2023 Upgraded to
A2 (sf)
USD23,400,000 Class D-R Senior Secured Deferrable Floating Rate
Notes, Upgraded to Baa3 (sf); previously on Jun 19, 2020 Downgraded
to Ba1 (sf)
Moody's have also affirmed the ratings on the following notes:
USD249,329,621 Class A-R-2 Senior Secured Floating Rate Notes,
Affirmed Aaa (sf); previously on Sep 22, 2021 Assigned Aaa (sf)
USD19,500,000 Class E-R Secured Deferrable Floating Rate Notes,
Affirmed B1 (sf); previously on Jun 19, 2020 Downgraded to B1 (sf)
USD3,000,000 Class F-R Secured Deferrable Floating Rate Notes,
Affirmed Caa2 (sf); previously on Jun 19, 2020 Downgraded to Caa2
(sf)
Crestline Denali CLO XIV, Ltd., originally issued in October 2016
and last refinanced in September 2021, is a managed cashflow CLO.
The notes are collateralized primarily by a portfolio of broadly
syndicated senior secured corporate loans. The transaction's
reinvestment period ended in October 2023.
RATINGS RATIONALE
The rating upgrades on the Class B-R-2, Class C-R and Class D-R
notes are primarily a result of the deleveraging of the senior
notes following amortisation of the underlying portfolio since the
last rating action in October 2023.
The affirmations on the ratings on the Class A-R-2, E-R and F-R
notes are primarily a result of the expected losses on the notes
remaining consistent with their current rating levels, after taking
into account the CLO's latest portfolio, its relevant structural
features and its actual over-collateralisation ratios.
The Class A-R-2 notes have paid down by approximately USD93.4
million (38.1%) since the last rating action in October 2023 and
USD97.5 million (39.1%) since closing. As a result of the
deleveraging, over-collateralisation (OC) has increased across the
capital structure. According to the trustee report dated July 2024
[1] the Class A/B, Class C, Class D and Class E OC ratios are
reported at 132.70%, 122.72%, 112.57% and 105.31% compared to
October 2023 [2] levels of 126.13%, 118.28%, 110.06% and 104.03%,
respectively. Moody's note that the July 2024 principal payments
are not reflected in the reported OC 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 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: USD278.1m
Defaulted Securities: USD0.96m
Diversity Score: 66
Weighted Average Rating Factor (WARF): 3043
Weighted Average Life (WAL): 3.9 years
Weighted Average Spread (WAS) (before accounting for Euribor
floors): 3.32%
Weighted Average Recovery Rate (WARR): 47.1%
Par haircut in OC tests and interest diversion test: 0.43%
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, 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.
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.
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.
CSMC TRUST 2017-CALI: S&P Lowers Cl. X-B Certs Rating to 'B+ (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on six classes of commercial
mortgage pass-through certificates from CSMC Trust 2017-CALI, a
U.S. CMBS transaction. At the same time, S&P affirmed its 'CCC
(sf)' and 'CCC- (sf)' ratings on the class E and F certificates,
respectively, from the transaction.
This U.S. standalone (single-borrower) CMBS transaction is backed
by a portion ($250.0 million) of a 3.8% fixed-rate, interest-only
(IO) $300.0 million mortgage whole loan secured by the borrower's
fee-simple interest in One California Plaza, a 1985-built,
42-story, 1.05 million sq. ft. class A LEED Platinum-certified
office building in the Downtown Los Angeles office submarket.
Rating Actions
The downgrades on classes A, B, C, and D and affirmations on
classes E and F reflect the following:
-- S&P said, "Our concerns with the borrower's ability to
refinance the loan by its November 2024 maturity date if the
property's net cash flow (NCF) and occupancy do not materially
improve. The loan is on the master servicer's watchlist due to low
reported debt service coverage (DSC) on a 3.8% fixed interest rate,
which was 1.28x as of the trailing 12 months (TTM) ending March 31,
2024. We considered that if the loan transfers to special servicing
and the resolution timing is protracted, it may result in reduced
liquidity and recovery to the trust."
-- S&P said, "Occupancy, which was 73.2% as of the March 31, 2024,
rent roll, has not materially improved since out last review, and
it may fall below 70.0% if the borrower is not able to backfill
vacancies after the second-largest tenant, Skadden, Arps, Slate,
Meagher & Flom LLP (Skadden; 10.3% of net rentable area [NRA]),
vacates at the end of November 2024. We assessed that the DSC as of
the TTM ending March 31, 2024, excluding Skadden's gross rent and
keeping all else equal, would fall below 1.0x. According to the
July 2024 Commercial Real Estate Finance Council (CREFC) loan level
reserve report, there is $3.1 million in the debt service reserve
account."
-- S&P said, "Given these factors, we further revised our
expected-case valuation for the property, which is now 10.5% lower
than the value we derived in our November 2023 review and 28.1%
lower than the valuation we derived at issuance. To arrive at this
value, we assumed current market rents for spaces we expect to
become vacant through 2025 due to known tenant departures."
S&P said, "The affirmations on classes E and F at 'CCC (sf)' and
'CCC- (sf)', respectively, also reflect our view that these classes
remain at heightened risk of default and losses and are susceptible
to liquidity interruption, based on our analysis, the current
market conditions, and their positions in the payment waterfall.
"We lowered our ratings on the class X-A and X-B IO certificates
based on our criteria for rating IO securities, which states that
the ratings on the IO securities would not be higher than that of
the lowest-rated reference class. The notional amount of class X-A
references class A, while class X-B references classes B and C.
"We will continue to monitor the tenancy and performance of the
property and the loan. If we receive information including a
special servicing transfer and resolution strategies that differs
materially from our expectations, we may revisit our analysis and
take additional rating actions as we determine necessary."
Updates To Property-Level Analysis
S&P said, "At the time of our Nov. 21, 2023, review, we noted that
various media reports indicated that the second-largest tenant,
Skadden, planned to vacate at its lease expiration in November 2024
and relocate to Century City; however, the master servicer, KeyBank
Real Estate Capital, stated that the sponsor had specified that it
was in discussions with several new and existing tenants interested
in taking additional space, comprising up to 8.3% of NRA. At that
time, we derived a sustainable NCF of $14.4 million by assuming a
72.8% occupancy rate, $46.99 per sq. ft. S&P Global Ratings gross
rent, 52.4% operating expense ratio, and higher tenant improvement
(TI) costs.
"Since then, occupancy has remained relatively flat according to
the March 31, 2024, rent roll, and we expect that occupancy will
decrease further considering known departing tenants, near-term
lease expirations, and spaces being marketed for sublease."
As of the March 31, 2024, rent roll, the property was 73.2% leased
and had a reported NCF of $14.8 million as of the TTM ended March
31, 2024. According to CoStar, the Downtown Los Angeles office
submarket, where the property sits, had a 24.7% vacancy and 22.0%
availability rate for 4- and 5-star properties as of year-to-date
August 2024. CoStar projects vacancy to increase to 28.0% by 2028.
CoStar noted that the property has an availability rate of 44.3% as
of year-to-date August 2024, which includes Skadden's NRA (10.3%)
that expires November 2024 and about 8.8% of NRA that is being
marketed for sublease by existing tenants.
S&P said, "In our current analysis, we considered that, according
to the July 2024 CREFC loan level report, there is $18.3 million in
the replacement, tenant, and other reserve accounts and per the
property's website, the sponsor may have signed new leases for 2.4%
of the NRA. Based on these considerations, we used the in-place
vacancy of 26.8%, a $46.67 per sq. ft. S&P Global Ratings gross
rent (marking down the gross rents on two tenants comprising 14.3%
of NRA that we expect will vacate before year-end 2025), a 56.4%
operating expense ratio, and higher TI costs to arrive at our
revised NCF of $12.9 million, 10.5% below the NCF in our last
review and 13.0% lower than the reported NCF for the TTM ended
March 31, 2024. Using an S&P Global Ratings capitalization rate of
7.00% (unchanged from the last review), we arrived at an S&P Global
Ratings value of $183.9 million, or $176 per sq. ft., down from
$205.4 million, or $196 per sq. ft., at our last review and 59.9%
below the issuance appraisal value of $459.0 million ($438 per sq.
ft.). This yielded an S&P Global Ratings loan-to-value ratio of
163.2% on the whole loan balance.
"In our analysis, we also considered that the 1.4 million sq. ft.
Gas Company Tower, a Downtown Los Angeles office building, was
recently re-appraised in March 2024 at $214.5 million, or $156 per
sq. ft. The Gas Company Tower secures the sole loan in GCT
Commercial Mortgage Trust 2021-GCT (not rated by S&P Global
Ratings) and has a reported payment status of foreclosure in
progress. In addition, CoStar noted that the nearby 1.1 million sq.
ft. Aon Center office tower was acquired in late 2023 for about
$140 per sq. ft. Further, the 1.0 million sq. ft. 777 Tower, also
in the Downtown Los Angeles office submarket, was set to sell for
approximately $145.0 million or $141 per sq. ft., but the deal fell
through in April 2024."
Table 1
Servicer-reported collateral performance
TTM ENDING MARCH
2024 (I) 2023(I) 2022(I) 2021(I)
Occupancy rate (%) 73.2 75.7 72.0 76.4
Net cash flow (mil. $) 14.8 14.6 13.6 14.5
Debt service coverage (x) 1.28 1.26 1.18 1.26
Appraisal value (mil. $) 459.0 459.0 459.0 459.0
(i)Reporting period.
TTM--Trailing 12 months.
Table 2
S&P Global Ratings' key assumptions
CURRENT LAST REVIEW ISSUANCE
(AUGUST 2024)(I) (NOV 2023)(I) (NOV 2017)(I)
Occupancy rate (%) 73.2 72.8 82.2
Net cash flow (mil. $) 12.9 14.4 17.9
Capitalization rate (%) 7.00 7.00 7.00
Value (mil. $) 183.9 205.4 255.8
Value per sq. ft. ($) 176 196 244
Loan-to-value
ratio (%)(ii) 163.2 146.0 117.3
(i)Review period. (ii)On the whole loan balance at the time of
S&P's review.
Ratings Lowered
CSMC Trust 2017-CALI
Class A to 'BBB+ (sf)' from 'AA (sf)'
Class B to 'BB (sf)' from 'A- (sf)'
Class C to 'B+ (sf)' from 'BB (sf)'
Class D to 'B- (sf)' from 'B (sf)'
Class X-A to 'BBB+ (sf)' from 'AA (sf)'
Class X-B to 'B+ (sf)' from 'BB (sf)'
Ratings Affirmed
CSMC Trust 2017-CALI
Class E: CCC (sf)
Class F: CCC- (sf)
DBGS 2024-SBL: Fitch Assigns 'Bsf' Rating on Class HRR Certificates
-------------------------------------------------------------------
Fitch Ratings has assigned the following final ratings and Ratings
Outlooks to DBGS 2024-SBL Mortgage Trust Commercial Mortgage
Pass-Through Certificates.
- $191,900,000 class A 'AAAsf'; Outlook Stable;
- $21,700,000 class B 'AA-sf'; Outlook Stable;
- $23,300,000 class C 'A-sf'; Outlook Stable;
- $32,800,000 class D 'BBB-sf'; Outlook Stable;
- $50,200,000 class E 'BB-sf'; Outlook Stable;
- $7,340,000 class F 'B+sf'; Outlook Stable.
- $17,260,000 class HRR 'Bsf'; Outlook Stable.
HRR is a Horizontal risk retention interest representing at least
5.0% of the estimated fair value of all classes.
Transaction Summary
The certificates represent the beneficial ownership interest in a
trust that will hold an approximately $344.5 million, two-year,
floating-rate interest-only (IO) mortgage loan with three one-year
extension options. The mortgage will be secured by the borrower's
fee simple interest in a portfolio of 19 industrial facilities,
comprising approximately 4.1 million square feet (sf) located in
seven states and 10 markets.
Loan proceeds will be used to refinance approximately $307.0
million of existing debt, return approximately $20.9 million of
equity, fund upfront lease sweep reserves totaling approximately
$7.2 million and upfront earnout reserve of $4 million, fund
outstanding landlord obligations of approximately $100,000, fund
$81,875 immediate repairs reserve, fund $29,666 rent concession
reserve and pay approximately $5.2 million in closing costs.
The certificates will follow a pro rata paydown for the initial 30%
of the loan amount and a standard senior sequential paydown
thereafter.
The loan was originated by German American Capital Corporation and
Goldman Sachs Mortgage Company. KeyBank National Association is the
master servicer, with Situs Holdings, LLC as a special servicer.
Computershare Trust Company, NA is the trustee and Deutsche Bank
National Trust Company is the certificate administrator. Park
Bridge Lender Services LLC will act as operating advisor.
The transaction closed on Aug. 7, 2024.
KEY RATING DRIVERS
Net Cash Flow: Fitch estimates stressed net cash flow (NCF) for the
portfolio at $23.0 million. This is 3.8% lower than the issuer's
NCF and 17.0% higher than YE 2023 NCF, due to the portfolio's
lease-up period. Fitch applied a 7.25% cap rate to derive a Fitch
value of $317.3 million.
High Fitch Leverage: The $344.5.0 million whole loan equates to
debt of approximately $83 per sf with a Fitch stressed debt service
coverage ratio (DSCR) of 0.81x, loan-to-value ratio (LTV) of 108.6%
and debt yield of 6.7%. The loan represents approximately 67.7% of
the appraised value of $509.2 million. Fitch increased the LTV
hurdles by 1.25% to reflect the higher in-place leverage. Based on
the total rated debt and a blend of the Fitch and market cap rates,
the transaction's Fitch market LTV is 94.5%.
Geographic and Tenant Diversity: The portfolio has strong
geographic diversity with 19 industrial properties (4.1 million sf)
located across seven states and 10 MSAs. The three largest state
concentrations are Texas (1.9 million sf; seven properties),
Washington (711,900 sf; three properties) and California (498.2,000
sf; two properties). The three largest MSAs are Dallas-Fort Worth,
TX (38.7% of NRA; 33.4% of ALA), Seattle, WA (17.2% of NRA; 25.4%
of ALA) and Stockton, CA (10.1% of NRA; 9.5% of ALA). The portfolio
also exhibits significant tenant diversity as it features 27
distinct tenants, with no tenant occupying more than 14.0% of NRA.
Institutional Sponsorship and Management: The loan is sponsored by
a joint venture (JV) between The Goldman Sachs Group, Inc. (80%)
and Dalfen Last Mile IV Co Investment General Partnership (20%).
This JV was formed during a 2019 transaction and has $2.5 billion
and approximately 20 million sf in assets under management Goldman
Sachs Asset Management was established in 1991 and is a part of
Goldman Sachs which has over $2.8 trillion in global assets under
management as of Dec. 31, 2023. Dalfen Industrial specializes in
the last mile industrial sector with a focus on industrial real
estate development, acquisitions, asset management, property
management, construction, legal and capital markets.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Defined stresses describe the impact of two defined stress
assumptions: an up-stress, reflecting a 10% increase to Fitch's NCF
at the time of issuance; and NCF reduced by 10% from Fitch's NCF at
the time of issuance. Declines to NCF result in lower DSCRs and
higher LTVs, which are two of the biggest drivers of default and
loss in Fitch's model. The following table shows the impact on
ratings for each additional defined stress to NCF
- Original Rating: 'AAAsf'/'AA-sf'/'A-sf'/
'BBB-sf'/'BB-sf'/'B+sf/'Bsf'';
- 10% NCF Decline: 'AA-sf'/'BBB+sf'/'BBB-sf'/
'BBsf'/'Bsf'/'B-sf'/'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Original Rating: 'AAAsf'/'AA-sf'/'A-sf'/
'BBB-sf'/'BB-sf'/'B+sf'/'Bsf';
- 10% NCF Increase: 'AAAsf'/'AA+sf'/'A+sf'/
'BBB+sf'/'BBsf'/'BBsf'/'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 Ernst & Young LLC. The third-party due diligence
described in Form 15E focused on comparison and re-computation of
certain characteristics with respect to the mortgage loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
DRYDEN 108: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
-----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the
Dryden 108 CLO, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Dryden 108 CLO, Ltd.
A-1-R LT AAAsf New Rating
A-2 26253MAC4 LT PIFsf Paid In Full AAAsf
A-2-R LT AAAsf New Rating
B 26253MAE0 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 26253MAG5 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating
D 26253MAJ9 LT PIFsf Paid In Full BBB-sf
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E 26253NAA6 LT PIFsf Paid In Full BB-sf
E-R LT BB-sf New Rating
X LT AAAsf New Rating
Transaction Summary
Dryden 108 CLO, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by PGIM, Inc.
The original transaction closed in July 2022 and is being
refinanced. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $495 million (not including defaulted obligations) 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 WARF of the indicative portfolio is 22.39, versus
a maximum covenant, in accordance with the initial expected matrix
point of 24.43. 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
94.29% first-lien senior secured loans. The WARR of the indicative
portfolio is 75.19% versus a minimum covenant, in accordance with
the initial expected matrix point of 72.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 50% 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 'AAAsf' for class X, between 'BBB+sf' and 'AA+sf' for
class A-1-R, between 'BBB+sf' and 'AA+sf' for class A-2-R, between
'BB+sf' and 'A+sf' for class B-R, between 'B+sf' and 'BBB+sf' for
class C-R, between less than 'B-sf' and 'BB+sf' for class D-1-R,
between less than 'B-sf' and 'BB+sf' for class D-2-R, and between
less than 'B-sf' and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X, 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, 'A+sf'
for class D-1-R, 'A-sf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Dryden 108 CLO,
Ltd. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
EATON VANCE 2020-1: S&P Assigns Prelim 'BB-' Rating on E-RR Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-RR, B-RR, C-RR, D-1RR, and E-RR replacement debt and proposed new
class D-2 debt from Eaton Vance CLO 2020-1 Ltd./Eaton Vance CLO
2020-1 LLC, a CLO managed by Eaton Vance Management that was
originally issued in August 2020 and underwent a first refinancing
in September 2021.
The preliminary ratings are based on information as of August 1,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the August 8, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the September 2021 debt.
S&P said, "At that time, we expect to withdraw our ratings on the
September 2021 debt and assign ratings to the replacement debt.
However, if the refinancing doesn't occur, we may affirm our
ratings on the September 2021 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 non-call period will be extended to Aug. 8, 2026.
-- The reinvestment period will be extended to Oct. 15, 2029.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) will be extended to Oct. 15,
2037.
-- No additional assets will be purchased on the Aug. 8, 2024
refinancing date, and the target initial par amount will decrease
to approximately $444.85 million. There will be no additional
effective date or ramp-up period, and the first payment date
following the refinancing is Oct. 15, 2024.
-- The class D-2 debt will be issued on the refinancing date.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- Approximately $10 million in additional subordinated notes will
be issued on the refinancing date.
-- The transaction documents had some changes to the concentration
limitations such as an increase in current pay obligations and
discount obligations and a reduction in covenant-lite obligations.
The documents also added the prohibition to acquire ESG collateral
obligations.
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
Eaton Vance CLO 2020-1 Ltd./Eaton Vance CLO 2020-1 LLC
Class A-RR, $284.806 million: AAA (sf)
Class B-RR, $53.401 million: AA (sf)
Class C-RR (deferrable), $26.701 million: A (sf)
Class D-1RR (deferrable), $26.701 million: BBB- (sf)
Class D-2 (deferrable), $4.450 million: BBB- (sf)
Class E-RR (deferrable), $13.350 million: BB- (sf)
Other Debt
Eaton Vance CLO 2020-1 Ltd./Eaton Vance CLO 2020-1 LLC
Subordinated notes, $54.800 million: Not rated
GCT COMMERCIAL 2021-GCT: Moody's Cuts Rating on Cl. C Certs to C
----------------------------------------------------------------
Moody's Ratings has downgraded the ratings on three classes,
affirmed the ratings on three classes and placed two of the
downgraded classes on review for further possible downgrade in GCT
Commercial Mortgage Trust 2021-GCT, Commercial Mortgage
Pass-Through Certificates, Series 2021-GCT as follows:
Cl. A, Downgraded to B1 (sf) and Placed On Review for Downgrade;
previously on Jun 4, 2024 Downgraded to Ba2 (sf)
Cl. B, Downgraded to Caa1 (sf) and Placed On Review for Downgrade;
previously on Jun 4, 2024 Downgraded to B2 (sf)
Cl. C, Downgraded to C (sf); previously on Jun 4, 2024 Downgraded
to Caa3 (sf)
Cl. D, Affirmed C (sf); previously on Jun 4, 2024 Downgraded to C
(sf)
Cl. E, Affirmed C (sf); previously on Jun 4, 2024 Downgraded to C
(sf)
Cl. HRR, Affirmed C (sf); previously on Jun 4, 2024 Affirmed C
(sf)
RATINGS RATIONALE
The ratings on three principal and interest (P&I) classes, Cl. A,
Cl. B and Cl. C, were downgraded primarily due to the potential for
higher expected losses upon the ultimate loan resolution given
market value data on comparable office properties and weaker
fundamentals in Downtown Los Angeles office market. The downgrades
also reflect the likely continued decline in property occupancy as
the property faces additional significant rollover concerns through
2026 and a previously reported potential lease with the City of Los
Angeles for approximately 310,000 square feet (SF) at the property
has failed to materialize. The property has also been marketed for
sale through the receiver with a possible foreclosure sale.
Furthermore, there was a recent sale of 777 tower, a 1.0 million SF
office building in Downtown Los Angeles originally owned by the
same sponsor, in July 2024 at $120 million, or $117 per SF.
The ratings on two P&I classes, Cl. A and Cl. B, were also placed
on review for possible downgrade due to the uncertainty around the
ultimate loan resolution timing and recovery value. The appraisal
dated March 2024 valued the property at $214.5 million (or $156 per
SF), 39% below the outstanding trust mortgage balance, and the
County of Los Angeles has reportedly recently submitted a $215
million cash bid on the property, however, the offer is non-binding
and subject to approvals. Moody's analysis also factored in the
recent sale of 777 tower at $120 million ($117 per SF). During the
review period, Moody's will monitor any updates in the sale or
foreclosure process that could impact the ultimate loan disposition
as well as comparable market data for office properties in Downtown
Los Angeles. As part of the review period Moody's will also
consider outstanding loan advances and other sales costs or fees
that could impact the ultimate principal proceeds and losses to the
trust.
The ratings on three P&I class Cl. D, Cl. E and Cl. HRR, were
affirmed because the ratings are consistent with Moody's expected
loss. 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 or
higher expected losses or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-backed
Securitizations" published in July 2024.
DEAL PERFORMANCE
As of the July 2024 distribution date the transaction's certificate
balance was $350 million, the same as at securitization. The
original 5-year (two-year initial term plus three, one-year
extension options), floating rate, interest-only loan is secured by
the fee simple interest in (i) a 54-story, Class A office building
located at 555 West 5th Street in Los Angeles, California (the "Gas
Company Tower") and (ii) a 1,166-stall parking garage located at
350 South Figueroa Street in Los Angeles, California. There is
mezzanine debt totaling $115 million held outside of the trust.
The Gas Company Tower is a 1,377,053 SF, Class A office building
with grade level retail space located in Downtown Los Angeles. The
building was built in 1991 and is LEED Gold certified. The
property's original sponsor, Brookfield DTLA Holdings, LLC,
originally owned six Class-A office properties and a retail center
that are all located in Downtown Los Angeles. Brookfield DTLA has
previously reported defaults on three of its original mortgages
secured by office properties in Downtown Los Angeles, including Gas
Company Tower, with an additional asset, Bank of America Plaza,
recently transferring to special servicing in several CMBS conduit
transactions due to imminent maturity default. One of the
previously defaulted assets, a nearby 1.0 million SF office
property named 777 Tower, was recently sold for $120 million or
$117 per SF, which is approximately 17% lower than a previously
reported potential sale that fell through in April 2024.
The loan has been in special servicing since February 2023 after
the borrower elected not to extend or pay off the loan at its
initial maturity date that month and a receiver was subsequently
appointed in April 2023. Given the decline in NCF and occupancy
since securitization in combination with the higher debt service
payments due to the loan's floating rate, the property has not been
able to generate sufficient NCF to service the interest only
floating rate debt service amount since 2023. The most recent
reported appraised value was 39% below the outstanding loan balance
causing a recognized appraisal reduction amount of $166.6 million
as of the July 2024 remittance statement. As a result, interest
shortfalls impacted up to Cl. C and totaled $5.9 million as of the
July 2024 payment date. There was also outstanding loan advances
and accrued advance interest totaling approximately $10.4 million.
