/raid1/www/Hosts/bankrupt/TCR_Public/240901.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, September 1, 2024, Vol. 28, No. 244
Headlines
A&D MORTGAGE 2024-NQM4: S&P Assigns B-(sf) Rating on Cl. B-2 Certs
ADAGIO XII: S&P Assigns B- (sf) Rating on Class F Notes
ANGEL OAK 2024-8: Fitch Assigns 'B(EXP)sf' Rating on Cl. B-2 Certs
APIDOS CLO XXX: S&P Assigns BB- (sf) Rating on Class D Notes
ARBOR REALTY 2022-FL1: DBRS Confirms B(low) Rating on G Notes
ARES CLO LXIV: Moody's Assigns Ba3 Rating to $20MM Class E-R Notes
BALLYROCK CLO 27: S&P Assigns BB- (sf) Rating on Class D Notes
BANK 2017-BNK6: S&P Lowers Class X-F Certs Rating to 'CCC- (sf)'
BANK5 2024-5YR8: DBRS Finalizes BB(high) Rating on G-RR Certs
BANK5 2024-5YR8: Fitch Assigns Final B-sf Rating on Cl. G-RR Certs
BARINGS CLO 2018-II: S&P Assigns B- (sf) Rating on Class F-R Notes
BBCMS MORTGAGE 2019-C4: Fitch Cuts Rating on 2 Tranches to CCsf
BEAR STEARNS 2007-AR4: Moody's Hikes Rating on II-A-1 Debt From Ba1
BEAR STEARNS 2007-AR5: Moody's Ups Cl. I-A-1A Certs Rating to B1
BELLEMEADE RE 2024-1: DBRS Finalizes B Rating on Class B-1 Notes
BENCHMARK 2020-B21: Fitch Affirms B Rating on Class X-G Debt
BENCHMARK 2020-B22: Fitch Affirms B- Rating on 2 Tranches
BENEFIT STREET XXVII: S&P Assigns BB-(sf) Rating on Cl. E-R Notes
BLUEMOUNTAIN FUJI I: S&P Affirms BB- (sf) Rating on Class E Notes
BMO 2024-5C5: Fitch Assigns 'B-sf' Final Rating on Class G-RR Certs
BRAVO RESIDENTIAL 2024-NQM6: Fitch Gives B(EXP) Rating on B-2 Notes
BRSP LTD 2024-FL2: Fitch Assigns 'B-sf' Rating on Class G Notes
BSPRT 2021-FL7: DBRS Confirms B(low) Rating on Class H Notes
BX COMMERCIAL 2021-MC: S&P Affirms B- (sf) Rating on Class F Certs
BX COMMERCIAL 2024-AIRC: Fitch Assigns BBsf Rating on Cl. HRR Certs
BX TRUST 2018-GW: DBRS Confirms B(low) Rating on Class G Certs
BX TRUST 2021-ARIA: DBRS Confirms BB Rating on Class G Certs
BX TRUST 2021-LGCY: DBRS Confirms B(low) Rating on Class G Certs
CALI MORTGAGE 2019-101C: S&P Lowers X-A Certs Rating to 'BB(sf)'
CANYON CLO 2020-3: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
CANYON CLO 2020-3: Moody's Assigns B3 Rating to $500,000 F-R Notes
CARLYLE US 2017-1: Moody's Affirms Ba3 Rating on $24MM Cl. D Notes
CARLYLE US 2022-5: Fitch Assigns BB-(EXP)sf Rating on Cl. E-R Notes
CD 2017-CD5: Fitch Affirms 'B-sf' Rating on Cl. F Debt, Outlook Neg
CHASE HOME 2024-DRT1: DBRS Gives Prov. B(low) Rating on B-5 Notes
CHASE HOME 2024-DRT1: Fitch Assigns BB-sf Rating on Cl. B-5 Notes
CITIGROUP 2014-GC23: Fitch Lowers Rating on 2 Tranches to CCC
CITIGROUP 2016-C1: Fitch Affirms 'B-sf' Rating on Class F Certs
CITIGROUP 2017-B1: Fitch Affirms BB-sf Rating on 2 Tranches
CITIGROUP 2017-P8: Fitch Lowers Rating on Two Tranches to CCC
CITIGROUP COMMERCIAL 2015-GC27: DBRS Confirms C Rating on G Certs
CLOVER CREDIT III: Moody's Cuts Rating on $19MM Cl. E Notes to B2
COMM 2014-CCRE19: Fitch Affirms 'BBsf' Rating on Cl. E Certificates
COMM 2015-LC23: Fitch Lowers Rating on Two Tranches to 'B-sf'
COREVEST AMERICAN 2022-P2: Fitch Lowers Rating on Cl. G Debt to CCC
CSMC TRUST 2014-USA: S&P Affirms CCC(sf) Rating on Class X-2 Certs
CXP TRUST 2022-CXP1: Moody's Lowers Rating on Cl. F Certs to Csf
DBGS 2018-C1: Fitch Lowers Rating on Two Tranches to 'B+sf'
DBJPM 2016-C1: Fitch Lowers Rating on Class X-D Certs to CCCsf
DRYDEN 76 CLO: S&P Assigns BB- (sf) Rating on Class E-R2 Notes
DRYDEN 94: S&P Assigns Prelim BB- (sf) Rating on Class E-R Notes
ELMWOOD CLO 31: S&P Assigns BB- (sf) Rating on Class E-2 Notes
ELMWOOD CLO 32: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
FLATIRON CLO 18: Moody's Ups Rating on $22.5MM Cl. E Notes to Ba2