Downtown Los Angeles office market fundamentals have been
deteriorating since the COVID pandemic. According to CBRE EA, as of
Q2 2024, the Class A office vacancy in Los Angeles Financial
District submarket was 24.2% and the average gross asking rent was
$31.57 per SF, compared to 22.7% and $32.11 per SF, respectively,
in 2023 and 15.4% and $37.03 per SF, respectively, in 2019. The
Financial District office submarket has also seen consecutive years
of negative net absorptions since 2019.
As of June 2024, the property was 54% leased, compared to 73% in
December 2022 and 76% at securitization. The property's 2023
reported NOI was $22.1 million which was 21% lower than its 2022
reported net operating income (NOI) and 37% lower than its 2019
reported NOI. Furthermore, tenants representing an additional 36%
of property's NRA have lease expirations by October 2026, several
of which have already indicated potential plans to vacate or
downsize their space. A previously reported potential lease with
the City of Los Angeles for approximately 310,000 SF at the
property has failed to materialize. The property has also been
marketed for sale through the receiver with a possible foreclosure
sale. It was reported that the County of Los Angeles has submitted
a nonbinding letter of interest to buy the property for $215
million ($156 per SF) and has begun the due diligence process.
However, the offer will be subject to approval by the county's
Board of Supervisors.
Moody's Adjusted LTV and stressed DSCR for the first mortgage loan
balance are 194% and 0.53X, respectively, unchanged from Moody's
last review. Moody's analysis also factored in the potential for
higher expected losses given the loan advances, continued loan
delinquency and uncertainty of the timing of the ultimate
resolution of the asset given comparable market data in the
Downtown Los Angeles office market. The loan is last paid through
its December 2023 payment date and there are outstanding advances
totaling approximately $10.4 million and interest shortfalls
totaling $5.9 million affecting up to Cl. C as of the July 2024
distribution date.
GLS AUTO 2024-3: S&P Assigns Prelim BB(sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GLS Auto
Receivables Issuer 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 Aug. 7,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The availability of approximately 56.4%, 47.5%, 36.9%, 28.3%,
and 24.3% of credit support (hard credit enhancement and haircut to
excess spread) for the class A (classes A-1, A-2, and A-3,
collectively), B, C, D, and E notes, respectively, based on
stressed cash flow scenarios. These credit support levels provide
at least 3.20x, 2.70x, 2.10x, 1.60x, and 1.38x S&P's 17.50%
expected cumulative net loss (ECNL) for the class A, B, C, D, and E
notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.60x S&P's expected loss level), all else being equal, its
preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB
(sf)' ratings on the class A, B, C, D, and E notes, respectively,
are within its credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under 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, including the representation in the transaction
documents that all contracts in the pool have made at least one
payment, S&P's view of the credit risk of the collateral, and its
updated macroeconomic forecast and forward-looking view of the auto
finance sector.
-- The series' bank accounts at UMB Bank N.A., which do not
constrain the preliminary ratings.
-- S&P's operational risk assessment of Global Lending Services
LLC, as servicer, and our view of the company's underwriting and
backup servicing arrangement with UMB Bank N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors that are in
line with its sector benchmark.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
GLS Auto Receivables Issuer Trust 2024-3
Class A-1, $54.900 million: A-1+ (sf)
Class A-2, $165.000 million: AAA (sf)
Class A-3, $57.984 million: AAA (sf)
Class B, $88.566 million: AA (sf)
Class C, $83.217 million: A (sf)
Class D, $78.164 million: BBB (sf)
Class E, $36.556 million: BB (sf)
GOLDENTREE LOAN 5: S&P Affirms B- (sf) Rating on Class F Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-RR, B-RR,
C-RR, and D-RR replacement debt from GoldenTree Loan Management US
CLO 5 Ltd., a CLO managed by GoldenTree Loan Management L.P. that
was originally issued in August 2019 and underwent a refinancing in
October 2021. At the same time, S&P withdrew its ratings on the
class A-R, B-R, C-R, and D-R debt following payment in full on the
Aug. 5, 2024, refinancing date. S&P also affirmed its ratings on
the class A-1, A-1B, E, and F debt, which was not refinanced.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period was extended to Feb. 5, 2024;
-- No additional assets were purchased on the Aug. 5, 2024,
refinancing date, and the target initial par amount remains at $600
million.
-- There is no additional effective date or ramp-up period, and
the first payment date following the refinancing is Oct. 20, 2024;
-- The aggregate amount of the class A-1B notes may be increased
up to $254 million upon a conversion of the class A-1 loans.
-- No additional subordinated notes were issued on the refinancing
date.
Replacement And October 2021 Debt Issuances
Replacement debt
-- Class A-RR, $127.0 million: Three-month CME term SOFR + 1.07%
-- Class B-RR, $60.0 million: Three-month CME term SOFR + 1.50%
-- Class C-RR, $51.0 million: Three-month CME term SOFR + 1.90%
-- Class D-RR, $36.0 million: Three-month CME term SOFR + 2.80%
October 2021 debt
-- Class A-1 loans, $254.0 million: Three-month CME term SOFR +
1.07%
-- Class A-1B, $0: Three-month CME term SOFR + 1.07%
-- Class E, $25.5 million: Three-month CME term SOFR + 5.11%
-- Class F, $12.0 million: Three-month CME term SOFR + 6.83%
-- Subordinated notes, $33.2 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
GoldenTree Loan Management US CLO 5 Ltd./
GoldenTree Loan Management US CLO 5 LLC
Class A-RR, $127.0 million: AAA (sf)
Class B-RR, $60.0 million: AA (sf)
Class C-RR, $51.0 million: A (sf)
Class D-RR, $36.0 million: BBB- (sf)
Ratings Withdrawn
GoldenTree Loan Management US CLO 5 Ltd./
GoldenTree Loan Management US CLO 5 LLC
Class A-R to not rated from 'AAA (sf)'
Class B-R to not rated from 'AA (sf)'
Class C-R to not rated from 'A (sf)'
Class D-R to not rated from 'BBB- (sf)'
Ratings Affirmed
GoldenTree Loan Management US CLO 5 Ltd./
GoldenTree Loan Management US CLO 5 LLC
Class A-1 loans: AAA (sf)
Class A-1B: AAA (sf)
Class E: BB- (sf)
Class F: B- (sf)
Other Debt
GoldenTree Loan Management US CLO 5 Ltd./
GoldenTree Loan Management US CLO 5 LLC
Subordinated notes, $33.2 million: Not rated
GOODLEAP SUSTAINABLE 2023-2: Fitch Affirms 'BB' Rating on C Debt
----------------------------------------------------------------
Fitch Ratings has affirmed the ratings on 15 classes of five
GoodLeap Sustainable Home Solutions (GoodLeap) Solar ABS
transactions. The Rating Outlook remained Stable for all classes
except classes B and C of the 2023-2 deal. The Outlook for classes
B and C of the 2023-2 deal were revised to Negative from Stable.
The Negative Outlook for classes B and C of 2023-2 reflect their
vulnerability to the effects of lower prepayment rates and
increasing default rates.
Entity/Debt Rating Prior
----------- ------ -----
GoodLeap Sustainable
Home Solutions
Trust 2023-2
A 38237AAA0 LT A-sf Affirmed A-sf
B 38237AAB8 LT BBBsf Affirmed BBBsf
C 38237AAC6 LT BBsf Affirmed BBsf
GoodLeap Sustainable
Home Solutions
Trust 2023-3
A 38237CAA6 LT Asf Affirmed Asf
B 38237CAB4 LT BBBsf Affirmed BBBsf
C 38237CAC2 LT BB-sf Affirmed BB-sf
GoodLeap Sustainable
Home Solutions
Trust 2021-5
A 38237HAA5 LT Asf Affirmed Asf
B 38237HAB3 LT BBBsf Affirmed BBBsf
C 38237HAC1 LT BBsf Affirmed BBsf
GoodLeap Sustainable
Home Solutions
Trust 2022-1
A 38237JAA1 LT Asf Affirmed Asf
B 38237JAB9 LT BBBsf Affirmed BBBsf
C 38237JAC7 LT BBsf Affirmed BBsf
GoodLeap Sustainable
Home Solutions
Trust Series 2023-4
A 38237YAA8 LT Asf Affirmed Asf
B 38237YAB6 LT BBBsf Affirmed BBBsf
C 38237YAC4 LT BBsf Affirmed BBsf
Transaction Summary
The transactions subject to this review are securitizations of
consumer loans backed by residential solar equipment; loans are
originated by GoodLeap (formerly known as Loanpal), a frequent
securitization sponsor and currently one of the largest specialized
solar lenders by originations in the U.S., which started advancing
solar loans in December 2017 (although the company already existed
as a mortgage lender).
KEY RATING DRIVERS
Prepayments Exacerbate Negative Excess Spread: Prepayments in
GoodLeap Solar ABS transactions have been below Fitch's initial
expectations, despite increasing in Q2 2024, primarily driven by
tax season. This is particularly true for 2023-2, which has had the
lowest average prepayment levels when compared with other GoodLeap
transactions rated by Fitch and currently has the lowest excess
spread.
The current weighted average cost of funds (rebased to stated
principal balance) for GoodLeap deals ranges from 2.04% to 4.67%,
which yield annual excess spreads before accounting for fees
ranging from -1.33% to 0.36% (see Rating Action Report attached).
While the loans were purchased at a discount to mitigate negative
or low excess spreads, the lower prepayments extend the life of
rated notes increasing losses due to negative excess spreads. This
leaves less credit enhancement (CE) to protect against credit
losses.
Fitch anticipates long-term prepayment rates to rise from the
current low levels due to borrower mobility and potential monetary
policy easing. This will affect the 2021-5, 2022-1 and 2023-2 deals
less, as borrowers' lower weighted average interest rates (2.67%,
2.69% and 2.48%, respectively) provide a smaller incentive to
prepay given refinancing costs and returns on alternative
investments. In contrast, higher rates in newer deals (3.65% and
4.65% for 2023-3 and 2023-4, respectively) make prepaying more
attractive.
Fitch has aligned the prepayment assumptions to the FICO
distribution-based levels assigned for the 2024-1 deal. For 2021-5
and 2022-1 given that most of the loans have a seasoning greater
than the re-amortization term, Fitch has only considered post
re-amortization assumption (figures available in the Rating Action
Report attached).
Lower Prepayments and CE levels drive changes in Outlook for 2023-2
classes B and C: The revision on the Outlook to Negative from
Stable on classes B and C of 2023-2 reflect their vulnerability to
the effects of lower prepayment rates. As lower prepayments early
in the transaction's life increase the yield supplement
overcollateralization, the target overcollateralization (OC) has
not been reached for any of the notes and the difference to target
has even increased since closing, currently holding the largest
difference among its peers in a relative basis.
Defaults and Recoveries mostly in line with Fitch's expectations:
Default performance of the portfolios since the last review has
been mostly in line with Fitch's expectations. Fitch updated its
base case default rate for the remaining life of the transactions
and also reviewed its default multipliers.
Updated figures along with Cumulative Default Rates for each
transaction are available in the Rating Action Report attached to
this rating action. The updated base case default rate assumption
and default rate multiples reflect additional FICO-based
performance data, and different FICO weights are the main cause of
the differences, as well as Fitch's macro-economic outlook.
For Fitch, the low recovery observations, as of June of 2024, are
consistent with the low seasoning of the transactions and the
typically long recovery for solar loans. Fitch has therefore
maintained a base case recovery assumption of 25%, an 'Asf'
recovery haircut of 36% and a recovery lag assumption of 48
months.
Amortization Trigger Offers Stronger Structural Protection for
Senior Class: The notes initially amortize based on target OC
percentages. Should the asset performance deteriorate: first,
additional principal will be paid to cover any defaulted amounts;
and, second, if the cumulative loss trigger is breached, the
payment waterfall will switch to "turbo" sequential to the senior
class.
No further ITC Attainment Assumed: Since note amortization relies
on the adjusted principal balance, Fitch calculated a vector for
modelling representing the ratio between stated and adjusted
principal balances over time, accounting for retained interest.
Assuming no borrowers awaiting re-amortization make the expected
prepayment, all loans re-amortize. As yield supplement OC is based
on the next monthly installment, it rises when a borrower misses
the expected prepayment at re-amortization, reducing OC calculated
on the adjusted principal balance. Fitch has factored this impact
into the rating decisions for each note.
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 ratings.
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 'Asf'
category due to limited performance history, while the assigned
'A-sf' rating is further constrained by the level of CE. As a
result, a positive rating action could result from an increase of
CE due to deleveraging, underpinned by low defaults.
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 historical information available for this originator was
limited in that originations began less than seven years ago, while
the loan tenure can be as long as 25 years. Fitch applied a rating
cap at the 'Asf' category to address this limitation. The
amortizing nature of the assets and the application of an annual
default rate to the static portfolio allowed us to determine
lifetime default assumptions.
Fitch also considered proxy data from other originators and
borrower characteristics (including demographics and relatively
high FICO scores) to derive asset assumptions, as envisaged under
the Consumer ABS Rating Criteria. Taking into account this
analytical approach, the rating committee considered the available
data sufficient to support a rating in the 'Asf' category.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
GS MORTGAGE 2018-RIVR: S&P Lowers Class A Certs Rating to 'CCC-'
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from GS Mortgage
Securities Corp. Trust 2018-RIVR, a U.S. CMBS transaction, and
removed them from CreditWatch with negative implications.
S&P said, "We had lowered our ratings on these classes and placed
them on CreditWatch with negative implications on May 23, 2024,
following interest shortfalls that affected all the classes due to
a significant increase in the appraisal reduction amount (ARA) that
resulted in appraisal subordinate entitlement reduction amounts
(ASER).
"As part of resolving our CreditWatch placements, our analysis
considered the magnitude and duration of the interest shortfalls
and updates from the special servicer regarding the resolution
strategy and timing of the defaulted loan."
This is a U.S. standalone (single-borrower) CMBS transaction backed
by a $309.8 million floating-rate, interest-only mortgage loan
secured by the borrower's fee-simple interest in River North Point,
a 1.7 million sq. ft. mixed-use property in Chicago comprising
approximately 1.3 million sq. ft. of LEED-certified gold,
multi-tenanted office space and approximately 437,000 sq. ft. of
lodging space that is leased until June 2050 to the 535-key Holiday
Inn Mart Plaza Hotel, which is located in the south office tower on
floors 14 to 23.
Rating Actions
S&P said, "The downgrades on the class A, B, C, and D certificates
reflect our view of the magnitude and duration of the interest
shortfalls due to a significant revision in the ARA to $225.9
million that resulted in a higher ASER amount commencing with the
May 2024 payment date. As of the July 15, 2024, trustee remittance
report, all the classes have experienced interest shortfalls for at
least three consecutive months, and the monthly interest shortfalls
are primarily due to ASER amounts totaling $1.3 million and the
accumulated interest shortfalls totaling $5.8 million. Based on our
correspondence with the current special servicer, KeyBank Real
Estate Capital (KeyBank), who noted that resolution strategies are
still being determined, we expect the resolution timing to be
protracted and the shortfalls to continue for the foreseeable
future.
"Further, in our current analysis, we considered the potential that
the special servicer may resolve the specially serviced loan at an
amount that repays the interest shortfalls and principal on class A
totaling $111.4 million (which, including servicer advances, other
expense advances, and accrued unpaid interest on advances to date,
totals $115.4 million). However, if class A's interest shortfalls
remain outstanding for a prolonged period of time or we receive
updates from the special servicer that indicate class A will likely
incur principal losses, we will further lower our rating to 'D
(sf)'."
The downgrades on classes B, C, and D to 'D (sf)' also reflect
S&P's belief that based on their positions in the payment
waterfall, the implied new appraisal valuation of roughly $100.0
million, and the total loan exposure of $318.9 million (as of the
July 2024 trustee remittance report), these classes would incur
principal losses upon the eventual resolution of the specially
serviced loan.
KeyBank, who replaced the prior special servicer, Wells Fargo Bank
N.A., in early June 2024, had no additional updates on the
resolution strategy and timing other than that it is currently
evaluating the asset and is in discussions with the borrower.
Moreover, the current special servicer had no additional updates on
the property's occupancy and performance.
Ratings Lowered And Removed From CreditWatch
GS Mortgage Securities Corp. Trust 2018-RIVR
Class A to 'CCC- (sf)' from 'BB+ (sf)/Watch Neg'
Class B to 'D (sf)' from 'CCC- (sf)/Watch Neg'
Class C to 'D (sf)' from 'CCC- (sf)/Watch Neg'
Class D to 'D (sf)' from 'CCC- (sf)/Watch Neg'
GS MORTGAGE 2019-GC40: Fitch Lowers Rating on Two Tranches to B-sf
------------------------------------------------------------------
Fitch Ratings has downgraded 11 and affirmed four classes of GS
Mortgage Securities Trust 2019-GC40 commercial mortgage
pass-through certificates, series 2019-GC40 (GSMS 2019-GC40). Fitch
has also assigned Negative Rating Outlooks to 10 classes following
their downgrades.
Entity/Debt Rating Prior
----------- ------ -----
GSMS 2019-GC40
A-1 36257HBL9 LT PIFsf Paid In Full AAAsf
A-2 36257HBM7 LT AAAsf Affirmed AAAsf
A-3 36257HBN5 LT AAAsf Affirmed AAAsf
A-4 36257HBP0 LT AAAsf Affirmed AAAsf
A-AB 36257HBQ8 LT AAAsf Affirmed AAAsf
A-S 36257HBT2 LT AA+sf Downgrade AAAsf
B 36257HBU9 LT A+sf Downgrade AA-sf
C 36257HBV7 LT BBB+sf Downgrade A-sf
D 36257HAA4 LT BB+sf Downgrade BBBsf
E 36257HAE6 LT BB-sf Downgrade BBB-sf
F 36257HAG1 LT B-sf Downgrade BB-sf
G-RR 36257HAL0 LT CCsf Downgrade B-sf
X-A 36257HBR6 LT AA+sf Downgrade AAAsf
X-B 36257HBS4 LT BBB+sf Downgrade A-sf
X-D 36257HAC0 LT BB-sf Downgrade BBB-sf
X-F 36257HAJ5 LT B-sf Downgrade BB-sf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Fitch's current ratings
incorporate a 'Bsf' rating case loss of 7.6%, which has increased
from 3.8% at the prior rating action. Eight loans are classified as
Fitch Loans of Concern (FLOCs; 45.8% of the pool), including two
loans (5.7%) in special servicing.
The downgrades reflect higher pool loss expectations since the
prior rating action, driven primarily by further performance
deterioration on the 250 Livingston office FLOC (9.8% of the pool)
given the anticipated departure of the largest tenant and a
significantly lower updated appraisal valuation on the 57 East 11th
Street loan (2.6%). Since Fitch's last rating action, the 57 East
11th Street loan transferred to special servicing in February 2024
for payment default as the sole tenant WeWork stopped paying rent
and vacated the entire property when its lease was rejected in
bankruptcy.
The Negative Outlooks reflect the high office concentration in the
pool of 48.1% and likely further downgrades without performance and
occupancy stabilization, as well as additional clarity on the
sponsor's business plan for 250 Livingston or the special
servicer's workout strategy for 57 East 11th Street.
Largest Loss Contributors: The largest increase in loss since the
prior rating action is the largest loan, 250 Livingston, secured by
a 370,305-sf office property located in Brooklyn, NY that was built
in 1910 and renovated in 2013. The largest tenant, The City of New
York (92.5% of NRA), has exercised a termination option to end its
lease in August 2025, five years ahead of expiration in August
2030.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 21.9% factors a higher probability of default to account for the
largest tenant's expected departure coupled with weakening
submarket conditions with CoStar reporting a vacancy rate of 19.5%
for the Downtown Brooklyn office submarket as of 2Q24.
The second largest increase in loss since the prior rating action
is the 57 East 11th Street loan, which is secured by a 64,460-sf
office building located in the Greenwich Village neighborhood of
New York City. The loan transferred to special servicing in
February 2024 due to payment default and was reported 60 days
delinquent as of July 2024.
The property was formerly 100% occupied by WeWork. Per the
servicer, WeWork stopped paying rent in October 2023 and is no
longer operating at the subject property after its lease was
rejected during bankruptcy proceedings. The property remains
vacant.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 68.5% considers a recent appraisal value, which is down 76.6%
from the appraisal value at issuance, reflecting a stressed value
of approximately $290 psf.
The third largest increase in loss since the prior rating action is
the 101 California Street loan, which is secured by a 1.25
million-sf office property located in San Francisco's Northern
Financial District.
As of December 2023, the property was 76.1% occupied, compared with
76.3% at YE 2022, 76.2% at YE 2021, 88.1% at YE 2020 and 92.1% at
issuance. Major tenants at the property include Chime Financial
(16.1% of NRA through October 2032), Deutsche Bank (4.8%; December
2024) and Winston & Strawn (4.2%; October 2024). Upcoming rollover
includes 16% of the NRA in 2024 and 6.2% in 2025.
According to CoStar as of 2Q24, the Financial District submarket
has a vacancy rate of 30.9% and an average rental rate of $52.88
psf, compared to the subject property of 23.9% and $67.40,
respectively.
Fitch's 'Bsf' rating case loss of 5.3% (prior to concentration
adjustments) reflects a 9.25% cap rate and a 10% stress to the YE
2023 NOI.
Increased Credit Enhancement (CE): As of the July 2024 remittance
reporting, the pool's aggregate balance has been paid down by 26.4%
to $762.5 million from $1.0 billion at issuance. There are 22 loans
(71.8% of the pool) that are full-term interest-only and the
remaining 12 loans (28.2%) are amortizing.
Investment-Grade Credit Opinion Loans: Four loans representing
24.4% of the pool were assigned investment-grade credit opinions on
a standalone basis at issuance. Loans currently with
investment-grade credit opinions include Moffett Towers II Building
V (6.6%) and Newport Corporate Center (6.6%). The 101 California
loan is no longer considered to have credit characteristics
consistent with an investment-grade credit opinion due to
performance declines since issuance. The ARC Apartments loan was
repaid at its March 2024 maturity date.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' classes are not expected due to the
position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur.
Downgrades to classes in the 'AAsf', 'Asf' and 'BBBsf' rated
categories are likely with higher expected losses from continued
performance deterioration or lack of performance stabilization of
the FLOCs, particularly the 250 Livingston and 57 East 11th Street
loans, and limited to no improvement in these classes' CE.
Downgrades to classes in the 'BBsf' and 'Bsf' rated categories are
likely with higher than expected losses from continued
underperformance of the FLOCs, particularly the aforementioned
office FLOCs with deteriorating performance and/or with greater
certainty of losses on the specially serviced loans or other
FLOCs.
A downgrade to the 'CCsf' rated class would occur with a greater
certainty of losses and/or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with improved deal-level loss expectations and
sustained performance improvement and stabilization on the FLOCs,
particularly 250 Livingston and 57 East 11th Street.
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', 'Bsf', and 'CCsf' 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 and/or
valuations on the FLOCs are better than expected and there is
sufficient CE to the classes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
GSR TRUST 2007-HEL1: Moody's Hikes Rating on Class A Debt to B3
---------------------------------------------------------------
Moody's Ratings has upgraded the ratings of three bonds from three
US residential mortgage-backed transactions (RMBS), backed by
second lien mortgages, issued by multiple issuers.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: CSFB Home Equity Mortgage Trust 2005-4
Cl. M-1, Upgraded to Baa1 (sf); previously on Sep 28, 2015 Upgraded
to Caa1 (sf)
Issuer: CWHEQ Revolving Home Equity Loan Trust, Series 2005-H
Cl. 2-A, Upgraded to Baa1 (sf); previously on Dec 12, 2017 Upgraded
to Caa2 (sf)
Issuer: GSR Trust 2007-HEL1
Cl. A, Upgraded to B3 (sf); previously on May 20, 2016 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.
Class 2-A from CWHEQ Revolving Home Equity Loan Trust, Series
2005-H and Class A from GSR Trust 2007-HEL1 benefit from a
financial guaranty insurance policy. For Class 2-A from CWHEQ
Revolving Home Equity Loan Trust, Series 2005-H, the bond insurer,
who provides the financial guaranty insurance policy, is no longer
rated by us. As such, the upgrade of this bond 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 M-1
from CSFB Home Equity Mortgage Trust 2005-4 has seen its
enhancement level grow by approximately 50% since Moody's last
review in September 2023. Similarly, Class 2-A from CWHEQ Revolving
Home Equity Loan Trust, Series 2005-H has experienced growth in
credit enhancement of approximately 28% 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.
The rating upgrades also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Over the past few years,
Moody's have worked closely with loan servicers to understand and
analyze their strategies regarding borrower relief programs and the
impact those programs may have on collateral performance and
transaction liquidity, through servicer advancing. Moody's recent
analysis has found that many of these borrower relief programs, in
addition to robust home price appreciation, have contributed to
collateral performance being stronger than Moody's past
expectations, thus supporting the upgrades.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
Principal Methodologies
The principal methodology used in 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.
HENLEY CLO VII: S&P Assigns Prelim B- (sf) Rating on Cl. F-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary credit ratings to
Henley CLO VII DAC's class A-R, B-1-R, C-R, D-R, E-R, and F-R
notes.
On Aug. 21, 2024, the issuer will refinance the original class A,
B-1, C, D, E, and F notes by issuing replacement debt of the same
notional.
The replacement debt is largely subject to the same terms and
conditions as the original debt, except that the replacement debt
will have a lower spread over Euro Interbank Offered Rate (EURIBOR)
than the original debt.
The ratings reflect S&P's assessment of:
-- The diversified collateral pool, which primarily comprises
broadly syndicated speculative-grade senior secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated debt through collateral selection, ongoing
portfolio management, and trading.
-- The transaction's legal structure, which S&P expects to be
bankruptcy remote.
-- The transaction's counterparty risks, which S&P expects to be
in line with its counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,877.69
Default rate dispersion 398.79
Weighted-average life (years) 4.34
Obligor diversity measure 119.76
Industry diversity measure 17.66
Regional diversity measure 1.16
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.89
Actual 'AAA' weighted-average recovery (%) 36.70
Actual weighted-average spread (net of floors; %) 4.04
Actual weighted-average coupon (%) 4.06
Rating rationale
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments.
The portfolio's reinvestment period will end in April 2025.
The portfolio is well-diversified, primarily comprising broadly
syndicated speculative-grade senior secured term loans and senior
secured bonds. Therefore, we have conducted our credit and cash
flow analysis by applying our criteria for corporate cash flow
CDOs.
S&P said, "In our cash flow analysis, we used a EUR396.72 million
target par collateral principal amount, the portfolio's actual
weighted-average spread (4.04%), actual weighted-average coupon
(5.38%), and actual weighted-average recovery rates at each rating
level.
"We applied various cash flow stress scenarios, using four
different default patterns, in conjunction with different interest
rate stress scenarios for each liability rating category.
"We expect that the transaction's documented counterparty
replacement and remedy mechanisms will adequately mitigate its
exposure to counterparty risk under our current counterparty
criteria.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned preliminary ratings.
"At closing, we expect that the transaction's legal structure and
framework will be bankruptcy remote, in line with our legal
criteria.
"Our credit and cash flow analysis indicates that the available
credit enhancement for the class B-1-R, C-R, D-R, and E-R notes
could withstand stresses commensurate with higher ratings than
those assigned. However, as the CLO is still in its reinvestment
phase, during which the transaction's credit risk profile could
deteriorate, we capped our assigned preliminary ratings on these
refinanced notes.
"For the class F-R notes, our credit and cash flow analysis
indicate that the available credit enhancement could withstand
stresses commensurate with a lower rating. However, we have applied
our 'CCC' rating criteria, resulting in a preliminary 'B- (sf)'
rating on this class of notes."
The ratings uplift for the class F-R notes reflects several key
factors, including:
-- The class F-R notes' available credit enhancement, which is in
the same range as that of other CLOs S&P has rated and that has
recently been issued in Europe.
-- The portfolio's average credit quality, which is similar to
other recent CLOs.
-- S&P's model generated break-even default rate (BDR) at the 'B-'
rating level of 20.76%, versus if we were to consider a long-term
sustainable default rate of 3.1% for 4.34 years, which would result
in a target default rate of 13.45%.
-- S&P does not believe that there is a one-in-two chance of this
tranche defaulting.
-- S&P does not envision this tranche defaulting in the next 12-18
months.
-- Following this analysis, S&P considers that the available
credit enhancement for the class F-R notes is commensurate with a
'B-' rating. S&P has therefore assigned a preliminary 'B- (sf)'
rating to this class of notes.
-- Following S&P's analysis of the credit, cash flow,
counterparty, operational, and legal risks, S&P believes its
preliminary ratings are commensurate with the available credit
enhancement for the class A-R, B-R, C-R, D-R, E-R, and F-R notes.
In addition to S&P's standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, S&P has also
included the sensitivity of the preliminary ratings on the class
A-R to E-R notes based on four hypothetical scenarios.
The transaction securitizes a portfolio of primarily senior secured
leveraged loans and bonds, and it is managed by Napier Park Global
Capital Ltd.
Environmental, social, and governance
S&P said, "We regard the transaction's exposure to environmental,
social, and governance (ESG) credit factors as broadly in line with
our benchmark for the sector. Primarily due to the diversity of the
assets within CLOs, the exposure to environmental credit factors is
viewed as below average, social credit factors are below average,
and governance credit factors are average."
For this transaction, the documents prohibit assets from being
related to the following industries: pornographic materials or
content or prostitution; 10% or more of electricity generation is
from thermal coal; services to private prisons; endangered or
protected wildlife; payday lending; over 25% of its revenue from
tobacco or tobacco products, extraction of thermal coal, oil sands,
fossil fuels from unconventional sources or other fracking
activities, or coal mining and/or coal based power generation,
controversial weapons, non-certified palm oil production and
transactions of soft commodities; illegal drugs or narcotics. The
relevant obligor is prohibited if in severe violation of "The Ten
Principles of the UN Global Compact," International Labor
Organization's (ILO) Conventions, the OECD Guidelines for
Multinational Enterprises, or the UN Guiding Principles on Business
and Human Rights (UNGPs). Accordingly, since the exclusion of
assets from these industries does not result in material
differences between the transaction and S&P's ESG benchmark for the
sector, no specific adjustments have been made in our rating
analysis to account for any ESG-related risks or opportunities.
Ratings
REPLACEMENT ORIGINAL
PRELIM. NOTES NOTES CREDIT
PRELIM. AMOUNT INTEREST INTEREST ENHANCEMENT
CLASS RATING* (MIL. EUR) RATE§ RATE (%)
A-R AAA (sf) 232.00 3mE + 0.99% 3mE + 1.05% 41.52
B-1-R AA (sf) 33.90 3mE + 1.80% 3mE + 2.40% 27.40
C-R A (sf) 24.00 3mE + 2.10% 3mE + 3.15% 21.35
D-R BBB- (sf) 29.00 3mE + 3.00% 3mE + 4.25% 14.04
E-R BB- (sf) 18.80 3mE + 5.90% 3mE + 7.14% 9.31
F-R B- (sf) 12.20 3mE + 9.00% 3mE + 9.50% 6.23
*The preliminary ratings assigned to the class A-R and B-1-R notes
address timely interest and ultimate principal payments, and the
preliminary ratings assigned to the class C-R, D-R, E-R, and F-R
notes address ultimate interest and principal payments.
§The payment frequency switches to semiannual and the index
switches to 6mE when a frequency switch event occurs.
3mE--Three-month Euro Interbank Offered Rate.
HMH TRUST 2017-NSS: S&P Lowers Class D Certs Rating to 'CCC- (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from HMH Trust
2017-NSS, a U.S. CMBS transaction.
This is a U.S. stand-alone (single-borrower) CMBS transaction that
is backed by a $204.0 million fixed-rate interest-only loan secured
by the borrower's leasehold interests (21 properties) and fee
simple interest (one property) in 22 limited-service and
extended-stay hotel properties in nine U.S. states.
Rating Actions
The downgrades on classes A, B, C, and D primarily reflect the
following:
-- Full-year 2023 operating performance showing a $5.7 million
portfolio net cash flow (NCF), down from $8.4 million in 2022, that
was driven mainly by increased operating expenses. While the 2024
budget shows an anticipated increase in NCF to $8.1 million, this
is well-below the 2019 pre-COVID-19 pandemic level of $23.0 million
and our prior S&P Global Ratings' NCF of $16.2 million. Given the
portfolio's lagging performance, we believe its ultimate
disposition value could fall below the $152.2 million S&P Global
Ratings' expected-case value ($52,806 per room) noted in our
September 2023 published review.
-- The loan's total exposure, in excess of the mortgage loan
balance, increased to $31.5 million as of the July 2024 remittance
report, from $30.7 million in September 2023 (the rise being
moderated by the simultaneous use of portfolio NCF to repay prior
advances for taxes, insurance, and other expenses [assuming
primarily ground rent expense]). Servicer advances and interest
thereon comprised $22.2 million of the loan's total exposure, with
the balance reflecting appraisal subordinate entitlement reductions
(ASERs; the ASERs resulted in interest shortfalls to classes E and
F, neither of which is rated by S&P Global Ratings). The special
servicer, Mount Street US, confirmed a recent court order granting
them the option to dispose of the properties via deed-in-lieu or
receivership sale, and disclosed a potential 18-month disposition
timeframe. Given this, and the loan's 2023 reported 0.58x debt
service coverage (DSC), we believe servicer advances and interest
thereon will rise further, as the master servicer continues to
advance for debt service. As these advances are senior to the
outstanding trust debt, they will directly reduce ultimate
recoveries to the trust.
-- A potential piecemeal disposition outcome could erode the
portfolio's brand and geographic diversity, for which, we
previously applied a positive loan-to-value (LTV) adjustment at
each rating level. Given this potential diminution of
diversity-related characteristics, we removed this LTV adjustment.
-- Given these considerations, we reduced our expected case
valuation for the property portfolio, which is now 39.8% lower than
the valuation noted in our September 2023 review and 55.6% lower
than the valuation we derived at issuance (see the Property-Level
Analysis section below for more details).
The downgrades on classes B and C to 'CCC (sf)' from 'BB+ (sf)' and
'B- (sf)', respectively, and class D to 'CCC- (sf)' from 'CCC
(sf)', also reflect our view that these classes are at a heightened
risk of default and loss, and are susceptible to liquidity
interruption, based on our analysis and their relative positions in
the payment waterfall. Our analysis indicates 100%-plus S&P Global
Ratings' LTV ratios for each of these bonds.
We will continue to monitor the performance of the property
portfolio, including any updated operating performance and
valuation information (the special servicer recently informed us
that updated final appraisals are anticipated to be provided soon).
We will also monitor the progress of the portfolio's disposition,
including the results of any piecemeal property liquidations and
any updated timing indications. If we receive information that
differs materially from our expectations, we will revisit our
analysis and take additional rating actions as we determine
necessary.
Updates To Property-Portfolio Analysis
S&P said, "Our updated analysis considers the full-year 2023
operating performance and the 2024 budget. Occupancy, ADR, and
RevPAR were all stable or increased in 2023; however, the rise in
operating expenses outstripped the increase in revenues, resulting
in a portfolio NCF of $5.7 million, down from $8.4 million in 2022
(the operating expense increase was across the board, and included
departmental and undistributed expenses). The 2024 budget shows a
forecasted rise in ADR and RevPAR, and relatively stable operating
expenses, resulting in a forecasted portfolio NCF of $8.1 million
(please see table 1).
"In our re-evaluation of the property portfolio, we maintained our
occupancy, ADR, RevPAR, and other revenue-related assumptions from
our September 2023 review, and combined them with our updated
operating expense assumptions that consider the most-recent
reporting, yielding an updated S&P Global Ratings' NCF of $9.8
million. We applied our 10.66% portfolio-wide capitalization rate
(unchanged from our September 2023 review), yielding an S&P Global
Ratings' expected-case value of $91.6 million ($31,780 per room),
down 39.8% from the $152.2 million ($52,806 per room) noted in our
September 2023 review, and 55.6% from the $206.3 million ($71,573
per room) we derived at issuance."
While there is the potential for the portfolio's performance to
rebound, as illustrated by the 2024 budget, any increase in
performance (and accordingly, value) is likely to be offset by
future increases in servicer advances (and interest thereon) and/or
any required change-of-ownership-related property improvement
plans, which were considered in our analysis. The hotels are older,
with years built ranging from 1972 to 2009, with an average year
built of 1996.
Table 1
Servicer-reported collateral performance
2024 BUDGET (I) 2023(I) 2022(I) 2021(I)
Occupancy rate (%) 66.0 66.7 66.4 51.4
ADR ($) 136.85 131.64 127.28 122.83
RevPAR ($) 90.34 87.75 84.52 63.17
Aggregate operating
expenses (mil. $) 87.2 86.6 80.7 65.7
Net cash flow (mil. $) 8.1 (ii) 5.7 8.4 0.4
Debt service coverage (x) 0.82 0.58 0.86 0.04
Appraisal value (mil. $) 180.0 180.0 295.8 295.8
(i)Reporting period.
(ii)As calculated by S&P Global Ratings, reflecting the budgeted
net operating income, reduced by estimated capital expenditures.
Table 2
S&P Global Ratings' key assumptions
CURRENT LAST REVIEW ISSUANCE
(AUGUST 2024)(I) (SEP 2023)(I) (JUNE 2017)(I)
Occupancy rate (%) 71.0 71.0 71.0
ADR ($) 123.06 123.06 123.06
RevPAR ($) 87.40 87.40 87.40
Aggregate operating
expenses (mil. $) 81.9 75.7 72.3
Net cash flow (mil. $) 9.8 16.2 19.4
Capitalization rate (%) 10.66 10.66 9.66
Value (mil. $) 91.6 152.2 206.3
Value per room ($) 31,780 52,806 71,573
Loan-to-value
ratio (%)(ii) 222.7 134.0 98.9
(i)Review period.
(ii)On the mortgage loan balance.
Ratings Lowered
HMH Trust 2017-NSS
Class A to 'B+ (sf) from 'A (sf)'
Class B to 'CCC (sf)' from 'BB+ (sf)'
Class C to 'CCC (sf)' from 'B- (sf)'
Class D to 'CCC- (sf)' from 'CCC (sf)'
JP MORGAN 2024-6: Moody's Assigns B3 Rating to Cl. B-5 Certs
------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to 26 classes of
residential mortgage-backed securities (RMBS) issued by J.P. Morgan
Mortgage Trust 2024-6, and sponsored by J.P. Morgan Mortgage
Acquisition Corp. (JPMMAC).
The securities are backed by a pool of prime jumbo (83.9% by
balance) and GSE-eligible (16.1% by balance) residential mortgages
aggregated by JPMMAC, including loans aggregated by MAXEX Clearing
LLC (MAXEX; 20.5% by loan balance), and originated and serviced by
multiple entities.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2024-6
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aa1 (sf)
Cl. A-9-A, Definitive Rating Assigned Aa1 (sf)
Cl. A-9-X*, Definitive Rating Assigned Aa1 (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-10-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-X*, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-2-A, Definitive Rating Assigned A3 (sf)
Cl. B-2-X*, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
*Reflects Interest-Only Classes
After the provisional ratings were assigned on July 15, 2024, seven
loans from the pool were dropped.
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.39%, in a baseline scenario-median is 0.17% and reaches 6.05% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
JPMCC 2019-BROOK: Fitch Lowers Rating on Class F Certs to 'CCCsf'
-----------------------------------------------------------------
Fitch Ratings has downgraded one and affirmed six classes of JPMCC
Mortgage Securities Trust 2019-BROOK Commercial Mortgage
Pass-Through Certificates (JPMCC 2019-BROOK). The Rating Outlooks
for classes D, E and X-EXT remain Negative.
Entity/Debt Rating Prior
----------- ------ -----
JPMCC 2019-BROOK
A 46591JAA4 LT AAAsf Affirmed AAAsf
B 46591JAG1 LT AA-sf Affirmed AA-sf
C 46591JAJ5 LT A-sf Affirmed A-sf
D 46591JAL0 LT BBB-sf Affirmed BBB-sf
E 46591JAN6 LT BB-sf Affirmed BB-sf
F 46591JAQ9 LT CCCsf Downgrade B-sf
X-EXT 46591JAE6 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Property Releases: The affirmation of classes A, B, C, D, E and
X-EXT reflects their increased credit enhancement (CE) from
property releases. Since issuance, six properties, including four
office and two industrial properties, have been released, resulting
in paydowns to the transaction totaling $87 million (22.7% of the
original loan balance). These properties were collectively released
at a prepayment premium of 115% of the allocated loan amount.
Declining Performance; Specially Serviced Loan: The downgrade of
class F reflects continued portfolio performance declines since
Fitch's last rating action. The loan transferred to special
servicing in September 2023 due to maturity default. The borrower
is seeking to deleverage the transaction further with more property
releases. The master servicer indicated four additional properties
(17.5% of the current loan balance) are expected to be released,
two (11.4%) of which are reportedly under contract.
The Negative Outlooks on classes D, E and X-EXT reflect increasing
portfolio concentration and adverse selection concerns, and
possible future downgrades should the expected property releases
not occur, portfolio performance or submarket conditions
deteriorate further and/or the loan's workout is prolonged.
The current portfolio occupancy for the remaining 21 properties has
declined to 73.9% as of the March 2024 rent roll from 75.9% in June
2023. The portfolio's submarket conditions remain challenged, and
according to Costar as of 2Q24, the average availability rate was
37% for 15 of the 21 properties in the portfolio.
Fitch's sustainable net cash flow (NCF) of $20.7 million reflects
leases in-place for the remaining 21 properties as of the March
2024 rent roll and incorporates a 20% stress to leases expiring in
2024, resulting in an all-in vacancy assumption of 28%.
Approximately 8% of the portfolio NRA expires in 2024. Fitch relied
upon servicer-provided YE 2023 reporting for other revenue items
and expense reimbursement percentage.
Operating expenses, with the exception of insurance and management
fee, were inflated by 3% from YE 2023 figures. Insurance expense
was inflated by 10%. Fitch applied a management fee of 4% of EGI.
Fitch also applied tenant improvement allowance assumptions of $20
psf for new leases and $10 psf for renewal leases, and leasing
commissions of 5% for new tenants and 2.5% for renewal tenants.
Increasing Concentration and Adverse Selection: The loan is
currently secured by 21 class B suburban office properties totaling
3.1 million sf and located in five states, including Pennsylvania
(11 properties; 42.7% of current total NRA), Texas (four
properties; 25.7%), Florida (three properties; 13.6%), California
(two properties; 10.1%) and Rhode Island (one property; 7.9%). The
portfolio consists of approximately 400 unique tenants.
The largest tenant is 3.1% of the portfolio NRA and the top three
tenants are 7.1% of the NRA. Fitch utilized a stressed
capitalization rate of 9.5%, consistent with the last rating action
and up from 8.5% at issuance, to reflect the lower asset quality,
declining portfolio performance and deteriorating office sector
outlook.
Fitch Leverage: The $295.5 million mortgage loan has a
Fitch-stressed DSCR and LTV of 0.67x and 135.5%, respectively, and
trust debt of $96 psf. The capital stack also includes a $41.9
million mezzanine loan. The total debt Fitch-stressed DSCR and LTV
are 0.58x and 154.7%, respectively, and total debt of $110 psf. The
Fitch sustainable NCF and Fitch stressed capitalization rate
results in a Fitch value of approximately $218 million.
Floating Rate Loan: The loan is a three-year, floating-rate,
interest-only mortgage with two, one-year extension options. The
loan initially matured on September 2022 and the borrower exercised
its first extension option to September 2023. The loan defaulted in
September 2023. The loan's current interest rate is uncapped at
approximately 8%.
Sponsorship: The sponsors, Brookwood, acquired the portfolio
between 2007 and 2016 for a total purchase price of $430 million.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Expected property releases do not occur and loan does not further
pay down;
- Continued decline in portfolio occupancy and/or submarket
fundamentals;
- Sustained deterioration in property cash flow;
- Adverse selection alongside continued performance deterioration
as properties are released.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Sustained increase in portfolio occupancy and cash flow;
- Increased CE from additional property releases;
- Greater clarity on the workout and resolution of the loan,
including better recoveries 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.
JPMDB COMMERCIAL 2017-C7: Fitch Cuts Rating on Cl. F-RR Debt to CC
------------------------------------------------------------------
Fitch has downgraded nine classes and affirmed four classes of
JPMDB Commercial Mortgage Securities Trust 2016-C2 (JPMDB 2016-C2).
Fitch assigned Negative Rating Outlooks to classes A-S, B, C, X-A,
and X-B following the downgrades.
Fitch has also downgraded five classes and affirmed eight classes
of JPMDB Commercial Mortgage Securities Trust 2017-C7 (JPMDB
2017-C7). Fitch assigned Negative Outlooks to classes C, D, and X-D
following the downgrades and revised the Outlook to Negative from
Stable for affirmed classes, A-S, B, X-A, and X-B.
Entity/Debt Rating Prior
----------- ------ -----
JPMDB 2017-C7
A-3 46648KAS5 LT AAAsf Affirmed AAAsf
A-4 46648KAT3 LT AAAsf Affirmed AAAsf
A-5 46648KAU0 LT AAAsf Affirmed AAAsf
A-S 46648KAY2 LT AAAsf Affirmed AAAsf
A-SB 46648KAV8 LT AAAsf Affirmed AAAsf
B 46648KAZ9 LT AA-sf Affirmed AA-sf
C 46648KBA3 LT BBB-sf Downgrade A-sf
D 46648KAC0 LT BB-sf Downgrade BBB-sf
E-RR 46648KAE6 LT CCCsf Downgrade Bsf
F-RR 46648KAG1 LT CCsf Downgrade CCCsf
X-A 46648KAW6 LT AAAsf Affirmed AAAsf
X-B 46648KAX4 LT AA-sf Affirmed AA-sf
X-D 46648KAA4 LT BB-sf Downgrade BBB-sf
JPMDB 2016-C2
A-3A 46590LAS1 LT AAAsf Affirmed AAAsf
A-3B 46590LAA0 LT AAAsf Affirmed AAAsf
A-4 46590LAT9 LT AAAsf Affirmed AAAsf
A-S 46590LAX0 LT AA-sf Downgrade AAAsf
A-SB 46590LAU6 LT AAAsf Affirmed AAAsf
B 46590LAY8 LT BBB-sf Downgrade A-sf
C 46590LAZ5 LT BB-sf Downgrade BBB-sf
D 46590LAE2 LT CCCsf Downgrade B-sf
E 46590LAG7 LT CCsf Downgrade CCCsf
F 46590LAJ1 LT Csf Downgrade CCsf
X-A 46590LAV4 LT AA-sf Downgrade AAAsf
X-B 46590LAW2 LT BBB-sf Downgrade A-sf
X-C 46590LAC6 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Increasing Loss Expectations: Deal-level 'Bsf' ratings case losses
have increased to 13.3% in JPMDB 2016-C2 and 7.00% in JPMDB
2017-C7. Fitch Loans of Concern (FLOCs) comprise 13 loans (65.4% of
the pool) in JPMDB 2016-C2 including three loans in special
servicing (13.0%) and 11 loans (37.8%) in JPMDB 2017-C7 including
two loans in special servicing (8.2%).
JPMDB 2016-C2: The downgrades in the JPMDB 2016-C2 transaction
reflect higher pool loss expectations since Fitch's prior rating
action, driven primarily by further performance deterioration on
office FLOCs including 100 East Pratt (8.5%), High Crossing
Portfolio (4.8%), and Hall Office Park A1/G1/G3 (3.7%).
The Negative Outlooks reflect the high office concentration of
42.7% and the potential for downgrades should performance of the
FLOCs including DoubleTree Houston Intercontinental Airport (5.8%),
Palisades Center (4.5%) and aforementioned office loans, fail to
stabilize, and/or with additional declines in performance or
prolonged workouts of the loans in special servicing.
JPMDB 2017-C7: The downgrades in the JPMDB 2017-C7 transaction
reflect higher pool loss expectations since Fitch's prior rating
action, driven by continued performance declines and value
reductions on office FLOCs including First Stamford Place (5.6%),
Preston Plaza (2.6%), Capital Centers II & III (2.4%), 18301 Von
Karman (2.6%), and 18401 Von Karman (1.4%).
The Negative Outlooks in the JPMDB 2017-C7 transaction reflect the
office concentration of 38.4% and the potential for downgrades with
lack of performance stabilization of the aforementioned office
loans and FLOCs Sheraton DFW (3.0%) and Walgreens Witkoff Portfolio
(3.2%).
Largest Contributors to Loss: The largest increase in loss
expectations since the prior rating action and fourth largest
contributor to overall losses in the JPMDB 2016-C2 transaction is
the 100 East Pratt (8.5%) loan, secured by a 28-story, 662,708 sf,
landmarked Class A, LEED Silver certified office in downtown
Baltimore, MD. YE 2023 occupancy was 91%, with a servicer-reported
NOI DSCR of 2.25x.
In July 2022, the largest tenant, T Rowe Price (67% of NRA),
provided notice of lease termination, effective July 2024, which
includes the intention to exercise contemplated holdover rights
through January 2025. A cash trap was triggered with a collected
reserve balance of $9.48 million as of June 2024. The second
largest tenant, PwC, increased its footprint at the property to
5.7% of the NRA (from 4.8%) and renewed its lease through April
2030.
Fitch's 'Bsf' rating case loss of 16.0% (prior to concentration
add-ons) reflects a 10% cap rate, 10% haircut to the YE 2023 NOI
and increased probability of default due to the expected departure
of the largest tenant and decline in cashflow.
The second largest increase in loss expectations since the prior
rating action in the JPMDB 2016-C2 transaction is the High Crossing
Portfolio loan (3.6%), secured by a portfolio of seven office
buildings totaling 305,545-sf in Madison, WI and a 58,430 sf CarMax
facility located in Overland Park, KS. As of March 2024, occupancy
has declined to 76% from 79% as of YE 2023 and 87% at issuance.
Despite the decline in occupancy, YE 2023 NOI is 7.6% above YE 2022
and remains 2.0% above the originator's NOI underwritten at
issuance. Additionally, the office component of the portfolio has
rollover concerns with 38.4% of office leases expiring through the
end of 2026, with 13.2% expiring in 2024, 14.6% in 2025 and 10.6%
in 2026. The loan has a maturity in April 2026.
Fitch's 'Bsf' rating loss of 15.4% (prior to concentration add-ons)
reflects an 11% cap rate (110 basis points above the cap rate at
issuance), 15% stress to the YE 2023 NOI, and factors a higher
probability of default to account for the heightened maturity
default risk as the loan approaches maturity in 2026.
The third largest increase in loss expectations since the prior
rating action in the JPMDB 2016-C2 transaction is the Hall Office
Park A1/G1/G3 loan (3.7%), secured by a portfolio of three office
buildings totaling 328,743-sf in Frisco, TX. Performance has
remained relatively stable with occupancy of 89% and NOI DSCR of
1.87x as of March 2024. YE 2023 NOI is down 11.5% from YE 2022 but
remains 3.1% above the originator's underwritten NOI from
issuance.
The portfolio has substantial rollover concerns with 27% of leases
expiring in 2024 with an additional 11% rolling in 2025. According
to Costar, 56,517 sf (17% of the portfolio NRA) is listed as
available at the G3 building, which corresponds with the
AmerisourceBergen space (24.3% of the portfolio NRA) with a lease
expiration in December 2024. The loan has a maturity in January
2026.
Fitch's 'Bsf' rating loss of 18.6% (prior to concentration add-ons)
reflects a 10% cap rate (100 basis points above the cap rate at
issuance), 30% stress to the YE 2023 NOI, and factors a higher
probability of default to account for the heightened maturity
default risk as the loan approaches maturity in 2026.
The largest increase in loss expectations since the prior rating
action and the overall largest contributor to loss in the JPMDB
2017-C7 transaction is the First Stamford Place loan (7.0%),
secured by a three-building suburban office property totaling
810,471-sf located in Stamford, CT. The loan transferred to special
servicing in December 2023 as the borrower indicated intentions to
relinquish control of the asset.
As of March 2024, occupancy improved to 79% from 75% at YE 2023,
but remains below issuance occupancy of 91%. Cash flow has
deteriorated significantly with YE 2023 NOI 49.8% below the
originator's underwritten NOI at issuance. As of March 2024, NOI
DSCR was 1.61x which compares with 1.91x as of YE 2022.
Fitch's 'Bsf' rating case loss of 35% (prior to concentration
adjustments) reflects a discount to a recent appraisal value
reflecting a recovery value of $132 psf.
The second largest increase in loss expectations since the prior
rating action in the JPMDB 2017-C7 transaction is the Capital
Centers II & III loan (6.6%), secured by 10 buildings within an
office park totaling 530,365-sf in Rancho Cordova, CA. Capital
Center II is comprised of six buildings and Capital Center III is
comprised of four buildings. The most recent rent roll available is
as of October 2023 which reflects an occupancy of 81.8% with
near-term rollover of 23% through the end of 2024. YE 2023 NOI is
in-line with YE 2022, but is 26% below the originator's
underwritten NOI from issuance. Costar reflects availability of 32%
across all 10 buildings.
Fitch's 'Bsf' rating loss of 24.1% (prior to concentration add-ons)
reflects a 10% cap rate (100 basis points above the cap rate at
issuance), 20% stress to the YE 2023 NOI, and factors a higher
probability of default to account for the heightened maturity
default risk as the loan approaches maturity in 2026.
The third largest increase in loss expectations since the prior
rating action and second largest contributor to overall losses in
the JPMDB 2017-C7 transaction is the Preston Plaza loan (2.6%),
secured by a 259,009-sf office building in Dallas, TX. Performance
at the property continues to deteriorate and the loan transferred
to special servicing in September 2023 for imminent monetary
default as the borrower was no longer willing to fund shortfalls.
Occupancy was reported at 65% in the first quarter of 2023, down
from 91% at issuance with cash flow insufficient to service the
debt. A receiver, which was appointed in February 2024, is in
process of marketing the asset for sale. Costar indicates that the
asset is listed for sale and reflects an availability rate of 42%
at the property.
Fitch's 'Bsf' rating loss of 42% (prior to concentration add-ons)
reflects a 10% cap rate (100 basis points above the cap rate at
issuance), 15% stress to the TTM March 2023 NOI, and factors a
higher probability of default to account for continued performance
deterioration and expectation of elevated losses.
Changes in Credit Enhancement (CE): As of the July 2024
distribution date, the aggregate balances of the JPMDB 2016-C2 and
JPMDB 2017-C7 transactions have been paid down by 24.7% and 11.2%,
respectively, since issuance.
The JPMDB 2016-C2 transaction includes four loans (8.3% of the
pool) that have fully defeased and JPMDB 2017-C7 has three loans
(7.8%) fully defeased loans. Cumulative interest shortfalls of $3.6
million are affecting the non-rated class NR in JPMDB 2016-C2 and
$222,598 is affecting the non-rated class G-RR and 6,293 is
affecting the VRR class in JPMDB 2017-C7.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur or
are expected to occur.
Downgrades to junior 'AAAsf' rated classes, with Negative Outlooks,
are possible with continued performance deterioration of the FLOCs,
increased expected losses and limited to no improvement in class
CE, or if interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories,
which have Negative Outlooks, may occur should performance of the
FLOCs, which include 100 East Pratt (8.5%), High Crossing Portfolio
(4.8%), Hall Office Park A1/G1/G3 (3.7%), DoubleTree Houston
Intercontinental Airport (5.8%), and Palisades Center (4.5%) in
JPMDB 2016-C2, and First Stamford Place (5.6%), Preston Plaza
(2.6%), Capital Centers II & III (2.4%), 18301 Von Karman (2.6%),
18401 Von Karman (1.4%), Sheraton DFW (3.0%) and Walgreens Witkoff
Portfolio (3.2%) in JPMDB 2017-C7, deteriorate further or more
loans than expected default at or prior to maturity.
Downgrades to the 'BBBsf', 'BBsf' and 'Bsf' categories are likely
with higher than expected losses from continued underperformance of
the FLOCs, particularly the aforementioned loans with deteriorating
performance and with greater certainty of losses on the specially
serviced loans or other FLOCs.
Downgrades to distressed ratings would occur should 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' category may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance on the FLOCs.
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 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.
MAGNETITE XXII: Fitch Assigns 'BB+sf' Rating on Class E-RR Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Magnetite
XXII, Limited reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Magnetite XXII, Limited
A-R 55954HAL6 LT PIFsf Paid In Full AAAsf
A-RR LT AAAsf New Rating
B-RR LT AAsf New Rating
C-RR LT Asf New Rating
D-J LT BBB-sf New Rating
D-RR LT BBB-sf New Rating
E-RR LT BB+sf New Rating
F LT NRsf New Rating
X LT NRsf New Rating
Transaction Summary
Magnetite XXII, Limited (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by BlackRock Financial
Management, Inc., which was first reset in May 2021 and will be
reset for a second time on July 31, 2024. Net proceeds from the
issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $598.8 million of
primarily first lien senior secured leveraged loans (excluding
defaults).
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.31% first-lien senior secured loans and has a weighted average
recovery assumption of 75.66%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a three-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 loan (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-RR, between
'BB+sf' and 'A+sf' for class B-RR, between 'B+sf' and 'BBB+sf' for
class C-RR, between less than 'B-sf' and 'BB+sf' for class D-RR,
between less than 'B-sf' and 'BB+sf' for class D-J, and between
less than 'B-sf' and 'BB-sf' for class E-RR.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-RR 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-RR, 'AA+sf' for class C-RR,
'A+sf' for class D-RR, 'A-sf' for class D-J, and 'BBB+sf' for class
E-RR.
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 Magnetite XXII,
Limited. In cases where Fitch does not provide ESG relevance scores
in connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
MAGNETITE XXII: Moody's Assigns B3 Rating to $6MM Class F Notes
---------------------------------------------------------------
Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes (the Refinancing Notes) issued by Magnetite XXII,
Limited (the Issuer):
US$6,000,000 Class X Senior Secured Floating Rate Notes due 2036,
Assigned Aaa (sf)
US$384,000,000 Class A-RR Senior Secured Floating Rate Notes due
2036, Assigned Aaa (sf)
US$6,000,000 Class F Deferrable Mezzanine Floating Rate Notes due
2036, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 90%
of the portfolio must consist of first lien senior secured loans
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans and bonds.
BlackRock Financial Management, Inc. (the Manager) will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended three year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes and five other
classes of secured notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: reinstatement and extension of the reinvestment period;
extensions of the stated maturity and non-call period; changes to
certain collateral quality tests; changes to the
overcollateralization test levels; and changes to the base matrix
and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2024.
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, diversity score 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: $595,651,709
Defaulted par: $5,254,269
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3075
Weighted Average Spread (WAS): 3.35%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 7 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
MORGAN STANLEY 2013-C9: Moody's Raises Rating on Cl. C Certs to B1
------------------------------------------------------------------
Moody's Ratings has affirmed the ratings on seven classes and
upgraded the ratings on two classes in Morgan Stanley Bank of
America Merrill Lynch Trust 2013-C9, Commercial Mortgage
Pass-Through Certificates, Series 2013-C9 as follows:
Cl. B, Upgraded to Baa3 (sf); previously on Jul 28, 2023 Downgraded
to Ba2 (sf)
Cl. C, Upgraded to B1 (sf); previously on Jul 28, 2023 Downgraded
to B2 (sf)
Cl. D, Affirmed B3 (sf); previously on Jul 28, 2023 Downgraded to
B3 (sf)
Cl. E, Affirmed Caa1 (sf); previously on May 3, 2023 Downgraded to
Caa1 (sf)
Cl. F, Affirmed Caa2 (sf); previously on May 3, 2023 Downgraded to
Caa2 (sf)
Cl. G, Affirmed Caa3 (sf); previously on May 3, 2023 Downgraded to
Caa3 (sf)
Cl. H, Affirmed C (sf); previously on May 3, 2023 Downgraded to C
(sf)
Cl. PST, Affirmed Ba2 (sf); previously on Jul 28, 2023 Downgraded
to Ba2 (sf)
Cl. X-B*, Affirmed Ba3 (sf); previously on Jul 28, 2023 Downgraded
to Ba3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on two P&I classes, Cl. B and Cl. C, were upgraded
primarily due to the payback of outstanding loan advances and prior
interest shortfalls as a result of the loan modification and
assumption of the largest remaining loan in the pool, the Milford
Plaza Fee (72.6% of the pool). The loan has been brought current
and benefits from a low fixed interest rate of 3.5%, through its
current maturity date in June 2028. The upgrades also reflect the
significant credit support on these two classes in connection with
the transaction's Moody's loan-to-value (LTV) ratio.
The ratings on five P&I classes, Cl. D through Cl. H, were affirmed
because of their credit support and the transaction's key metrics,
including Moody's LTV ratio, Moody's stressed debt service coverage
ratio (DSCR) are within acceptable ranges. The ratings reflect the
high Moody's LTV on the largest remaining loans and the potential
risk of higher losses or interest shortfalls if the remaining loans
were to default on their debt service payments.
The rating on the interest-only class, Cl. X-B, was affirmed based
on the credit quality of its referenced classes.
The rating on the exchangeable class, Cl. PST, was affirmed based
on the credit quality of its referenced exchangeable classes.
Moody's rating action reflects a base expected loss of 35.4% of the
current pooled balance. Moody's base expected loss plus realized
losses is now 7.0% of the original pooled balance.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-backed Securitizations" published in
July 2024.
DEAL PERFORMANCE
As of the July 17, 2024 distribution date, the transaction's
aggregate certificate balance has decreased by 82% to $227.3
million from $1.28 billion at securitization. The certificates are
collateralized by three remaining mortgage loans and one of these
loans, the Milford Plaza Fee (72.6% of the pool), remains in
special servicing but was listed as current on its debt service
payments after a recent loan modification was completed.
No loans have liquidated from the pool with a loss, however, an
aggregate realized loss of $9.3 million has been incurred due to
the reimbursement for non-recoverable advances on the specially
serviced loan, Milford Plaza Fee Loan ($165 million -- 72.6% of the
pool).
The sole specially serviced loan is the Milford Plaza Fee Loan
($165 million -- 72.6% of the pool), which represents a pari passu
portion of a $275 million mortgage loan. The loan was originally
secured by a condominium unit that was being leased to operate the
Row Hotel, a 1,331 key full service hotel located on 8th avenue in
New York City. The lease commenced in 2013 and ran through 2112,
and had annual CPI increases. The loan transferred to the special
servicer in June 2020 due to payment default on the rent due to the
significant decline in performance of the non-collateral hotel
improvements. The hotel property has been leased to New York City
through April 2026. A loan modification and loan assumption was
recently executed in which the leasehold and leased fee interests
have been collapsed into a fee simple structure and the new
borrower controls the entire property. As part of the loan
assumption, the hotel operator has remitted all past due interest
payments and most of the prior loan advances. The balance of loan
advances incurred while the loan was specially serviced will be
recovered through a cash flow sweep before any cash flow will be
released to the new borrower. Furthermore, the new borrower signed
a future renovation guaranty at closing and agreed to fund an
interest reserve during the time the hotel undergoes renovations.
The original 2043 final maturity has been brought in to June 2028,
however, the timing of the ultimate resolution is unclear as it
would require the maturity of the in place contract with New York
City and the undertaking of an extensive renovation to reposition
the property as a competitive hotel. Moody's LTV and stressed DSCR
are 171% and 0.68X, respectively.
The two non-specially serviced loans represent 27.4% of the pool
balance. The largest loan is the Apthorp Retail Condominium Loan
($51.0 million -- 22.5% of the pool), which is secured by the
12,850 SF ground floor retail portion interest of the Apthorp, a 12
story condo building that is historically landmarked in New York
City. The collateral sits along Broadway between 79th and 78th
streets. The largest tenant is a Chase Bank Branch, occupying 56%
of the property's NRA through 2029. This tenant pays above market
rents, which may pose future risk to the performance of the
property should the tenant vacate or renegotiate their rent at
lease maturity in December 2029 (ahead of the loan maturity in
March 2033). Occupancy has fluctuated in recent years, with a low
of 63% at year-end 2020, however, several new tenants were signed,
and the property was 82% occupied in December 2023. The loan has
amortized 21% since securitization, however, the cash flow remains
low and the 2023 year-end NOI DSCR was only 0.88X. The loan matures
in March 2033 and Moody's LTV and stressed DSCR are 139% and 0.70X,
respectively, compared to 136% and 0.68X at the last review.
The other remaining loan is the Brighton Shopping Center Loan
($11.3 million -- 5.0% of the pool), which is secured by a 297,941
SF retail property located in Brighton, Michigan consisting of
five, single-story buildings containing 43 units. The loan's NOI
DSCR was 1.44X and the property was 89% leased as of December 2023
compared to 99% leased in March 2023. The property faces notable
lease rollover risk over the next several years with all three of
its largest tenants having lease expiration dates by December 2026.
The loan is fully amortizing, having already amortized 46% and will
mature in March 2032. Moody's LTV and stressed DSCR are 54% and
2.00X, respectively.
MORTGAGE LENDERS 2000-1: Moody's Cuts Rating on 2 Tranches to Ba1
-----------------------------------------------------------------
Moody's Ratings has downgraded the rating of Class A-4 and Class
A-5 issued by Mortgage Lenders Network Home Equity Loan Trust
2000-1. The collateral backing this deal consists of subprime home
equity loans.
The complete rating actions are as follows:
Issuer: Mortgage Lenders Network Home Equity Loan Trust 2000-1
Cl. A-4, Downgraded to Ba1 (sf); previously on Sep 6, 2023 Affirmed
A1 (sf)
Cl. A-5, Downgraded to Ba1 (sf); previously on Sep 6, 2023 Affirmed
A1 (sf)
RATING RATIONALE
The rating downgrades of Class A-4 and Class A-5 from Mortgage
Lenders Network Home Equity Loan Trust 2000-1 reflect the
possibility that these bonds may not be paid in full prior to a
final maturity date of April, 2031. Moody's ratings are based on
the expectation that principal will be paid in full by this date.
However, certain loans have had their terms extended beyond this
date, making payment of principal uncertain.
The two classes currently benefit from a financial guaranty
insurance policy from Assured Guaranty Municipal Corp. (Assured).
While the financial guaranty insurance policy will be in effect
until the tranches are paid off, it does not guarantee the payment
of the full principal balances by the final maturity date of April,
2031. Moody's analysis takes into consideration Moody's estimate of
the principal amount outstanding on April, 2031 based on Moody's
estimates of the amortization speed of the collateral, which has
been extended due to the loan term extensions. Therefore, the
rating downgrades of Class A-4 and Class A-5 from Mortgage Lenders
Network Home Equity Loan Trust 2000-1 to below Assured's rating
reflect the possibility that these bonds may not be paid in full
prior to the final maturity date in April 2031, on which Moody's
current ratings are based.
Principal Methodology
The principal methodology used in these ratings was "Guarantees,
Letters of Credit and Other Forms of Credit Substitution
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.
NASSAU LTD 2019-I: Moody's Cuts Rating on $28.25MM D Notes to Caa1
------------------------------------------------------------------
Moody's Ratings has taken a variety of rating actions on the
following notes issued by Nassau 2019-I Ltd.:
US$13.125M Class AN-B-R Senior Secured Floating Rate Notes,
Upgraded to Aaa (sf); previously on Mar 16, 2023 Upgraded to Aa1
(sf)
US$28.25M Class D Secured Deferrable Floating Rate Notes,
Downgraded to Caa1 (sf); previously on Sep 1, 2020 Confirmed at Ba3
(sf)
Moody's have also affirmed the ratings on the following notes:
US$296.875M (current outstanding amount US$192,803,718) Class AL
Loans Notes, Affirmed Aaa (sf); previously on Mar 16, 2023 Upgraded
to Aaa (sf)
US$70M Class (current outstanding amount US$40,860,041) AN-A-R
Senior Secured Floating Rate Notes, Affirmed Aaa (sf); previously
on Sep 7, 2021 Assigned Aaa (sf)
US$21.75M Class B-R Senior Secured Deferrable Floating Rate Notes,
Affirmed A1 (sf); previously on Mar 16, 2023 Upgraded to A1 (sf)
US$30M Class C Senior Secured Deferrable Floating Rate Notes,
Affirmed Baa3 (sf); previously on Sep 1, 2020 Confirmed at Baa3
(sf)
Nassau 2019-I Ltd., originally issued in May 2019 and partially
refinanced in September 2021, is a collateralised loan obligation
(CLO) backed by a portfolio of mostly high-yield senior secured US
loans. The portfolio is managed by NCC CLO Manager LLC. The
transaction's reinvestment period ended in April 2023.
RATINGS RATIONALE
The rating upgrade on the Class AN-B-R notes is primarily a result
of the deleveraging of the Class AL and Class AN-A-R notes
following amortisation of the underlying portfolio since the last
rating action in March 2023.
The rating downgrade on the Class D notes is primarily a result of
the deterioration in over-collateralisation (OC) ratios since the
last rating action in March 2023, and the OC deterioration is
largely driven by some recent negative rating migration and
defaults of the assets in the portfolio.
The affirmations on the ratings on the Class AL, Class AN-A-R,
Class B-R and Class 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 over-collateralisation
ratios.
The Class AL and Class AN-A-R notes have paid down by
approximately USD104.07 million (35.06%) and USD29.14 million
(41.63%), respectively, 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 July 2024 [1] the
Class A OC ratio is reported at 129.47%, compared to February 2023
[2] level of 128.29%.
However, the over-collateralisation ratios of the remaining rated
notes have deteriorated. According to the trustee report dated July
2024 [1] the Class B, Class C and Class D OC ratios is reported at
120.67%, 110.33% and 102.09% compared to February 2023 [2] level of
121.35%, 112.91% and 105.98%, respectively.
Moody's note that Class D OC ratio is in breach as per July 2024
trustee report. Moody's also note that the July 2024 principal
payments are not reflected in the reported OC 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 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: USD333.54m
Defaulted Securities: USD3.96m
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2866
Weighted Average Life (WAL): 3.78 years
Weighted Average Spread (WAS): 3.53%
Weighted Average Coupon (WAC): 8.00%
Weighted Average Recovery Rate (WARR): 46.89%
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. 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.
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.
NATIXIS COMMERCIAL 2019-NEMA: Moody's Lowers C Certs Rating to Ba2
------------------------------------------------------------------
Moody's Ratings has downgraded the ratings on five classes of
Natixis Commercial Mortgage Securities Trust 2019-NEMA, Commercial
Mortgage Pass-Through Certificates, Series 2019-NEMA as follows:
Cl. A, Downgraded to A2 (sf); previously on Jul 25, 2023 Downgraded
to Aa2 (sf)
Cl. B, Downgraded to Baa2 (sf); previously on Jul 25, 2023
Downgraded to A2 (sf)
Cl. C, Downgraded to Ba2 (sf); previously on Jul 25, 2023
Downgraded to Baa2 (sf)
Cl. X*, Downgraded to Baa2 (sf); previously on Jul 25, 2023
Downgraded to A1 (sf)
Cl. V-ABC, Downgraded to Baa2 (sf); previously on Jul 25, 2023
Downgraded to A2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on three P&I classes were downgraded due to the
increase in Moody's LTV ratio driven by the property's performance
and cash flow trends since 2020 as well as the uncertainty around
the timing and extent of performance recovery on the asset given
the San Francisco market fundamentals. The property's net cash flow
(NCF) experienced a significant drop in 2020 and 2021 due to a
combination of lower revenue and higher expenses and while cash
flow has improved since 2021, the slow recovery has caused cash
flow to remain well below levels at securitization.
While property performance has improved since 2021, the rate of
recovery has slowed and the 2023 NCF improved 5% year over year but
remained 38% lower than in 2019. After transferring to special
servicing in August 2023 the loan was subsequently modified and the
loan remained current based on its modified terms as of the July
2024 remittance date. The loan modification included a reduced
interest rate on the subordinate B-notes held outside the trust
(the B-1 note through August 2026 and the B-2 class through the
loan's maturity date in February 2029). Despite the significant
drop in cash flow, the DSCR on the senior mortgage loan in the
trust was approximately 1.14X based on the 2023 cash flow and
accounting for the modification and interest rate reduction, the
total mortgage debt DSCR (inclusive of the $110 million B-notes)
would be 1.02X. The loan benefits from a low fixed interest rate of
4.44% on the senior mortgage notes through the loan's maturity date
in 2029.
The lingering effects of the pandemic has had an outsized negative
impact on the San Francisco/San Mateo MSA and the city is lagging
other major cities in terms of bounce back. The 754 unit
multifamily property known as NEMA San Francisco is of high quality
and is located just south of the city's SoMa neighborhood and the
property exhibited stable performance prior to its performance drop
in 2020. The most recent reported appraised value dated October
2023 was $328.8 million which represented a 40% decline from
securitization and remained above the senior trust mortgage loan,
but below the total mortgage debt balance of $384 million
[inclusive the subordinate B-notes].
The rating on the IO class, Cl. X, was downgraded based on the
decline in credit quality of its referenced classes.
The rating on the exchangeable class, Cl. V-ABC, was downgraded due
to the decline in credit quality of its referenced exchangeable
classes.
In this credit rating action Moody's considered qualitative and
quantitative factors in relation to the senior-sequential structure
and the asset quality, 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. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or a
significant improvement in loan performance.
Factors that could lead to a downgrade of the ratings include a
decline in actual or expected performance of the loan or interest
shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except the
interest-only class was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-backed Securitizations" published in
July 2024.
DEAL PERFORMANCE
As of the July 17, 2024 distribution date, the transaction's
aggregate certificate balance remains unchanged at $199 million.
The whole loan, including $75 million pari passu notes and
subordinate $110 million B notes held outside the trust, is a
10-year, fixed-rate, first lien mortgage loan with an outstanding
principal balance of $384 million. The original debt service for
the whole loan was approximately $18 million and the loan matures
in February 2029. As part of the recent loan modification, the
interest rate on the $60 million B-1 note [held outside the trust]
has been reduced to 2% through August 2026 or when the NCF DSCR
reaches 1.1X on a quarterly basis, and the interest rate on the $50
million B-2 note has been reduced to 0% through February 2029. The
modified debt service for the whole loan is currently $13.4
million.
The trust assets primarily consist of two promissory notes,
including one senior Note A-1 and one senior subordinate Note A-B,
with an aggregate principal balance of $199 million. In addition to
the trust assets there are four additional pari passu senior notes
outside of the trust, Notes A-2, A-3, A-4, and A-5 (securitized in
conduit transactions BBCMS 2019-C3 and BBCMS 2019-C5) with a
combined balance of $75 million. Notes A-2, A-3, A-4, and A-5 are
pari passu to the Note A-1 and senior to Note A-B. Two junior
notes, Notes B-1 and B-2, with balances of $60 million and $50
million, respectively, are also outside of the trust.
The property is a Class A multifamily with premium amenities
including an on-site subterranean parking garage, fitness facility,
and approximately 30,000 square feet (SF) of outdoor space. The
property's improvements consist of four linked towers that range
from 10 stories to 35 stories tall. Of the 754 units available to
rent, there are 664 market rent units without any rental
restrictions and 90 rent affordable units rented under San
Francisco's Inclusionary Housing Program. The property was 95%
leased as of March 2024 rent roll, compared to 94% occupancy at
securitization.
The outbreak has had an outsized negative impact on the San
Francisco market and the city is lagging the other major cities in
terms of bounce back. Prior to the coronavirus outbreak in 2020,
the property's NCF hovered around $20 million for the previous four
years. However, starting in 2020, the property was not able to
generate enough cash to cover its original mortgage debt service
amount. The property's net cash flow (NCF) experienced a
significant drop in 2020 and 2021 due to a combination of lower
revenue and higher expenses and while cash flow has improved since
2021, the slow recovery has caused cash flow to remain well below
levels at securitization. After transferring to special servicing
in August 2023 due to its depressed cash flow, the loan was
subsequently modified and remains current based on its modified
terms as of the July 2024 remittance date. The loan modification
included a reduced interest rate on the subordinate B-notes held
outside the trust [the B-1 note through August 2026 and the B-2
class through the loan's maturity date in February 2029].
The sponsor, Crescent Heights, Inc., is a real estate development
firm based in Miami, FL with over 30 years of industry experience.
They specialize in the development, ownership and operation of
mixed-use high-rises in major cities. The company has completed
over 150 projects, including more than 38,000 multifamily units.
The sponsor had previously funded debt service shortfalls and the
loan remains current with no outstanding advances as of the July
2023 remittance date. However, the property will require more time
to recover its financial performance to pre-pandemic levels. The
sponsor developed the property in 2013 at a cost basis of
approximately $322 million.
The trust loan balance plus pari passu notes (total of $274 million
of A Notes) represent a Moody's LTV of 121%. The Moody's A Notes
DSCR at a 9.25% stressed constant is 0.62X. The Moody's whole loan
mortgage LTV ($384 million, inclusive of the B Notes) was 170% and
the whole loan Stressed DSCR was 0.45X. The adjusted Moody's LTV
ratios for the A Notes and total whole loan mortgage balance was
110% and 154%, respectively, based on Moody's Value using a cap
rate adjusted for the current interest rate environment. However,
these metrics are based on the assumptions that the property
continues its current path to recovery in the foreseeable future.
There are no outstanding interest shortfalls and no losses have
been realized as of the current distribution date.
NEUBERGER BERMAN 51: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Neuberger
Berman Loan Advisers CLO 51, Ltd.'s reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Neuberger Berman Loan
Advisers CLO 51, Ltd.
A-R LT AAAsf New Rating
B 64135BAE9 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 64135BAG4 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating
D 64135BAJ8 LT PIFsf Paid In Full BBB-sf
D-1-R LT BBBsf New Rating
D-2-R LT BBB-sf New Rating
E 64135CAA5 LT PIFsf Paid In Full BB+sf
E-R LT BB-sf New Rating
Transaction Summary
Neuberger Berman Loan Advisers CLO 51, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that will
be managed by Neuberger Berman Loan Advisers II LLC. Net proceeds
from the issuance of the secured and subordinated notes will
provide financing on a portfolio of approximately $570 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 26.12, versus a maximum covenant, in
accordance with the initial expected matrix point of 27.15. 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
93.58% first-lien senior secured loans. The WARR of the indicative
portfolio is 74.11% versus a minimum covenant, in accordance with
the initial expected matrix point of 72.2%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% 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 3.2-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-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-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, 'Asf' 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 Neuberger Berman
Loan Advisers CLO 51, 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.
NRPL 2024-RPL2: Fitch Assigns 'Bsf' Final Rating on Class B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed notes issued by NRPL 2024-RPL2 Trust (NRPL
2024-RPL2).
Entity/Debt Rating
----------- ------
NRPL 2024-RPL2
A-1 LT AAAsf New Rating
A-2 LT AAsf New Rating
A-3 LT Asf New Rating
M-1 LT BBBsf New Rating
B-1 LT BBsf New Rating
B-2 LT Bsf New Rating
B-3 LT NRsf New Rating
B-4 LT NRsf New Rating
B LT NRsf New Rating
PT LT NRsf New Rating
R LT NRsf New Rating
SA LT NRsf New Rating
XS LT NRsf New Rating
Transaction Summary
The NRPL 2024-RPL2 notes are supported by 828 loans with a balance
of $182.3 million (this includes $16.3 million of deferred
balances) as of the cutoff date. This will be the third NRPL
transaction rated by Fitch.
The notes are secured by a pool of seasoned re-performing and
performing, fixed-rate and step-rate, fully amortizing and
interest-only mortgage loans primarily secured by first liens on
one- to four-family residential properties, planned unit
developments, condominiums, townhouses, manufactured housing,
mobile homes, commercial properties and land. The majority of the
loans in the pool have been modified (73.4%), and 96.4% of the
loans in the pool are current with 3.6% of the loans in the pool
being 30 days delinquent.
Rushmore Loan Management Servicers LLC (Rushmore) will service
56.2% of the pool and the remaining 43.8% of the pool will be
serviced by Shellpoint Mortgage Servicing LLC (Shellpoint). Fitch
rates Rushmore as 'RSS2' for special servicing and Shellpoint as
'RPS2' for prime primary servicing and 'RSS2' for special
servicing. Rushmore and Shellpoint have been servicers on prior
Fitch-rated re-performing transactions. Fitch believes that
Rushmore and Shellpoint have the requisite controls and practices
in place to effectively servicer seasoned performing and
re-performing loans.
There is no Libor exposure in this transaction. The majority of the
loans in the collateral pool comprise fixed-rate mortgages, 1% of
the pool comprises of step-rate mortgages Fitch treated as
Adjustable-Rate Mortgages (ARM).
The offered class A-1 notes do not have Libor exposure as the
coupons are fixed rate and capped at the net weighted average
coupon (WAC). The class A-2, A-3, M-1, B-1, B-2, B-3, and B-4 notes
have coupons based on the net WAC. The class B and PT notes are
exchangeable and will not have a note rate but are entitled on each
payment date to receive the interest payment amount and interest
carryforward amounts otherwise payable to the related initial
exchangeable notes for such payment date.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.8% above a long-term sustainable level (vs.
11.1% on a national level as of 4Q23, down 0% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices. Home prices have
increased 5.5% yoy nationally as of February 2024 despite modest
regional declines, but are still being supported by limited
inventory.
Seasoned Performing and Reperforming Credit Quality (Negative): The
collateral consists of re-performing and performing, fixed-rate and
step-rate, seasoned, fully-amortizing and interest-only mortgage
loans primarily secured by first liens on one- to four-family
residential properties, planned unit developments, condominiums,
townhouses, manufactured housing, mobile homes, commercial
properties and land (together with any such properties acquired by
the Issuer through foreclosure or grant of a deed in lieu of
foreclosure after the cut-off date. The 828 mortgage loans in the
pool have an aggregate Principal Balance of approximately
$182,272,284 as of the cut-off date.
The pool is seasoned at 150 months according to Fitch and is ~73%
modified.
The borrowers in this pool have moderate credit profiles with a
Fitch-determined WA FICO score of 689 and a 43.8% Fitch-determined
debt-to-income ratio (DTI), as well as moderate leverage, with an
original combined loan-to-value ratio (CLTV), as determined by
Fitch, of 78.5%, translating to a Fitch-calculated sustainable LTV
ratio (sLTV) of 58.1%.
Fitch's analysis considers 87.4% of the pool consisting of loans
where the borrower maintains a primary residence while 11.6%
comprises investor properties and 1.0% represents second homes.
In Fitch's analysis, the majority of the loans (85%) are to
single-family homes and planned unit developments (PUDs); 5.7% are
to condos; 8.8% are to multifamily homes and manufactured housing,
and there is one loan to a commercial property (0.05%) in the pool.
In the analysis, Fitch treated manufactured properties and
properties coded as other occupancy types (including commercial) as
multi-family; as a result, the probability of default (PD) was
increased for these loans.
There is one loan to a commercial property in the pool. For this
loan, Fitch received confirmation that there is no potential for
environmental damage issues, which could impact the losses for this
loan.
In Fitch's analysis all loans were treated as originated through a
broker/correspondent channel. According to Fitch, 15.9% of the
loans are designated as non-QM loans, 0.6% are higher priced QM
loans and 19.5% are safe-harbor QM loans, while the remaining 64%
are exempt from QM status as they were originated prior to the ATR
rule taking effect in January 2014 or since the occupancy type is
investor occupied.
The pool contains eight loans over $1.0 million, including deferred
balance, with the largest loan at $3.4 million.
In Fitch's analysis, about 11.6% of the pool is comprised of loans
for investor properties, this includes "unavailable" loan purpose
types. There are no second liens in the pool and none of the loans
have subordinate financing. All loans are in the first lien
position as confirmed by the servicer.
Of the loans, 25.6% are concentrated in California. The largest MSA
concentration is in the New York MSA (16.3%), followed by Los
Angeles (11.0%), and the Miami Ft. Lauderdale MSA (5.1%). The top
three MSAs account for 32.4% of the pool. As a result, there was a
no increase to Fitch's expected loss at the 'AAAsf' stress due to
geographic concentration.
According to Fitch, 96.4% of the pool is current as of the cut-off
date with 46.5% of the loans not having a prior delinquency in the
past 24 months. Overall, the pool characteristics resemble
reperforming collateral; therefore, the pool was analyzed using
Fitch's Alt-A model and time lines were extended.
No Advancing (Mixed): The servicer will not be advancing delinquent
monthly payments of principal and interest. Because P&I advances
made on behalf of loans that become delinquent and eventually
liquidate reduce liquidation proceeds to the trust, the loan-level
loss severities (LS) are less for this transaction than for those
where the servicer is obligated to advance P&I. The downside to
this is the additional stress on the structure side as there is
limited liquidity in the event of large and extended
delinquencies.
Sequential deal structure with No Advancing (Mixed): The
transaction utilizes a sequential payment structure with no
advancing of delinquent principal and interest. In a sequential
structure, the subordinate classes do not receive principal until
the senior classes are repaid in full. Furthermore, the provision
to re-allocate principal to pay interest on the 'AAAsf' rated notes
prior to other principal distributions is highly supportive of
timely interest payments to that class with no advancing.
There is no advancing of delinquent principal and interest in this
transaction. The transaction is structured so that the payment of
interest is prioritized over principal and as a result the credit
enhancement (CE) will be increased as principal funds will need to
be used to pay interest if loans become delinquent. Fitch sees this
structure as supportive of the 'AAAsf' being paid timely interest
and the 'AAsf' to 'Bsf' rated classes being paid ultimate
interest.
The coupons on the class A-1 notes are based on the lower of the
net WAC or the stated coupon. The coupons on the class A-2, A-3,
M-1, B-1, B-2, B-3, and B-4 notes are based on the net WAC. The
class B and PT notes do not have a stated coupon but are paid
interest based on the classes with which they are exchangeable.
Besides subordination, the transaction has excess interest that
will help to protect the classes from losses if they are to occur.
Although the excess interest is limited in this transaction.
Losses will be allocated to the notes in reverse sequential order
starting with class B-4.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the
model-projected 41.9%, at 'AAA'. The analysis indicates there is
some potential rating migration, with higher MVDs for all rated
classes compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC, Clayton, and Opus. The third-party due
diligence described in Form 15E focused on a regulatory compliance
for 97.8% of the pool (the 18 loans without compliance grades are
loans to investors that do not need to receive a compliance review
per Fitch's criteria). In addition to the compliance review, 28.9%
of the pool received a credit review and 27.3% received a valuation
review. A data integrity check and updated tax and title search was
also performed on 100% of the loans in the pool. All loans were
confirmed to be in the first lien position and none of the loans
had damage reported that would materially impact the transaction
based on the information provided to Fitch.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments: increased the LS on 51 loans
(5.2% of the pool) due to HUD-1 issues, applied 200% LS floor for
one high cost loan (0.05% of the pool), extended timelines for
missing documentation for six loans (0.2% of the pool), and applied
100% LS floor for three loans (0.4% of pool) due to ATR issues,
increased the LS to account for potential TRID issues. These
adjustments resulted in an increase in the 'AAAsf' expected loss of
approximately 75bps. The increase in loss was driven by the HUD-1
issues, as the lien and TRID issues did not materially increase the
loss severity.
Fitch accounted for delinquent taxes/tax liens, outstanding HOA
liens, and outstanding municipal liens in its analysis, but the
impact was not material and did not increase Fitch's loss
expectations.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100.0% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria".
The sponsor, Nomura Corporate Funding Americas, LLS, engaged
SitusAMC, Opus, and Clayton to perform the review. 97.8% of the
loans were reviewed for compliance and they received initial and
final grades for this subcategory. The loans that did not receive
compliance grades are investor occupied homes which do not receive
compliance grades. 28.9% of the loans reviewed received a credit
and 27.3% of loans received a valuation review and they received
initial and final grades for these subcategories.
For seasoned loans a payment history review was performed, a
custodial reviewed was performed, a servicer comment review was
performed and a tax and title search was performed. This is in
addition to the servicer confirming the payment history and the
current lien status.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format. The ASF data tape
layout was established with input from various industry
participants, including rating agencies, issuers, originators,
investors and others, to produce an industry standard for the
pool-level data in support of the U.S. RMBS securitization market.
The data contained in the data tape layout were populated by the
due diligence company and no material discrepancies were noted.
ESG Considerations
NRPL 2024-RPL2 Trust has an ESG Relevance Score of '4' for
Transaction Parties & Operational Risk due to elevated operational
risk, which has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors. While
the aggregator and servicer did not have an impact on the expected
losses, the Tier 2 R&W framework with a 12 month sunset feature for
the counterparty providing the representations and warranties
resulted in an increase in the expected losses.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
OBX TRUST 2021-J2: Moody's Upgrades Rating on Cl. B-5 Certs to Ba3
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 48 bonds from four US
residential mortgage-backed transactions (RMBS). OBX 2021-J2, OBX
2022-J1, OBX 2023-J1 Trust are backed by prime jumbo mortgage
loans. OBX 2022-INV3 Trust is backed by almost entirely agency
eligible investor (INV) mortgage loans.
A comprehensive review of all credit ratings for the respective
transactions have been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: OBX 2021-J2 Trust
Cl. A-19, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-20, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-21, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-20*, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-21*, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-22*, Upgraded to Aaa (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Jul 29, 2021
Definitive Rating Assigned B2 (sf)
Cl. B-X-1*, Upgraded to Aa1 (sf); previously on Jul 29, 2021
Definitive Rating Assigned Aa3 (sf)
Issuer: OBX 2022-INV3 Trust
Cl. A-13, Upgraded to Aaa (sf); previously on Mar 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-14, Upgraded to Aaa (sf); previously on Mar 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-IO14*, Upgraded to Aaa (sf); previously on Mar 16, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Mar 16, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa2 (sf); previously on Mar 16, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Mar 16, 2022 Definitive
Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to A1 (sf); previously on Mar 16, 2022
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Mar 16, 2022 Definitive
Rating Assigned Baa2 (sf)
Cl. B-3A, Upgraded to A3 (sf); previously on Mar 16, 2022
Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Mar 16, 2022
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Mar 16, 2022 Definitive
Rating Assigned B3 (sf)
Cl. B-IO1*, Upgraded to Aa2 (sf); previously on Mar 16, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-IO2*, Upgraded to A1 (sf); previously on Mar 16, 2022
Definitive Rating Assigned A2 (sf)
Cl. B-IO3*, Upgraded to A3 (sf); previously on Mar 16, 2022
Definitive Rating Assigned Baa2 (sf)
Issuer: OBX 2022-J1 Trust
Cl. B-1, Upgraded to Aa2 (sf); previously on May 6, 2022 Definitive
Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa2 (sf); previously on May 6, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on May 6, 2022 Definitive
Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to A1 (sf); previously on May 6, 2022 Definitive
Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on May 6, 2022 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on May 6, 2022
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on May 6, 2022 Definitive
Rating Assigned B2 (sf)
Cl. B-X-1*, Upgraded to Aa2 (sf); previously on May 6, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to A1 (sf); previously on May 6, 2022
Definitive Rating Assigned A2 (sf)
Issuer: OBX 2023-J1 Trust
Cl. A-15, Upgraded to Aaa (sf); previously on Feb 23, 2023
Definitive Rating Assigned Aa1 (sf)
Cl. A-16, Upgraded to Aaa (sf); previously on Feb 23, 2023
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Feb 23, 2023
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-9*, Upgraded to Aaa (sf); previously on Feb 23, 2023
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Feb 23, 2023
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa2 (sf); previously on Feb 23, 2023
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Feb 23, 2023
Definitive Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to Aa3 (sf); previously on Feb 23, 2023
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Feb 23, 2023 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Feb 23, 2023
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Feb 23, 2023
Definitive Rating Assigned B2 (sf)
Cl. B-X-1*, Upgraded to Aa2 (sf); previously on Feb 23, 2023
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to Aa3 (sf); previously on Feb 23, 2023
Definitive Rating Assigned A2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pools.
Each of the transactions Moody's reviewed continue to display
strong collateral performance, with no cumulative losses for each
transaction and a small number of loans in delinquency. In
addition, enhancement levels for most tranches have grown
significantly, as the pools amortize relatively quickly. The credit
enhancement since closing has grown, on average, 12.5% for the
tranches upgraded.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
strategies regarding borrower relief programs and the impact those
programs may have on collateral performance and transaction
liquidity, through servicer advancing. Moody's recent analysis has
found that in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
Moody's analysis on certain bonds included an assessment of the
existing credit enhancement floor, in place to mitigate the
potential default of a small number of loans at the tail end of a
transaction.
No actions were taken on the remaining rated classes in these deals
because their expected losses on the bonds remain commensurate with
their current ratings, after taking into account the updated
performance information, structural features and credit
enhancement.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds and/or pools.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
OCP CLO 2017-14: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-1R, A-2R, B-1R, B-2R, C-R, D-1R, D-2R, and E-R replacement
debt from OCP CLO 2017-14 Ltd./OCP CLO 2017-14 LLC, a CLO
originally issued in 2017 that is managed by Onex Credit Partners
LLC, a subsidiary of Onex.
The preliminary ratings are based on information as of Aug. 6,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Aug. 8, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. S&P
said, "At that time, we expect to withdraw our ratings on the
original debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The non-call period will be extended to July 2026.
-- The reinvestment period will be extended to July 2029.
-- The legal final maturity (for the replacement debt and the
existing subordinated notes) will be extended to July 2037.
-- The target initial par amount will decrease to $450 million.
-- The class X-R debt will be issued on the refinancing date and
is expected to be paid down using interest proceeds during the
first 12 payment dates beginning in January 2025.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- Additional subordinated notes will be issued on the refinancing
date.
-- The transaction has adopted benchmark replacement language and
was updated to conform to current rating agency methodology.
Replacement And Original Debt Issuances
Replacement debt
-- Class X-R, $3.00 million: Three-month CME term SOFR + 1.10%
-- Class A-1R, $288.00 million: Three-month CME term SOFR + 1.37%
-- Class A-2R, $8.55 million: Three-month CME term SOFR + 1.57%
-- Class B-1R, $40.50 million: Three-month CME term SOFR + 1.70%
-- Class B-2R, $4.95 million: 5.597%
-- Class C-R (deferrable), $27.00 million: Three-month CME term
SOFR + 2.00%
-- Class D-1R (deferrable), $24.75 million: Three-month CME term
SOFR + 3.10%
-- Class D-2R (deferrable), $6.75 million: Three-month CME term
SOFR + 4.50%
-- Class E-R (deferrable), $13.50 million: Three-month CME term
SOFR + 6.55%
-- Subordinated notes, $74.65 million: Not applicable
Original debt
-- Class A-1a, $345.60 million: Three-month CME term SOFR + 1.15%
+ CSA(i)
-- Class A-1b, $44.40 million: Three-month CME term SOFR + 1.25% +
CSA(i)
-- Class A-2, $64.80 million: Three-month CME term SOFR + 1.50% +
CSA(i)
-- Class B (deferrable), $33.60 million: Three-month CME term SOFR
+ 1.95% + CSA(i)
-- Class C (deferrable), $39.60 million: Three-month CME term SOFR
+ 2.60% + CSA(i)
-- Class D (deferrable), $24.00 million: Three-month CME term SOFR
+ 5.80% + CSA(i)
-- Subordinated notes, $59.45 million: Not applicable
(i)The CSA is 0.26161%.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"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 2017-14 Ltd./OCP CLO 2017-14 LLC
Class X-R, $3.00 million: AAA (sf)
Class A-1R, $288.00 million: AAA (sf)
Class A-2R, $8.55 million: AAA (sf)
Class B-1R, $40.50 million: AA (sf)
Class B-2R, $4.95 million: AA (sf)
Class C-R (deferrable), $27.00 million: A (sf)
Class D-1R (deferrable), $24.75 million: BBB (sf)
Class D-2R (deferrable), $6.75 million: BBB- (sf)
Class E-R (deferrable), $13.50 million: BB- (sf)
Other Debt
OCP CLO 2017-14 Ltd./OCP CLO 2017-14 LLC
Subordinated notes, $74.65 million: Not rated
OCTAGON INVESTMENT 42: Fitch Assigns BB-sf Rating on Cl. E-RR Notes
-------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Octagon
Investment Partners 42, Ltd. refinancing transaction.
Entity/Debt Rating
----------- ------
Octagon Investment
Partners 42, Ltd.
X LT NRsf New Rating
A-1-RR LT NRsf New Rating
A-2-RR LT AAAsf New Rating
B-RR LT AAsf New Rating
C-RR LT Asf New Rating
D-1-RR LT BBB-sf New Rating
D-2-RR LT BBB-sf New Rating
E-RR LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
Transaction Summary
Octagon Investment Partners 42, Ltd. (the issuer) is an arbitrage
cash flow collateralized loan obligation (CLO) managed by Octagon
Credit Investors, LLC. that originally closed in May 2019. This is
the second refinancing where existing notes will be refinanced in
whole on July 31, 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 24.3, versus a maximum covenant, in accordance with
the initial expected matrix point of 27.3. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
96.76% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.07% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.5%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% 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-RR, between
'BB+sf' and 'A+sf' for class B-RR, between 'Bsf' and 'BBB+sf' for
class C-RR, between less than 'B-sf' and 'BB+sf' for class D-1-RR,
between less than 'B-sf' and 'BB+sf' for class D-2-RR, and between
less than 'B-sf' and 'B+sf' for class E-RR.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2-RR 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-RR, 'AAsf' for class C-RR, 'A+sf'
for class D-1-RR, 'Asf' for class D-2-RR and 'BBB+sf' for class
E-RR.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assesses the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the rating
agency's rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Octagon Investment
Partners 42, 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.
OFSI BSL XIV: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to OFSI BSL XIV
CLO Ltd./OFSI BSL XIV CLO LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by OFS CLO Management II LLC.
The preliminary ratings are based on information as of Aug. 6,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
OFSI BSL XIV CLO Ltd./OFSI BSL XIV CLO LLC
Class A, $234.400 million: AAA (sf)
Class B, $50.600 million: AA (sf)
Class C (deferrable), $22.500 million: A (sf)
Class D-1 (deferrable), $16.875 million: BBB+ (sf)
Class D-2 (deferrable), $5.625 million: BBB- (sf)
Class E (deferrable), $15.000 million: BB- (sf)
Subordinated notes, $31.825 million: Not rated
OHA CREDIT XIV: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, B-1-R,
B-2-R, C-R, D-1-R, D-2-R, and E-R replacement debt from OHA Credit
Partners XIV Ltd./OHA Credit Partners XIV LLC, a CLO originally
issued in November 2017 that is managed by Oak Hill Advisors L.P.,
a subsidiary of T. Rowe Price.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
proposed supplemental indenture:
-- The weighted average cost of the replacement debt is lower than
the original debt.
-- The original class B debt was replaced by two classes of pari
passu fixed- and floating-rate debt (classes B-1-R and B-2-R).
-- The original class D debt was replaced by two classes of
floating-rate debt (classes D-1-R and D-2-R).
-- The class D-1-R debt is senior to the class D-2-R debt.
-- The target par amount was increased to $600 million.
-- The stated maturity was extended to July 2037.
-- The reinvestment period was extended to July 2029.
-- The non-call date was extended to August 2026.
-- Additional subordinated notes were issued in connection with
this refinancing.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1-R, $368.40 million: Three-month CME term SOFR +
1.37%
-- Class A-2-R, $39.60 million: Three-month CME term SOFR + 1.57%
-- Class B-1-R, $37.00 million: Three-month CME term SOFR + 1.65%
-- Class B-2-R, $11.00 million: 5.579%
-- Class C-R (deferrable), $36.00 million: Three-month CME term
SOFR + 1.90%
-- Class D-1-R (deferrable), $36.00 million: Three-month CME term
SOFR + 2.85%
-- Class D-2-R (deferrable), $7.50 million: Three-month CME term
SOFR + 4.20%
-- Class E-R (deferrable), $16.50 million: Three-month CME term
SOFR + 5.45%
-- Subordinated notes, $62.84 million: Not applicable
Original debt
-- Class A-1, $253.700 million: Three-month CME term SOFR + 1.16%
+ CSA(i)
-- Class A-2, $19.875 million: Three-month CME term SOFR + 1.30% +
CSA(i)
-- Class B, $53.750 million: Three-month CME term SOFR + 1.50% +
CSA(i)
-- Class C (deferrable), $26.350 million: Three-month CME term
SOFR + 1.80% + CSA(i)
-- Class D (deferrable), $26.075 million: Three-month CME term
SOFR + 2.70% + CSA(i)
-- Class E (deferrable), $15.850 million: Three-month CME term
SOFR + 6.25% + CSA(i)
-- Subordinated notes, $39.650 million: Not applicable
(i)The CSA is 0.26161%.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
OHA Credit Partners XIV Ltd./OHA Credit Partners XIV LLC
Class A-1-R, $368.40 million: AAA (sf)
Class A-2-R, $39.60 million: NR
Class B-1-R, $37.00 million: AA (sf)
Class B-2-R, $11.00 million: AA (sf)
Class C-R (deferrable), $36.00 million: A (sf)
Class D-1-R (deferrable, $36.00 million: BBB- (sf)
Class D-2-R (deferrable), $7.50 million: BBB- (sf)
Class E-R (deferrable), $16.50 million: BB- (sf)
Ratings Withdrawn
OHA Credit Partners XIV Ltd./OHA Credit Partners XIV LLC
Class A-1 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C (deferrable) to NR from 'A (sf)'
Class D (deferrable) to NR from 'BBB- (sf)'
Class E (deferrable) to NR from 'BB- (sf)'
Other Debt
OHA Credit Partners XIV Ltd./OHA Credit Partners XIV LLC
Subordinated notes, $62.84 million: NR
NR--Not rated.
OMI TRUST 1999-D: S&P Assigns 'CCC- (sf)' Rating on Class A1 Certs
------------------------------------------------------------------
S&P Global Ratings completed its review of three ratings from three
U.S. manufactured housing ABS transactions issued by Oakwood
Mortgage Investors Inc.'s series 1998-D, and OMI Trust 1999-D and
2000-C. S&P raised its rating on OMI Trust 2000-C's A-1
certificates and affirmed its rating on OMI Trust 1999-D's A-1
certificates. At the same time, S&P lowered its rating on Oakwood
Mortgage Investors Inc. series 1998-D's A-1 ARM certificates.
The collateral pools backing the transactions consist of
manufactured housing loans that were originated by Oakwood
Acceptance Corp. LLC. The transactions are serviced by Vanderbilt
ABS Corp., which began servicing these transactions in April 2004.
For OMI Trust 2000-C, the raised rating to 'B- (sf)' from 'CCC
(sf)' reflects S&P's view that the increase in hard credit support
as a percentage of the amortizing pool balance, compared with our
expected remaining losses, is commensurate with the revised
rating.
S&P said, "The affirmed 'CCC- (sf)' rating for OMI Trust 1999-D's
A-1 certificates reflects our view that credit support will remain
insufficient to cover our expected losses for this class. As
defined in our criteria, ratings in the 'CCC (sf)' category reflect
our view that the related classes are vulnerable to nonpayment and
are dependent upon favorable business, financial, and economic
conditions in order to be paid interest and/or principal according
to the terms of each transaction."
For the Oakwood Mortgage Investors Inc. series 1998-D transaction,
hard credit enhancement (HCE) in the form of subordination provided
by the class M-1 certificates has remained stable as a percentage
of the current pool balance. However, the class M-1 certificates
are being written down, in addition to receiving principal payments
at a faster rate than the class A-1-ARMs are being paid down. As
the balance of the M-1 certificates continues to decrease faster
than the balance of the class A-1-ARM certificates, the class
A-1-ARM's HCE level as a percent of the current pool balance is
likely to decline in the future. As a result, S&P has lowered its
rating on this class to 'BB (sf)' from 'BBB (sf)'.
S&P will continue to monitor the performance of the transactions
relative to their cumulative net loss expectations and the
available credit enhancement. It will take rating actions as it
considers appropriate.
Ratings Raised
OMI Trust 2000-C
Class A1: to 'B- (sf)' from 'CCC (sf)'
Ratings Lowered
Oakwood Mortgage Investors Inc. 1998-D
Class A-1 ARM: to 'BB (sf)' from 'BBB (sf)'
Ratings Affirmed
OMI Trust 1999-D
Class A1: 'CCC- (sf)'
RADIAN MORTGAGE 2024-J1: Fitch Assigns B- Rating on Cl. B-5 Certs
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage backed certificates issued by Radian Mortgage Capital
Trust 2024-J1 (RMCT 2024-J1).
Entity/Debt Rating Prior
----------- ------ -----
Radian Mortgage
Capital Trust
2024-J1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1-X LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-X LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-X LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-X LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-11-X LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-13-X LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-15-X LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-17-X LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-19-X LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-21-X LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-23-X LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-24-X LT AAAsf New Rating AAA(EXP)sf
A-25 LT AAAsf New Rating AAA(EXP)sf
A-25-X LT AAAsf New Rating AAA(EXP)sf
A-26 LT AAAsf New Rating AAA(EXP)sf
A-27 LT AAAsf New Rating AAA(EXP)sf
A-27-X LT AAAsf New Rating AAA(EXP)sf
A-28 LT AAAsf New Rating AAA(EXP)sf
A-28-X LT AAAsf New Rating AAA(EXP)sf
A-29 LT AAAsf New Rating AAA(EXP)sf
A-3-X LT AAAsf New Rating AAA(EXP)sf
A-30 LT AAAsf New Rating AAA(EXP)sf
A-31 LT AAAsf New Rating AAA(EXP)sf
A-32 LT AAAsf New Rating AAA(EXP)sf
A-33 LT AAAsf New Rating AAA(EXP)sf
A-34 LT AAAsf New Rating AAA(EXP)sf
A-34-X LT AAAsf New Rating AAA(EXP)sf
A-X LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-3-A LT BBB-sf New Rating BBB-(EXP)sf
B-3-X LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT B-sf New Rating B-(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
B LT BBB-sf New Rating BBB-(EXP)sf
B-X LT BBB-sf New Rating BBB-(EXP)sf
Transaction Summary
The RMCT 2024-J1 notes are supported by 359 prime loans with a
total balance of approximately $348.8 million as of the cutoff
date.
There have been no changes to the collateral or structure since the
presale.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, it views the home price values of
this pool as 11.4% above a long-term sustainable level. This is
lower than the projected overvaluation of 11.1% on a national level
as of 4Q23 and remains 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.
High-Quality Mortgage Pool (Positive): The collateral consists of
30-year, fixed-rate mortgage fully amortizing loans, seasoned at
approximately six months in aggregate, which is calculated by Fitch
as the difference between the cutoff date and origination date. The
average loan balance is $971,614. The collateral comprises
primarily of 88.7% prime-jumbo loans and 82 agency-conforming loans
accounting for 11.3% of the unpaid principal balance.
Borrowers in this pool have strong credit profiles (a 774 model
FICO), slightly higher than Fitch observed for earlier vintage
prime-jumbo securitizations but in line with comparable prime-jumbo
securitizations. The sustainable loan to value ratio is 83.7%, and
the mark-to-market combined loan to value ratio is 74.9%. Fitch
treated approximately 100% of the loans as full documentation
collateral, and 100% of the loans are qualified mortgages.
Of the pool, 91.2% are loans for which the borrower maintains a
primary residence, while 8.8% are for second homes. Additionally,
64.0% of the loans were originated through a retail channel.
Expected losses in the 'AAAsf' stress amount to 7.25%, similar to
those of other comparable prime-jumbo shelves.
Shifting-Interest Deal Structure (Mixed): The mortgage cash flow
and loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained. Due to the
leakage to the subordinate bonds, the shifting-interest structure
requires more CE. While there is only minimal leakage to the
subordinate bonds early in the life of the transaction, the
structure is more vulnerable to defaults at a later stage compared
with a sequential or modified-sequential structure.
To help mitigate tail risk, which arises as the pool seasons and
fewer loans are outstanding, a subordination floor of 1.65% of the
original balance will be maintained for the senior notes and a
subordination floor of 1.15% of the original balance will be
maintained for the subordinate notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
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 10.0%, 20.0% and 30.0% in addition to the
model projected 42.4% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. A 10% additional
decline in home prices would lower all rated classes by one full
category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national level
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes. A 10% gain
in home prices would result in a full category upgrade for the
rated class excluding those assigned 'AAAsf' ratings.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Canopy, Opus and Phoenix. 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, made the following adjustment to its
analysis: a 5% credit was given at the loan level for each loan
where satisfactory due diligence was completed. This adjustment
resulted in a 33bps reduction to the 'AAA' expected loss.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
REALT 2019-1: Fitch Lowers Rating on Two Tranches to 'BBsf'
-----------------------------------------------------------
Fitch Ratings has downgraded two and affirmed three classes of Real
Estate Asset Liquidity Trust's (REAL-T) commercial mortgage
pass-pass through certificates series 2019-1. Classes D-1 and D-2
were assigned Negative Outlooks following their downgrades. The
Rating Outlook for classes A-2, B and C were revised to Negative
from Stable.
Entity/Debt Rating Prior
----------- ------ -----
REAL-T 2019-1
A-2 75585RQZ1 LT AAAsf Affirmed AAAsf
B 75585RRB3 LT AAsf Affirmed AAsf
C 75585RRC1 LT Asf Affirmed Asf
D-1 75585RRD9 LT BBsf Downgrade BBBsf
D-2 LT BBsf Downgrade BBBsf
KEY RATING DRIVERS
Increased Pool Loss Expectations: The downgrade of classes D-1 and
D-2 reflect increased pool-level loss expectations since Fitch's
last rating action, mainly attributable to continued performance
deterioration and an updated lower valuation on the WSP Place loan
(13.7% of pool), which transferred to special servicing in December
2023. Fitch identified seven Fitch Loans of Concern (FLOCs; 31.4%
of pool), including two loans (18.1%) in special servicing. Fitch's
current ratings reflect a 'Bsf' rating case loss of 6.3%.
The Negative Outlooks on classes A-2, B, C, D-1 and D-2 factor an
additional sensitivity scenario that incorporates a potential
outsized loss of approximately 70% on the WSP Place loan, resulting
in a deal-level 'Bsf' sensitivity case loss of 11.8%. Downgrades to
these classes of up to two categories or more may be possible
without performance stabilization of the WSP Place loan and/or lack
of clarity or progression towards a workout.
The Negative Outlook on class A-2 also reflects limited cushion to
this class for potential future interest shortfalls should
valuation of the WSP Place loan decline further, affecting servicer
advances, or with additional FLOCs becoming delinquent. Current
interest shortfalls are affecting classes D-1, D-2 and the
non-rated classes E through H. The servicer is currently advancing
a portion of interest due on the WSP Place loan.
Specially Serviced Loans: The largest increase in loss since the
last rating action and largest contributor to overall loss
expectations is the WSP Place loan (13.7% of the pool), which is
secured by a 191,851-sf office property located in the Financial
District of Edmonton, AB. The loan is full recourse to the
sponsors, GSRI Ltd. and Pacific Plaza LP.
The loan transferred to special servicing in December 2023 for
payment default, ahead of its January 2024 maturity. The property
has experienced significant occupancy declines. Per updates from
the servicer, occupancy as of February 2024 declined to 38.8% after
the largest tenant, WSP Canada, downsized prior to its June 2026
lease expiration to 17.5% of the NRA from 36.4% at issuance.
Additionally, Her Majesty Queen in Right of Alberta (23.6% of NRA)
and Alberta Investment Management Corporation (8.5%) have also
vacated. The borrower has not reported updated financials since YE
2021.
Fitch's 'Bsf' rating case loss of 29% (prior to concentration
adjustments) reflects an 11% cap rate and a 30% stress to the YE
2021 NOI which considers a longer-term sustainable property
performance. In addition to the rating case, Fitch's 'Bsf'
sensitivity case loss for this loan increases to approximately 70%
when considering a liquidation of the asset at the updated
appraisal value, which is 71% below the appraisal value obtained at
issuance.
Per updates from the special servicer, the loan has been modified,
with terms that include a maturity extension through June 2026 and
the interest rate increasing to 7% from 4.654%. Given the updated
lower valuation and to allow time for the collateral and market
conditions to stabilize, as part of the executed forbearance
agreement, the special servicer is forbearing its right to enforce
the recourse provisions embedded in the loan in exchange for
additional security via assignment of proceeds upon disposition of
assets from the borrower's portfolio. In addition, the borrower has
agreed to make a principal payment of at least $1.2 million by July
2025. During the forbearance term, the special servicer has
appointed CBRE to lease up the asset.
The next largest specially serviced loan, Group Guzzo Retail
Terrebone loan (4.4%), is secured by a 101,821-sf mixed-use (retail
and office) property located in Terrebonne, Quebec. The loan is
full recourse to the sponsor, Cinemas Guzzo, Inc. The 80,418-sf
retail space is occupied by a sponsor-owned 14-screen movie
theater. The 21,403-sf office space is occupied by Cinemas Guzzo
Seige Social (15.0% of the NRA) through February 2038 and Centre de
Sante et Service (6.0%) on a lease that expired in January 2024.
Fitch requested updated financials, but the special servicer
indicated the borrower has not provided. The loan transferred to
special servicing in May 2024 due to delinquent principal and
interest payments.
Fitch's loss expectations are based on a stress to the October 2023
appraisal value, which is above the loan balance, resulting in a
minimal 'Bsf' rating case loss to account for fees and expenses.
Recourse Provisions: There are 23 loans (76.3% of the pool) that
contain recourse provisions, 19 of which (68.0%) are full recourse
to the sponsor.
Increasing Credit Enhancement: As of the July 2024 distribution
date, the pool's aggregate balance has been paid down by 43.8% to
$250.9 million from $446.4 million at issuance. Loan maturities are
concentrated in 2028 (12 loans; 47.7% of the pool) and 2029 (12
loans; 33.0%). All loans in the pool are currently amortizing.
Interest Shortfalls: Cumulative interest shortfalls totaling
$554,932 million are affecting classes D-1, D-2 and the non-rated
classes E through H. Classes D-1 and D-2 are receiving a portion of
their interest and classes E through H are not receiving their
interest.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A downgrade of up to one category on class A-2 may be possible
should performance and/or valuation of the WSP Place loan decline
further, if the WSP Place loan liquidates at an outsized loss
in-line with Fitch's sensitivity scenario and/or interest
shortfalls affect this class from additional FLOCs becoming
delinquent.
Downgrades of up to two categories on classes B and C are possible
if WSP Place loan liquidates at an outsized loss in-line Fitch's
sensitivity scenario and/or should performance of other FLOCs,
namely Yarmouth Mall & Shoppes, Churchill Plaza, Clayton Crossing
SC, Eastview Retail and William Street Industrial, experience
further performance declines and/or default at or prior to
maturity.
Further downgrades of two categories or more on classes D-1 and D-2
are possible if WSP Place loan liquidates at an outsized loss
in-line with Fitch's sensitivity scenario and/or with further
performance declines of the aforementioned FLOCs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated B and C would occur with significant
increases in CE, better than expected recoveries on WSP Place loan
and with performance improvement on the FLOCs, namely Yarmouth Mall
& Shoppes, Churchill Plaza, Clayton Crossing SC, Eastview Retail
and William Street Industrial.
Upgrades to classes D-1 and D-2 are unlikely, but may occur with
significantly better than expected recoverability of the WSP place
loan. Upgrades may be limited due to increasing concentration and
adverse selection of the remaining pool.
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.
SEQUOIA MORTGAGE 2024-8: Fitch Gives B+(EXP) Rating on B4 Certs
---------------------------------------------------------------
Fitch Ratings has assigned expected ratings to the residential
mortgage-backed certificates to be issued by Sequoia Mortgage Trust
2024-8 (SEMT 2024-8).
Entity/Debt Rating
----------- ------
SEMT 2024-8
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
B1A LT AA-(EXP)sf Expected Rating
B1X LT AA-(EXP)sf Expected Rating
B2 LT A-(EXP)sf Expected Rating
B2A LT A-(EXP)sf Expected Rating
B2X 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 389 loans with a total balance of
approximately $446.9 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 (QM) Pool (Positive): The collateral consists
of 389 loans, totaling $446.9 million, and seasoned approximately
five months in aggregate. The borrowers have a strong credit
profile (775 FICO and 35.9% debt-to-income) and a moderate leverage
(81.6% sustainable loan-to-value). The pool consists of 94.5% of
loans where the borrower maintains a primary residence, while 5.5%
is second home. Additionally, 66.0% of the loans were originated
through a retail channel. Additionally, 100.0% are designated as QM
loan.
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.
11.5% on a national level as of 1Q24, up 0.4% 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 5.9% YoY nationally as of May 2024 despite modest
regional declines, but are still being supported by limited
inventory.
Shifting Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate, shifting
interest structure, whereby the subordinate classes receive only
scheduled principal and are locked out from receiving unscheduled
principal or prepayments for five years. The lockout feature helps
to maintain subordination for a longer period should losses occur
later in the life of the deal.
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 to the super-senior
classes (A-9, A-12 and A-18).
Interest Reduction Risk (Negative): This deal is structured to four
months of servicer advances for delinquent P&I; with this, the
transaction also 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 42.2% 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'.
CRITERIA VARIATION
Per criteria, Fitch expects originators or aggregators that are new
to Fitch and represent greater than 15% of a portfolio to be deemed
'Acceptable' following an abbreviated qualitative assessment. The
variation is related to the 17.4% concentration of Ally Financial
which has not been reviewed by Fitch. Fitch is comfortable with the
originator concentration given the 100% diligence performed, strong
collateral attributes and Ally Financial standing as top 25
domestic bank and financially rated by Fitch.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 93.8% of the pool by loan
count. The third-party due diligence was consistent with Fitch's
"U.S. RMBS Rating Criteria." Clayton and AMC 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 2024-8 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in SEMT 2024-8 and includes strong R&W and transaction due
diligence as well as a strong aggregator, which resulted in a
reduction in the expected losses. This has a positive impact on the
credit profile and is relevant to the ratings in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SLM STUDENT 2007-6: Fitch Lowers Rating on Cl. A-5 Notes to 'BBsf'
------------------------------------------------------------------
Fitch Ratings has downgraded the outstanding notes of the A-5 and B
class notes of SLM Student Loan Trust 2007-6. Following the
downgrades, the Rating Outlook for the A-5 class notes is Negative,
and the Outlook for the class B notes is Stable.
Entity/Debt Rating Prior
----------- ------ -----
SLM Student Loan
Trust 2007-6
A-5 78444CAE3 LT BBsf Downgrade Asf
B 78444CAF0 LT Bsf Downgrade BBBsf
Transaction Summary
The class A-5 notes pass all credit stresses but miss their legal
final maturity date of April 27, 2043 under all maturity stresses
in Fitch's cashflow modelling. Performance has continued to
deteriorate since the prior review from a maturity risk
perspective. The loan term increased to 207.0 months from 205.7
months at the prior review. The downgrade of the notes to 'BBsf'
from 'Asf' reflects the increased maturity risk in Fitch's cashflow
analysis. The notes' rating remains higher than the model-implied
rating because of the length of time to the legal final maturity
date, which is over seven years away.
The class B notes pass credit stresses in Fitch's cashflow analysis
up to 'BBBsf' but miss their legal final maturity April 27, 2043
under all maturity stresses. The downgrade of the class B notes to
'Bsf' from 'BBBsf' reflects the increased maturity risk, since the
last review and the subordinate credit position of this class of
notes compared to class A-5 notes. The Stable Outlook mainly
reflects the length of time to maturity for the notes.
The ratings on the class A-5 and class B notes also incorporate
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor, the time horizon until the class A
and class B maturity dates and the current rate of amortization of
the bonds.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust's collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AA+'/Stable.
Collateral Performance: Based on transaction-specific performance
to date, Fitch assumes a base case cumulative default rate of
28.75% and a 79.06% default rate under the 'AA' credit stresses
scenario. After applying the default timing curve per criteria, the
effective default rate is unchanged from the cumulative default
rate. The claim reject rate is assumed to be 0.25% in the base case
and 1.65% in the 'AA' case.
Fitch maintained the sustainable constant default rate
assumption(sCDR) of 3.70%. The 31-60 DPD have decreased to 4.10%
from 4.17% one year ago, while 91-120 DPD increased to 2.06% from
1.26% one year ago. Fitch also maintained the sustainable constant
prepayment rate (sCPR; voluntary and involuntary prepayments) of
9.20% in the cash flow model. Increases in pre-payments from loan
consolidation activity since the last review reflected benefits
FFELP borrowers could receive by refinancing with a Federal Direct
loan prior to the end of June 2024. Fitch expects CPRs to decrease
quickly, similar to the Public Service Loan Forgiveness Program
waiver, which ended in October 2022 and which also drove short-term
inflation of CPR and voluntary prepayments higher. CPRs are
expected to decrease to historical levels in line with the sCPR
assumptions.
As of March 2024, the TTM levels of deferment, forbearance and
income-based repayment (IBR; prior to adjustment) are 3.95% (4.09%
at March 31, 2023), 16.87% (16.50%) and 24.46% (22.78%). These
assumptions are used as the starting point in cash flow modeling,
and subsequent declines or increases are modelled as per criteria.
The borrower benefit is assumed to be approximately 0.08%, based on
information provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. All the notes are indexed to 90-day average SOFR. Fitch
applies its standard basis and interest rate stresses to these
transactions as per criteria.
Payment Structure: Credit enhancement is provided by
overcollateralization, excess spread and for the class A notes,
subordination. As of the July 2024 distribution date, the parity
ratio is 100.00%. Liquidity support is provided by a reserve
account currently sized at its floor of $2,250,000. The transaction
will continue to release cash as long as 100% total parity
(excluding the reserve account) is maintained.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient is an acceptable
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
'AA+sf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below should
only be considered as one potential outcome, as the transactions
are exposed to multiple dynamic risk factors and should not be used
as an indicator of possible future performance.
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'BBsf'; class B 'Bsf';
- Default increase 50%: class A 'Bsf'; class B 'Bsf';
- Basis Spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf';
- Basis Spread increase 0.5%: class A 'Bsf'; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
- IBR Usage increase 25%: class A 'Bsf'; class B 'Bsf';
- IBR Usage increase 50%: class A 'Bsf'; class B 'Bsf'.
- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Credit Stress Rating Sensitivity
- Default decrease 25%: class A 'BBBsf'; class B 'BBBsf';
- Default decrease 50%: class A 'Asf'; class B 'Asf';
- Basis Spread decrease 0.25%: class A 'BBBsf'; class B 'BBBsf';
- Basis Spread decrease 0.5%: class A 'AA+sf'; class B 'Asf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
- IBR Usage decrease 25%: class A 'Bsf'; class B 'CCCsf';
- IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'.
- Remaining Term decrease 25%: class A 'AA+sf'; class B 'Asf';
- Remaining Term decrease 50%: class A 'AA+sf'; class B 'Asf'.
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.
TOWD POINT 2024-3: Fitch Assigns B-sf Final Rating on Cl. B2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to Towd Point Mortgage
Trust 2024-3 (TPMT 2024-3).
Entity/Debt Rating Prior
----------- ------ -----
Towd Point Mortgage Trust 2024-3
A1A LT AAAsf New Rating AAA(EXP)sf
A1B LT AAAsf New Rating AAA(EXP)sf
A2 LT AA-sf New Rating AA-(EXP)sf
M1 LT A-sf New Rating A-(EXP)sf
M2 LT BBB-sf New Rating BBB-(EXP)sf
B1 LT BB-sf New Rating BB-(EXP)sf
B2 LT B-sf New Rating B-(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
B4 LT NRsf New Rating NR(EXP)sf
B5 LT NRsf New Rating NR(EXP)sf
XS1 LT NRsf New Rating NR(EXP)sf
XS2 LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
A1 LT AAAsf New Rating AAA(EXP)sf
R LT NRsf New Rating NR(EXP)sf
Transaction Summary
The bond sizes in this rating action commentary reflect the final
closing bond sizes. The remainder of the commentary reflects the
data as of the statistical calculation date.
The TPMT 2024-3 transaction is expected to close on July 30, 2024.
The notes are supported by 1,224 primarily seasoned performing
loans (SPL) and reperforming loans (RPL) with a total balance of
approximately $501 million, as of the statistical calculation
date.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional senior-subordinate sequential structure.
The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicers will advance delinquent (DQ) monthly
payments of P&I for up to 150 days (under OTS method) or until
deemed non-recoverable.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to its updated view
on sustainable home prices, Fitch views the home price values of
this pool as 8% above a long-term sustainable level (versus 11.1%
on a national level as of 4Q23, unchanged since the prior quarter).
Housing affordability is the worst it has been in decades, driven
by both high interest rates and elevated home prices. Home prices
have increased 5.5% yoy nationally as of February 2024, despite
modest regional declines, but are still being supported by limited
inventory.
Seasoned Prime Credit Quality (Positive): The collateral consists
of 1,224 seasoned performing first lien loans, totaling $501
million and seasoned approximately 89 months in aggregate
(calculated as the difference between the origination date and the
run date). The pool is 98.7% current and 1.3% 30-59 days DQ. Over
the past two years, 84.9% of loans have been clean current.
Additionally, 9.5% of loans have a prior modification. The
borrowers have a very strong credit profile (762 Fitch model FICO
and 35% debt-to-income [DTI] ratio) and low leverage (58%
sustainable loan-to-value [sLTV] ratio). The pool consists of 84.8%
of loans where the borrower maintains a primary residence, while
15.2% are investment properties (including unknown occupancy) or a
second home.
Low Leverage (Positive): The pool consists of loans with a weighted
average (WA) original combined LTV (CLTV) ratio of 68.5%. All loans
received updated property values, translating to a WA current
(mark-to-market) CLTV ratio of 52.9% after applicable haircuts
based on valuation type and an sLTV of 57.7% at the base case. This
reflects low-leverage borrowers and is stronger than in comparable
seasoned transactions.
Payment Shock (Negative): Approximately 67% of the pool loans are
vulnerable to a future payment shock, either as a result of
underlying adjustable-rate loans or loans currently in an
interest-only period (or both). As the adjustable-rate loans were
originated under low rates and given the current rate environment,
the reset could prove to be meaningful. The borrowers' credit
profile and very low leverage should mitigate potential defaults
arising from a payment shock; however, defaults were still
increased by 46% to account for this risk.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent P&I. The limited advancing reduces
loss severities, as there is a lower amount repaid to the servicer
when a loan liquidates and liquidation proceeds are prioritized to
cover principal repayment over accrued but unpaid interest. The
downside to this is the additional stress on the structure side, as
there is limited liquidity in the event of large and extended
delinquencies.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the most senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' rated notes prior to other principal distributions
is highly supportive of timely interest payments to that class in
the absence of servicer advancing.
Indemnification Clause (Mixed): Banc of California (BoC), the
seller for 54% of the pool, will serve as the backstop and
indemnify any losses resulting from noncompliance with the ATR
standards for BoC-originated loans. Fitch deems the indemnification
provision to be robust enough to cover any ATR-related risks or
losses.
The indemnification language states that the BoC remedy provider
will indemnify the issuer and hold it harmless against any losses,
damages, penalties, fines, forfeitures, legal fees (including,
without limitation, legal fees incurred in connection with the
enforcement of the BoC remedy provider's indemnification
obligation) and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion
arising from or relating to (i) a breach or asserted breach of the
ATR reps or (ii) any act or omission on the part of the BoC remedy
provider in originating, receiving, processing or funding any BoC
mortgage loan, solely relating to (x) the ATR reps, prior to the
date such BoC mortgage loan was sold to an affiliate of the
transferring trusts or (y) interim servicing of the BoC mortgage
loans by the BoC remedy provider or its designee in strict
compliance with the terms of the BoC MLPA prior to the related
servicing transfer date.
Additionally, approximately 87% (by UPB) of the BoC loans underwent
a compliance review and only 26 loans had potential ATR findings,
all of which are likely caused by missing documentation, as all of
these loans are 100% clean pay.
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 40.2% at 'AAA'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
CRITERIA VARIATION
Fitch's analysis incorporated two criteria variations from its
"U.S. RMBS Rating Criteria" and "U.S. RMBS Loan Loss Criteria."
The first variation is that a due diligence compliance and data
integrity review was not completed on 100% of RPLs and SPLs from
multiple unknown originators. Approximately 74.4% by loan count
(46.3% by UPB) of the pool was originally acquired by the
transferring trusts and securitization trust seller from various
unrelated third-party sellers. Of this, 30 loans, or 3.3% by loan
count (0.9% by UPB), did not receive a due diligence compliance and
data integrity review.
The number of loans that did not receive a due diligence compliance
and data integrity review was considered immaterial relative to the
overall pool; thus, estimating full diligence review findings by
extrapolating the impact of adjustments on the reviewed portion was
deemed unnecessary. This variation had no rating impact.
The second variation relates to the application of lower loss
severity floors than those described in Fitch's criteria. This pool
benefits from a material amount of equity buildup. Even after a 40%
home price decline environment (AAAsf rating case), the stressed
sLTV is only 88.7%. Additionally, the pool's sLTV of 57.7% is below
the RPL industry average.
Fitch believes that applying a 30% loss severity floor in this
situation is highly punitive and considers a 20% loss severity
floor at 'AAAsf' provides additional downside protection in the
event of idiosyncratic events while differentiating this pool from
other pools with much higher sLTVs. This treatment resulted in a
rating of approximately one notch higher for each class.
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 Westcor. A third-party due diligence
was performed on approximately 93% (by loan count) of the pool by
AMC and Clayton, both assessed as 'Acceptable' third-party review
(TPR) firms by Fitch. While the review was substantially similar to
Fitch criteria with respect to RPL transactions, the sample size
yielded minor variations to the criteria.
The scope primarily focused on a regulatory compliance review to
ensure loans were originated in accordance with predatory lending
regulations. The results of the review indicated moderate
operational risk with a 12% portion assigned final compliance
grades of 'C' or 'D'. Fitch considered this information, along with
the tax, title and lien review results from AMC and Westcor, in its
analysis, which is reflected in the 'AAAsf' expected loss of
11.25%.
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.
VOYA CLO 2024-3: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Voya CLO 2024-3, Ltd.
Entity/Debt Rating
----------- ------
Voya CLO 2024-3,
Ltd.
A-1 LT NR(EXP)sf Expected Rating
A-1 Loan LT NR(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
Transaction Summary
Voya CLO 2024-3, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Voya
Alternative Asset Management LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.96, versus a maximum covenant, in accordance with
the initial expected matrix point of 25. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.12% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.5% versus a
minimum covenant, in accordance with the initial expected matrix
point of 69.2%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings. The WAL used for the transaction stress portfolio
and matrices analysis is 12 months less than the WAL covenant to
account for structural and reinvestment conditions after the
reinvestment period. In Fitch's opinion, these conditions would
reduce the effective risk horizon of the portfolio during stress
periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'A+sf' for
class D, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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 Voya CLO 2024-3,
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.
VOYA CLO 2024-3: Fitch Assigns 'BB-sf' Rating on Class E Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Voya CLO
2024-3, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Voya CLO 2024-3, Ltd.
A-1 Loans LT NRsf New Rating NR(EXP)sf
A-1 Notes LT NRsf New Rating NR(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
Transaction Summary
Voya CLO 2024-3, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Voya
Alternative Asset Management LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.96, versus a maximum covenant, in accordance with
the initial expected matrix point of 25. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.12% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.5% versus a
minimum covenant, in accordance with the initial expected matrix
point of 69.2%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings. The weighted average life (WAL) used for the
transaction stress portfolio and matrices analysis is 12 months
less than the WAL covenant to account for structural and
reinvestment conditions after the reinvestment period. In Fitch's
opinion, these conditions would reduce the effective risk horizon
of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, and
between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AAsf' for class C, 'A+sf' for
class D, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
Date of Relevant Committee
29 July 2024
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Voya CLO 2024-3,
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.
WELLMAN PARK: Fitch Assigns 'BBsf' Rating on Class E-R Notes
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Wellman
Park CLO, Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Wellman Park
CLO, Ltd.
A-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 BBsf New Rating
F LT NRsf New Rating
Subordinated Notes LT NRsf New Rating
Transaction Summary
Wellman Park CLO, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Blackstone Liquid
Credit Strategies LLC which originally closed in June 2021. The
secured notes will be refinanced in whole on Aug. 7, 2024. Net
proceeds from the issuance of the secured and subordinated notes
will provide financing on a portfolio of approximately $600 million
of primarily first-lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
95.54% first-lien senior secured loans and has a weighted average
recovery assumption of 75.36%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-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-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, 'A+sf'
for class D-1-R, 'A-sf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Wellman Park CLO,
Ltd. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
WELLS FARGO 2018-C46: Fitch Affirms CCC Rating on Class G-RR Debt
-----------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Wells Fargo Commercial
Mortgage Trust 2018-C46 (WFCM 2018-C46), 15 classes of Wells Fargo
Commercial Mortgage Trust 2018-C47 (WFCM 2018-C47) and 13 classes
of Wells Fargo Commercial Mortgage Trust 2018-C48 (WFCM 2018-C48).
Fitch has also revised the Rating Outlooks for classes H-RR and
G-RR in WFCM 2018-C47 and D and X-D in WFCM 2018-C48 to Negative
from Stable.
Fitch has affirmed the MOA 2020-WC46 E horizontal risk retention
pass through certificate (2018 C46 III Trust) and MOA 2020-WC48 E
horizontal risk retention pass through certificate (2018 C48 III
Trust).
Entity/Debt Rating Prior
----------- ------ -----
WFCM 2018-C46
A-2 95001QAR2 LT AAAsf Affirmed AAAsf
A-3 95001QAT8 LT AAAsf Affirmed AAAsf
A-4 95001QAU5 LT AAAsf Affirmed AAAsf
A-S 95001QAX9 LT AAAsf Affirmed AAAsf
A-SB 95001QAS0 LT AAAsf Affirmed AAAsf
B 95001QAY7 LT AA-sf Affirmed AA-sf
C 95001QAZ4 LT A-sf Affirmed A-sf
D 95001QAC5 LT BB+sf Affirmed BB+sf
E-RR 95001QAE1 LT BB-sf Affirmed BB-sf
F-RR 95001QAG6 LT B-sf Affirmed B-sf
G-RR 95001QAJ0 LT CCCsf Affirmed CCCsf
X-A 95001QAV3 LT AAAsf Affirmed AAAsf
X-B 95001QAW1 LT AA-sf Affirmed AA-sf
X-D 95001QAA9 LT BB+sf Affirmed BB+sf
MOA 2020-WC46 E
E-RR 90215NAA9 LT BB-sf Affirmed BB-sf
WFCM 2018-C48
A-4 95001RAW9 LT AAAsf Affirmed AAAsf
A-5 95001RAX7 LT AAAsf Affirmed AAAsf
A-S 95001RBA6 LT AAAsf Affirmed AAAsf
A-SB 95001RAV1 LT AAAsf Affirmed AAAsf
B 95001RBB4 LT AA-sf Affirmed AA-sf
C 95001RBC2 LT A-sf Affirmed A-sf
D 95001RAC3 LT BBB-sf Affirmed BBB-sf
E-RR 95001RAE9 LT BBB-sf Affirmed BBB-sf
F-RR 95001RAG4 LT BB-sf Affirmed BB-sf
G-RR 95001RAJ8 LT B-sf Affirmed B-sf
X-A 95001RAY5 LT AAAsf Affirmed AAAsf
X-B 95001RAZ2 LT AA-sf Affirmed AA-sf
X-D 95001RAA7 LT BBB-sf Affirmed BBB-sf
MOA 2020-WC48 E
E-RR 90216GAA3 LT BBB-sf Affirmed BBB-sf
WFCM 2018-C47
A-2 95002DAX7 LT AAAsf Affirmed AAAsf
A-3 95002DBD0 LT AAAsf Affirmed AAAsf
A-4 95002DBG3 LT AAAsf Affirmed AAAsf
A-S 95002DBR9 LT AAAsf Affirmed AAAsf
A-SB 95002DBA6 LT AAAsf Affirmed AAAsf
B 95002DBU2 LT AA-sf Affirmed AA-sf
C 95002DBX6 LT Asf Affirmed Asf
D 95002DAC3 LT BBBsf Affirmed BBBsf
E-RR 95002DAE9 LT BBB-sf Affirmed BBB-sf
F-RR 95002DAG4 LT BB+sf Affirmed BB+sf
G-RR 95002DAJ8 LT BB-sf Affirmed BB-sf
H-RR 95002DAL3 LT B-sf Affirmed B-sf
X-A 95002DBK4 LT AAAsf Affirmed AAAsf
X-B 95002DBN8 LT AA-sf Affirmed AA-sf
X-D 95002DAA7 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' rating case
losses are 7.2% in WFCM 2018-C46, 3.7% in WFCM 2018-C47 and 4.7% in
WFCM 2018-C48. Fitch Loans of Concerns (FLOCs) comprise seven loans
(22.6% of the pool) in WFCM 2018-C46, including three specially
serviced loans (6.8%); 12 loans (20.6%) in WFCM 2018-C47, including
three specially serviced loans (5%); 13 loans (30.1%) in WFCM
2018-C48 with no specially serviced loans.
The affirmations in all transactions reflect generally stable pool
performance and loss expectations since Fitch's prior rating
action. The Negative Outlooks in each deal reflect refinancing
risks for FLOCs secured by office properties.
Additionally, Negative Outlooks in WFCM 2018-C46 reflect potential
for higher losses with formerly specially serviced loans Fair Oaks
Mall and Silver Spring Plaza and performance concerns for Starwood
Hotel Portfolio in WFCM 2018-C47 and WFCM 2018-C48, as well as
maturity concerns with office properties Meridian at North in WFCM
2018-C47, and 1600 Terrell Mill Road, Home Depot Technology Center
and Liberty Portfolio in WFCM 2018-C48.
The largest contributor to overall loss expectations WFCM 2018-C46
is the Fair Oaks Mall (6.6%) loan which is secured by an enclosed
regional mall in Fairfax, VA. Non-collateral anchors include
JCPenney and Macy's Furniture Gallery. A second Macy's store serves
as a collateral anchor (27.7% of collateral NRA; February 2026).
The non-collateral former Sears store was 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 collateral was 92% occupied as of September 2023, compared to
91% in September 2022 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 loan transferred to special servicing in February 2023 due to
imminent maturity default. 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). According to the special servicer, the extension
would allow Olshan time to execute on a redevelopment of the
property into a residential focused mixed-use development. Fitch's
'Bsf' rating case loss of 29% (prior to concentration add-ons)
reflects a 7.5% stress to the annualized September 2023 NOI and a
12.5% cap rate.
Silver Spring Plaza (6.3%) is a FLOC given the low occupancy,
recent return from special servicing and continued concerns with
refinanceability. The collateral is a 242,823-sf office property
located in Silver Spring, MD. The loan returned to the master
servicer in March 2024 after originally transferring to special
servicing in July 2023 due to imminent monetary default. The loan
was modified with terms including a maturity date extension to July
2026. Per the YE 2023 rent roll, the property was 67.4% occupied.
Per CoStar as of QTD 3Q2024, the total submarket had a 18% vacancy
rate and 23.7% availability rate. Fitch's 'Bsf' rating case loss of
22% (prior to concentration add-ons) reflects a 15% stress to the
YE 2021 NOI and an 11% cap rate as well as an elevated probability
of default given ongoing concerns with maturity default.
The largest driver of expected losses in WFCM 2018-C47 is the
Starwood Hotel Portfolio loan (7.9%; 4% of the pool in WFCM
2018-C48). The loan is a FLOC given ongoing performance concerns;
the portfolio performance continues to stabilize slowly from the
pandemic. The TTM March 2024 NOI is 39% below YE 2019 and 2% below
the Fitch issuance NCF.
The portfolio's 22 hotels are located in 12 states with the largest
state by key of Missouri (23.3% of keys), followed by Kansas (13.6%
of keys) and Illinois (13% of keys). The collateral includes four
full-service hotels, six select-service hotels, five extended stay
hotels, and seven limited-service hotels and operates under three
brands including Marriott, Hilton and IHG. Fitch's 'Bsf' rating
case loss of 10% (prior to concentration add-ons) reflects an
11.50% cap rate and 15% stress to the TTM March 2024 NOI.
The largest contributor to expected losses in WFCM 2018-C48 is 1000
Windward Concourse (4.1%). The loan is a FLOC due to occupancy
declines and the submarket. Per the March 2024 rent roll, the
property was 63.3% occupied. Tenant rollover included 3.9% of NRA
in 2024 and 23.7% in 2025 (including the second largest tenant,
Kinder Morgan). Occupancy declined to 77% in 2021 from 98% in 2020
due to the largest tenant, Travelers, reducing its space to 34.7%
from 55.8%. Travelers remains the largest tenant and renewed
through May 2028 from August 2022.
Per CoStar as of QTD 3Q2024, comparable properties in the N
Fulton/Forsyth County submarket had a 25.3% vacancy rate and 28.4%
availability rate while the total submarket had a 18.4% vacancy
rate and 21.4% availability rate. Fitch's 'Bsf' rating case loss of
11% (prior to concentration add-ons) reflects a 10% cap rate and a
20% stress to the YE 2022 NOI.
Meridian at North is a FLOC in WFCM 2018-C47 (2.8%), which is
collateralized by an office property located in Indianapolis, IN.
Occupancy remains at 100%; however, the largest tenant Centene
Management Company (26.6% of NRA, 32% of base rent) is expected to
vacate at lease expiration in January 2025. Fitch's analysis
included a sensitivity scenario which increased the probability of
default to reflect concerns with maturity default given the
upcoming increased vacancy.
Other FLOCs in WFCM 2018-C48 include 1600 Terrell Mill Road (3.3%),
Home Depot Technology Center (1.9%) and Liberty Portfolio (1.7%).
These office properties are experiencing declines in occupancy or
expected occupancy due to a high proportion of subleased space, and
concerns with weak submarket performance. Fitch ran an additional
sensitivity scenario with higher probability of default to address
concerns with elevated maturity default risk. This sensitivity
scenario contributed to the Negative Outlooks.
Defeasance: Respective defeasance percentages in the WFCM 2018-C46,
WFCM 2018-C47 and WFCM 2018-C48 transactions include 6.7% (four
loans), 11.2% (11 loans) and 6.9% (four loans).
Increased Credit Enhancement (CE): As of the June 2024 remittance
report, the aggregate balances of the WFCM 2018-C46, WFCM 2018-C47
and WFCM 2018-C48 transactions have been reduced by 19.4%, 6.7% and
10.4%, respectively, since issuance. Loan maturities are
concentrated in 2028 with 33 loans for 81% of the pool in WFCM
2018-C46, 60 loans for 100% of the pool in WFCM 2018-C47 and 43
loans for 95% of the pool in WFCM 2018-C48.
Cumulative interest shortfalls for the WFCM 2018-C46, WFCM 2018-C47
and WFCM 2018-C48 transactions are $1.6 million, $417,600 and
$140,500 respectively; in all three transactions, they are
affecting the non-rated class H-RR or J-RR.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from concerns with further declines in performance that could
result in higher expected losses on FLOCs. If expected losses do
increase, downgrades to these classes are likely.
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 the junior 'AAAsf' rated classes with Negative
Outlooks are expected 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 may
occur should performance of the FLOCs deteriorate further or if
more loans than expected default at or prior to maturity. These
FLOCs include Fair Oaks Mall, Silver Spring Plaza, Medical Village
At Pine Hills and 11 North Pearl Street in WFCM 2018-C46; Starwood
Hotel Portfolio in WFCM 2018-C47 and WFCM 2018-C48; Meridian at
North in WFCM 2018-C47; and Riverworks, 1000 Windward Concourse,
1600 Terrell Mill Road, Home Depot Technology Center, and Liberty
Portfolio in WFCM 2018-C48.
Downgrades to classes rated in the 'BBBsf', 'BBsf', and 'Bsf'
categories, which have Negative Outlooks in each of the three
transactions, could occur with higher than expected losses from
continued underperformance of the aforementioned FLOCs,
particularly the aforementioned loans with deteriorating
performance and with greater certainty of losses on the specially
serviced loans or other FLOCs.
Downgrades to distressed ratings of 'CCCsf' would occur as losses
become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased 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.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings 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.
WELLS FARGO 2024-MGP: Moody's Assigns (P)Ba2 Rating to E-11 Certs
-----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to ten classes of
CMBS securities, to be issued by Wells Fargo Commercial Mortgage
Trust 2024-MGP, Commercial Mortgage Pass-Through Certificates,
2024-MGP.
Fund XI Certificates
Cl. A-11, Assigned (P)Aaa (sf)
Cl. B-11, Assigned (P)Aa3 (sf)
Cl. C-11, Assigned (P)A3 (sf)
Cl. D-11, Assigned (P)Baa3 (sf)
Cl. E-11, Assigned (P)Ba2 (sf)
Cl. HRR-11, Assigned (P)Ba3 (sf)
Fund XII Certificates
Cl. A-12, Assigned (P)Aaa (sf)
Cl. B-12, Assigned (P)Aa3 (sf)
Cl. C-12, Assigned (P)A3 (sf)
Cl. HRR-12, Assigned (P)Baa1 (sf)
RATINGS RATIONALE
The certificates are collateralized by two uncrossed commercial
mortgage loans:
i. A floating-rate and interest-only mortgage loan (the "Fund XI
Loan") secured by the related borrower's fee simple interest(s) in
a seven-property portfolio comprised of six
grocery/pharmacy-anchored retail centers and one community center.
The properties total approximately 1.3 million SF of rentable area
and are located across California and Washington (collectively, the
"Fund XI Properties" or the "Fund XI Portfolio").
ii. A floating-rate and interest-only mortgage loan (the "Fund XII
Loan") secured by the related borrower's fee simple and leasehold
interest(s) in an 11-property portfolio comprised of 10
grocery/pharmacy-anchored retail centers and one retail center
containing a gym. The properties total approximately 2.1 million SF
of rentable area and are located across California and Washington
(collectively, the "Fund XII Properties" or the "Fund XII
Portfolio").
Moody's approach to rating this transaction involved the
application of both Moody's Large Loan and Single Asset/Single
Borrower Commercial Mortgage-backed Securitizations methodology.
The rating approach for securities backed by single loans compares
the credit risk inherent in the underlying collateral with the
credit protection offered by the structure. The structure's credit
enhancement is quantified by the maximum deterioration in property
value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss
for various rating levels. In assigning single borrower ratings,
Moody's also consider a range of qualitative issues as well as the
transaction's structural and legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile.
The Moody's first mortgage actual Fund XI DSCR is 1.17x and Moody's
first mortgage actual stressed Fund XI DSCR is 0.92x. Moody's DSCR
is based on Moody's stabilized net cash flow. The Fund XI loan
first mortgage balance of $236.0 million represents a Fund XI
Moody's LTV ratio of 102.5% based on Moody's Value. Adjusted Fund
XI Moody's LTV ratio for the first mortgage balance is 92.9% based
on Moody's Value using a cap rate adjusted for the current interest
rate environment.
With respect to Fund XI loan level diversity, the pool's loan level
Herfindahl score is 4.19. Moody's also grade properties on a scale
of 0 to 5 (best to worst) and consider those grades when assessing
the likelihood of debt payment. The factors considered include
property age, quality of construction, location, market, and
tenancy. The portfolio's property quality grade is 1.75.
The Moody's first mortgage actual Fund XII DSCR is 1.49x and
Moody's first mortgage actual stressed Fund XII DSCR is 1.05x.
Moody's DSCR is based on Moody's stabilized net cash flow. The Fund
XII loan first mortgage balance of $425.0 million represents a Fund
XII Moody's LTV ratio of 87.1% based on Moody's Value. Adjusted
Fund XII Moody's LTV ratio for the first mortgage balance is 79.0%
based on Moody's Value using a cap rate adjusted for the current
interest rate environment.
With respect to Fund XI loan level diversity, the pool's loan level
Herfindahl score is 6.29. Moody's also grade properties on a scale
of 0 to 5 (best to worst) and consider those grades when assessing
the likelihood of debt payment. The factors considered include
property age, quality of construction, location, market, and
tenancy. The portfolio's property quality grade is 1.50.
Notable strengths of the transaction include: i. the property's
strong anchor tenancy and tenant mix; ii. locations; iii. tenant
sales; iv. multiple property pooling; and v. sponsorship. Notable
concerns of the transaction include: i. low percentage of tenants
reporting sales; ii. high share of discretionary retail offerings;
iii. a high MLTV ratio; iv. floating-rate interest-only loan
profile; and v. credit negative legal features.
Moody's rating approach considers sequential pay in connection with
a collateral release as a credit neutral benchmark. Although the
loans' release premium mitigates the risk of a ratings downgrade
due to adverse selection, the pro rata payment structure limits
ratings upgrade potential as mezzanine classes are prevented from
building enhancement. The benefit received from pooling through
cross-collateralization is also reduced.
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-backed
Securitizations" published in July 2024.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
WFLD 2014-MONT: S&P Lowers Class C Notes Rating to 'B- (sf)'
------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from WFLD 2014-MONT
Mortgage Trust, a U.S. CMBS transaction.
This is a U.S. CMBS transaction that is backed by a 10-year,
fixed-rate, interest-only (IO) mortgage loan secured by Westfield
Montgomery Mall in Bethesda, Md.
Rating Actions
The downgrades on classes A, B, C, and D reflect that:
-- While the loan, which transferred to special servicing in April
2024 due to imminent maturity default, was recently modified and
extended for two years to August 2026, S&P believes the borrower
will continue to face challenges refinancing the loan upon its
extended maturity date even after considering principal repayments
(details below) if the property's performance does not materially
improve. The special servicer obtained broker's opinions of value
(BOVs) that indicate a market value of the collateral mall that is
significantly below the issuance appraised value.
-- The property's reported performance has somewhat increased, but
it is still materially below pre-pandemic levels.
-- S&P's revised expected-case value, while comparable to the
value it derived in our last review in June 2022, is 36.7% below
its issuance value and 52.8% below the issuance appraised value.
S&P said, "The downgrade on class D to 'CCC (sf)' also reflects our
view that this class is at heightened risk of default and loss and
is susceptible to liquidity interruption, based on our analysis,
current market conditions, and its position in the payment
waterfall.
"Further, despite a higher model indicated rating, we lowered our
rating on class C to 'B- (sf)' because we qualitatively considered
the high cumulative debt per sq. ft. of $379 and its second-most
subordinate position in the payment waterfall.
"As we previously discussed, the loan transferred to special
servicing on April 4, 2024, due to imminent maturity default. The
sponsors, Unibail-Rodamco-Westfield (URW) and a joint venture
between Teachers Insurance And Annuity Association of America and
subsidiaries of Stichting Pensioenfonds ABP, indicated that they
were not able to repay the loan by its Aug. 1, 2024, maturity
date." According to the special servicer, Situs Holdings LLC, a
loan modification agreement was recently finalized and executed on
July 22, 2024, with terms that include:
-- Extending the loan's maturity for two years to Aug. 1, 2026.
-- The borrower making a one-time payment of $16.0 million to pay
down the loan's principal balance.
-- The borrower remitting an additional $5.5 million to pay down
the loan's principal balance (prorated monthly through the loan's
extended maturity date, about $230,000 per month). If the property
does not generate sufficient cash flow to fund the monthly amount,
the borrower is required to cover the shortfall.
-- The loan being placed in cash management and remaining there
through the extended maturity date.
-- The borrower having the right to release the Westlake Crossing
parcel for a sales price of at least $16.0 million and applying all
the sales proceeds to pay down the loan's principal balance.
According to the July 12, 2024, trustee remittance report, class D
had incurred monthly interest shortfalls of $72,917 and accumulated
interest shortfalls of $213,889, due primarily to special servicing
fees. S&P expects the borrower to repay the special servicing fees
as part of the loan modification. If the shortfalls are not repaid
back timely, it may further lower its rating to 'D (sf)'.
S&P said, "We will continue to monitor the performance of the mall
property and loan, including repayment of the loan's principal
balance as stipulated in the modification agreement. If we receive
information that differs materially from our expectations, such as
an updated appraisal value from the special servicer that is
substantially below our revised expected-case value or property
performance that is below our expectations, we may revisit our
analysis and take additional rating actions as we determine
appropriate."
Property-Level Analysis
Westfield Montgomery Mall is a two-story, 1.3 million-sq.-ft.
enclosed regional mall built in 1968 and renovated in 2014 in
Bethesda, of which 835,597 sq. ft. serves as collateral for the
loan. Non-collateral anchors at the property include Macy's Inc.
(BB+/Stable/B; 218,305 sq. ft.), Macy's Home (76,396 sq. ft.), and
a vacant anchor box formerly occupied by Sears (204,600 sq. ft.).
The mall is also anchored by Nordstrom ('BB+/Negative/--'; 212,800
sq. ft. ground lease), who owns its improvements.
In 2018, the sponsors announced a redevelopment project at the mall
that would involve demolishing the former Sears anchor store and
constructing various mixed-use buildings in three phases that would
include residential, hotel, and retail spaces as well as a parking
garage, a fitness center, and various outdoor areas. While the
Montgomery County government approved the redevelopment project in
July 2020, S&P has received limited updates on its progress other
than that various news articles indicated the sponsors were still
interested in the project.
S&P said, "At the time of our June 6, 2022, review, we noted that
the collateral property's performance had declined significantly in
2021. As a result, we revised and lowered our sustainable net cash
flow (NCF) to $23.3 million by utilizing an 86.7% occupancy rate,
$51-per-sq.-ft. S&P Global Ratings' gross rent, and 38.8% operating
expense ratio. Using a 7.00% S&P Global Ratings capitalization
rate, we arrived at an expected-case valuation of $332.5 million,
or $398 per sq. ft."
According to the March 31, 2024, rent roll and after excluding
known tenant movements, the collateral property was 85.6% leased.
The five largest tenants currently at the collateral property
comprised 41.0% of the net rentable area (NRA):
-- Nordstrom (26.5% of NRA; 0.3% of gross rent, as calculated by
S&P Global Ratings; October 2030 lease expiry),
-- AMC Theatres (8.1%; 6.6%; March 2034),
-- Forever 21 (2.7%; 1.4%; January 2025),
-- Lucky Strike (1.9%; 1.5%; January 2026), and
-- Gap/Gap Kids (1.8%; 0.2%; January 2025).
S&P said, "We noted that while the borrower has signed four new
in-line tenants totaling 13,570 sq. ft. (1.7% of NRA) in early
2024, 7.6% of NRA and 12.8% of gross rent (as calculated by S&P
Global Ratings) will roll over in 2024, 10.4% and 15.1% in 2025,
and 8.6% and 15.6% in 2026. According to the March 2024 tenant
sales report, excluding Apple and Tesla, the in-line tenant sales
and occupancy costs were about $514 per sq. ft. and 16.4%,
respectively, as calculated by S&P Global Ratings.
"In our current analysis, using an 85.6% occupancy rate,
$57.23-per-sq.-ft. S&P Global Ratings' gross rent, and 38.9%
operating expense ratio, we arrived at an S&P Global Ratings' NCF
of $23.3 million, unchanged from our last review. Utilizing an S&P
Global Ratings' capitalization rate of 7.25% (up 25 basis points
from our last review's 7.00% to reflect our view of the volatile
property's performance from strong competition from other retail
malls in the trade area and relatively weak anchor tenants at the
property), we arrived at an S&P Global Ratings' expected-case value
of $321.0 million, or $384 per sq. ft., 3.5% below our last review
value, a decline of 36.7% from our issuance value and 52.8% below
the issuance appraised value. We also considered that the special
servicer received BOVs that indicate a market value of the
collateral property that is significantly below the appraised value
at issuance. Our revised expected-case value yielded an S&P Global
Ratings' loan-to-value ratio of 102.3% after considering the
principal paydown of $21.5 million (on the reduced trust balance of
$328.5 million)."
Table 1
Servicer-reported collateral performance
2023(I) 2022(I) 2021(I)
Occupancy rate (%) 94.0 76.4 76.6
Net cash flow (mil. $) 25.3 28.1 22.0
Debt service coverage (x) 1.90 2.10 1.65
Appraisal value (mil. $) 680.0 680.0 680.0
(i)Reporting period.
Table 2
S&P Global Ratings' key assumptions
CURRENT LAST REVIEW ISSUANCE
(AUGUST 2024) (JUNE 2022) (AUGUST 2014)
(I) (I) (I)
Occupancy rate (%) 85.6 86.7 87.0
Net cash flow (mil. $) 23.3 23.3 33.0
Capitalization rate (%) 7.25 7.00 6.50
Value (mil. $) 321.0 332.5 506.9
Value per sq. ft. ($) 384 398 607
Loan-to-value ratio (%) 102.3(ii) 105.3 69.0
(i)Review period.
ii)Based on the reduced trust balance of $328.5 million. S&P
expects the trust balance to pay down by $21.5 million, according
to the recently executed modification agreement.
Transaction Summary
The IO mortgage loan had an initial and current balance of $350
million (according to the July 12, 2024, trustee remittance
report), pays a per annum fixed interest rate of 3.77%, and
originally matured on Aug. 1, 2024. Following the recently executed
loan modification, the loan now matures Aug. 1, 2026. The master
servicer, Wells Fargo Bank N.A., reported a debt service coverage
of 1.90x in 2023. To date, the trust has not incurred any principal
losses.
Ratings Lowered
WFLD 2014-MONT Mortgage Trust
Class A to 'BBB (sf)' from 'AA- (sf)'
Class B to 'BB- (sf)' from 'BBB- (sf)'
Class C to 'B- (sf)' from 'B+ (sf)'
Class D to 'CCC (sf)' from 'B (sf)'
[*] Moody's Raises Ratings on $50.3MM of US RMBS Issued 2017-2018
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 10 bonds from five US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo and agency eligible mortgage loans.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: FLAGSTAR MORTGAGE TRUST 2017-2
Cl. B-3, Upgraded to Aaa (sf); previously on Nov 18, 2022 Upgraded
to Aa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Sep 13, 2023 Upgraded
to Ba1 (sf)
Issuer: Flagstar Mortgage Trust 2018-1
Cl. B-3, Upgraded to Aaa (sf); previously on Sep 22, 2023 Upgraded
to Aa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Sep 22, 2023 Upgraded
to Ba1 (sf)
Issuer: Flagstar Mortgage Trust 2018-2
Cl. B-2, Upgraded to Aaa (sf); previously on Sep 22, 2023 Upgraded
to Aa1 (sf)
Cl. B-3, Upgraded to Aaa (sf); previously on Sep 22, 2023 Upgraded
to Aa3 (sf)
Issuer: Flagstar Mortgage Trust 2018-3INV
Cl. B-3, Upgraded to Aa1 (sf); previously on Sep 22, 2023 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to Aa1 (sf); previously on Sep 22, 2023 Upgraded
to A3 (sf)
Issuer: Flagstar Mortgage Trust 2018-5
Cl. B-3, Upgraded to Aaa (sf); previously on Sep 13, 2023 Upgraded
to Aa2 (sf)
Cl. B-5, Upgraded to A3 (sf); previously on Sep 13, 2023 Upgraded
to Ba3 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pools. Each of
the transactions Moody's reviewed continue to display strong
collateral performance, with cumulative losses at or near zero for
each transaction and a small number of loans in delinquency. In
addition, enhancement levels for most tranches have grown
significantly, as the pools amortize relatively quickly. The credit
enhancement since closing has grown, on average, 8x for the
tranches reviewed.
Moody's analysis on certain bonds included an assessment of the
existing credit enhancement floor, in place to mitigate the
potential default of a small number of loans at the tail end of a
transaction. In addition, while Moody's analysis applied a greater
probability of default stress on loans that have experienced
modifications, Moody's decreased that stress to the extent the
modifications were in the form of temporary payment relief.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
strategies regarding borrower relief programs and the impact those
programs may have on collateral performance and transaction
liquidity, through servicer advancing. Moody's recent analysis has
found that in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
No actions were taken on the other rated classes in these deals
because their expected losses on the bonds remain commensurate with
their current ratings, after taking into account the updated
performance information, structural features, credit enhancement
and other qualitative considerations.
Principal Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades Ratings on $146MM of US RMBS Issued 2021-2022
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 41 bonds from four US
residential mortgage-backed transactions (RMBS). Provident Funding
Mortgage Trust 2021-1 and Rate Mortgage Trust 2021-J2 are backed by
prime jumbo and agency eligible mortgage loans. Bayview Opportunity
Master Fund VI Trust 2022-INV4 and Citigroup Mortgage Loan Trust
2021-INV1 are backed by almost entirely agency eligible investor
(INV) mortgage loans.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Bayview Opportunity Master Fund VI Trust 2022-INV4
Cl. B-1, Upgraded to Aa2 (sf); previously on Mar 27, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Mar 27, 2022 Definitive
Rating Assigned A3 (sf)
Cl. B-3A, Upgraded to Baa1 (sf); previously on Mar 27, 2022
Definitive Rating Assigned Baa3 (sf)
Issuer: Citigroup Mortgage Loan Trust 2021-INV1
Cl. B-1, Upgraded to Aa1 (sf); previously on Jul 8, 2021 Definitive
Rating Assigned Aa2 (sf)
Cl. B-1-IO*, Upgraded to Aa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Aa2 (sf)
Cl. B-1-IOW*, Upgraded to Aa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Aa2 (sf)
Cl. B-1-IOX*, Upgraded to Aa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Aa2 (sf)
Cl. B-1W, Upgraded to Aa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Aa2 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jul 8, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-2-IO*, Upgraded to A1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-2-IOW*, Upgraded to A1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-2-IOX*, Upgraded to A1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-2W, Upgraded to A1 (sf); previously on Jul 8, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-3-IO*, Upgraded to Baa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-3-IOW*, Upgraded to Baa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-3-IOX*, Upgraded to Baa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-3W, Upgraded to Baa1 (sf); previously on Jul 8, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Jul 8, 2021 Definitive
Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Jul 8, 2021 Definitive
Rating Assigned B2 (sf)
Issuer: Provident Funding Mortgage Trust 2021-1
Cl. A-5, Upgraded to Aaa (sf); previously on Mar 25, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-5A, Upgraded to Aaa (sf); previously on Mar 25, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Mar 25, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Mar 25, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Mar 25, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Mar 25, 2021
Definitive Rating Assigned Ba3 (sf)
Issuer: Rate Mortgage Trust 2021-J2
Cl. A-31, Upgraded to Aaa (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-32, Upgraded to Aaa (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-33, Upgraded to Aaa (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-32*, Upgraded to Aaa (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-33*, Upgraded to Aaa (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-34*, Upgraded to Aaa (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa1 (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Aug 18, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-2A, Upgraded to A1 (sf); previously on Aug 18, 2021
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Aug 18, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba2 (sf); previously on Aug 18, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Aug 18, 2021 Definitive
Rating Assigned B3 (sf)
Cl. B-X-1*, Upgraded to Aa1 (sf); previously on Aug 18, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to A1 (sf); previously on Aug 18, 2021
Definitive Rating Assigned A3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pools.
Each of the transactions Moody's reviewed continue to display
strong collateral performance, with no cumulative losses for Rate
Mortgage Trust 2021-J2 and Bayview Opportunity Master Fund VI Trust
2022-INV4, and cumulative losses of less than .01% for Provident
Funding Mortgage Trust 2021-1 and Citigroup Mortgage Loan Trust
2021-INV1. These transactions also have a small number of loans in
delinquency. In addition, enhancement levels for most tranches have
grown significantly, as the pools amortize relatively quickly. The
credit enhancement since closing has grown, on average, 15.7% for
the tranches upgraded.
In addition, while Moody's analysis applied a greater probability
of default stress on loans that have experienced modifications,
Moody's decreased that stress to the extent the modifications were
in the form of temporary payment relief.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
strategies regarding borrower relief programs and the impact those
programs may have on collateral performance and transaction
liquidity, through servicer advancing. Moody's recent analysis has
found that in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
No actions were taken on the remaining rated classes in these deals
because their expected losses on the bonds remain commensurate with
their current ratings, after taking into account the updated
performance information, structural features and credit
enhancement.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds and/or pools.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades Ratings on $98MM of US RMBS Issued 2021-2022
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 28 bonds from three US
residential mortgage-backed transactions (RMBS), backed by prime
jumbo and agency eligible mortgage loans.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2021-GR2
Cl. A-3, Upgraded to Aaa (sf); previously on Aug 31, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on Aug 31, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Aug 31, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Aug 31, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-3*, Upgraded to Aaa (sf); previously on Aug 31, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Aug 31, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-6*, Upgraded to Aaa (sf); previously on Aug 31, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B, Upgraded to A1 (sf); previously on Oct 3, 2023 Upgraded to
A3 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Oct 3, 2023 Upgraded
to Aa2 (sf)
Cl. B-1-A, Upgraded to Aa1 (sf); previously on Oct 3, 2023 Upgraded
to Aa2 (sf)
Cl. B-1-X*, Upgraded to Aa1 (sf); previously on Oct 3, 2023
Upgraded to Aa2 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Oct 3, 2023 Upgraded
to A1 (sf)
Cl. B-2-A, Upgraded to Aa3 (sf); previously on Oct 3, 2023 Upgraded
to A1 (sf)
Cl. B-2-X*, Upgraded to Aa3 (sf); previously on Oct 3, 2023
Upgraded to A1 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Oct 3, 2023 Upgraded to
Baa2 (sf)
Cl. B-3-A, Upgraded to A2 (sf); previously on Oct 3, 2023 Upgraded
to Baa2 (sf)
Cl. B-3-X*, Upgraded to A2 (sf); previously on Oct 3, 2023 Upgraded
to Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Aug 31, 2021
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Aug 31, 2021
Definitive Rating Assigned B3 (sf)
Cl. B-X*, Upgraded to A1 (sf); previously on Oct 3, 2023 Upgraded
to A3 (sf)
Issuer: GS Mortgage-Backed Securities Trust 2021-PJ8
Cl. B-1, Upgraded to Aaa (sf); previously on Oct 3, 2023 Upgraded
to Aa1 (sf)
Cl. B-2, Upgraded to Aa2 (sf); previously on Oct 3, 2023 Upgraded
to Aa3 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Aug 31, 2021 Definitive
Rating Assigned Baa1 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Aug 31, 2021
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Aug 31, 2021
Definitive Rating Assigned B2 (sf)
Issuer: GS Mortgage-Backed Securities Trust 2022-PJ2
Cl. B-2, Upgraded to A1 (sf); previously on Oct 3, 2023 Upgraded to
A2 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Feb 28, 2022
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Feb 28, 2022 Definitive
Rating Assigned B3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pools.
Each of the transactions Moody's reviewed continue to display
strong collateral performance, with cumulative loss for the
transactions below 0.01% and a small number of loans in
delinquencies. In addition, enhancement levels for the tranches
have grown significantly, as the pool amortize relatively quickly.
The credit enhancement for each tranche upgraded has grown by, on
average, 17.70% since closing.
In addition, while Moody's analysis applied a greater probability
of default stress on loans that have experienced modifications,
Moody's decreased that stress to the extent the modifications were
in the form of temporary payment relief.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
strategies regarding borrower relief programs and the impact those
programs may have on collateral performance and transaction
liquidity, through servicer advancing. Moody's recent analysis has
found that in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
No actions were taken on the remaining rated classes in these deals
because their expected losses on the bonds remain commensurate with
their current ratings, after taking into account the updated
performance information, structural features and credit
enhancement.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment.
Transaction performance also depends greatly on the US macro
economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Takes Various Actions on 85 Classes From 33 U.S. RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 85 ratings from 33 U.S.
RMBS transactions issued between 2002 and 2007. The review yielded
27 upgrades, two withdrawals, one discontinuance, and 55
affirmations.
A list of Affected Ratings can be viewed at:
https://rb.gy/juc36e
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance, including delinquency trends;
-- Increase or decrease in available credit support;
-- Assessment of reduced interest payments due to loan
modifications and other credit-related events;
-- Missed interest payments;
-- A small loan count; and
-- Payment priority.
Rating Actions
S&P said, "The rating changes reflect our view regarding the
associated transaction-specific collateral performance, structural
characteristics, and/or the application of specific criteria
applicable to these classes. See the ratings list below for the
specific rationales associated with each of the classes with rating
transitions.
"The affirmations reflect our view that our projected credit
support, collateral performance, and credit-related reductions in
interest on these classes have remained relatively consistent with
our prior projections.
"In accordance with our surveillance and withdrawal policies, we
discontinued the rating on class A-2D from GSAMP Trust 2006-HE7 due
to the class being paid down in full.
"We withdrew our ratings on two classes from one transaction due to
the small number of loans remaining in the related group. Once a
pool has declined to a de minimis amount, its future performance
becomes more difficult to project. As such, we believe there is a
high degree of credit instability that is incompatible with any
rating level."
*********
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