FS TRUST 2024-HULA: DBRS Finalizes BB Rating on 2 Classes
GCAT TRUST 2022-INV2: Moody's Hikes Rating on Cl. B-5 Certs to Ba2
GENERATE CLO 2: S&P Assigns BB- (sf) Rating on Class ER2 Notes
GOLDENTREE LOAN 12: Fitch Assigns 'B-sf' Rating on Class F-R Notes
GS MORTGAGE 2014-GC24: Moody's Lowers Rating on Cl. C Certs to 'B2'
GS MORTGAGE 2024-RVR: Moody's Assigns Ba2 Rating to Cl. HRR Certs
HALSEYPOINT CLO 3: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
HARVEST US 2024-2: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. E Notes
HOMEWARD OPPORTUNITIES 2024-RRTL2: DBRS Gives P B(low) on M2 Notes
JEFFERIES CREDIT 2024-I: S&P Assigns BB-(sf) Rating on Cl. E Notes
KIND COMMERCIAL 2024-1: DBRS Finalizes BB(high) Rating on E Certs
KRR STATIC I: Fitch Affirms 'BB+sf' Rating on Class E Notes
LUNAR AIRCRAFT 2020-1: Fitch Hikes Rating on Cl. C Notes to 'BBsf'
MAGNETITE XXIX: Fitch Assigns 'BBsf' Rating on Class E-R Notes
MAGNETITE XXIX: Moody's Assigns B3 Rating to $750,000 Cl. F Notes
MELLO MORTGAGE 2021-INV1: Moody's Ups Rating on Cl. B-5 Certs to B2
MORGAN STANLEY 2016-C29: DBRS Cuts Class G Certs Rating to C
MORGAN STANLEY 2016-C32: DBRS Confirms BB(low) Rating on F Certs
MOUNTAIN VIEW 2017-2: Moody's Cuts Rating on $17.5MM E Notes to B1
MP CLO III: Moody's Cuts Rating on $21.3MM E-R Class Notes to B2
NATIXIS COMMERCIAL 2019-FAME: Moody's Cuts 2 Tranches to Caa1
NEUBERGER BERMAN 28: Fitch Assigns 'BB-(EXP)sf' Rating on E-R Notes
NMEF FUNDING 2024-A: Moody's Assigns Ba3 Rating to Class D Notes
OCP CLO 2022-24: S&P Assigns BB- (sf) Rating on Class E-R Notes
OCTAGON 60: Fitch Affirms 'BB-sf' Rating on Class E Notes
OCTAGON INVESTMENT XVI: S&P Raises E-R Notes Rating to BB- (sf)
OFSI BSL XIV: S&P Assigns BB- (sf) Rating on Class E Notes
PALMER SQUARE 2022-3: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
PALMER SQUARE 2022-3: Fitch Assigns BB-(EXP)sf Rating on E-R Notes
PALMER SQUARE 2024-3: S&P Assigns BB- (sf) Rating on Class E Notes
PARK AVENUE 2016-1: S&P Lowers Class D-R Notes Rating to 'B+ (sf)'
PARK AVENUE 2019-2: S&P Lowers Class D-R Notes Rating to BB- (sf)
PMT LOAN 2022-INV1: Moody's Upgrades Rating on Cl. B-5 Certs to B1
PRET TRUST 2024-RPL2: Fitch Assigns 'Bsf' Rating on Cl. B-2 Notes
PRPM 2024-RCF5: DBRS Finalizes BB(low) Rating on M-2 Notes
RAD CLO 26: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
RCKT MORTGAGE 2024-CES6: Fitch Assigns 'Bsf' Rating on 5 Tranches
REALT 2015-1: Fitch Affirms Bsf Rating on Class G Certs
REALT 2021-1: DBRS Confirms B Rating on Class G Certs
REALT 2021-1: Fitch Affirms Bsf Rating on Cl. G Certificates
RR 30: Fitch Assigns Final 'BB+sf' Rating on Class D Notes
SILVER ROCK IV: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
STEELE CREEK 2017-1: Moody's Cuts Rating on $18MM Cl. E Notes to B1
SYMPHONY CLO 41: Fitch Assigns 'BB-sf' Rating on Class E Notes
SYMPHONY CLO 45: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
SYMPHONY CLO XIX: Moody's Cuts Rating on $10MM Cl. F Notes to Caa2
TCW CLO 2024-2: S&P Assigns BB- (sf) Rating on Class E Notes
TMSQ 2014-1500: Moody's Downgrades Rating on Cl. D Certs to B1
UBS COMMERCIAL 2018-C9: Fitch Corrects Aug. 15 Ratings Release
UPSTART SECURITIZATION 2022-3: Moody's Cuts B Notes Rating to Caa1
VOYA CLO 2024-4: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
WARWICK CAPITAL 4: S&P Assigns Prelim 'BB-' Rating on Cl. E Notes
WELLFLEET CLO 2022-1: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
WELLFLEET CLO 2022-1: Moody's Gives B3 Rating to $750,000 F-R Notes
WELLINGTON MANAGEMENT 3: S&P Assigns BB- (sf) Rating on E Notes
WELLS FARGO 2015-LC22: Fitch Lowers Rating on Two Tranches to B-sf
WIND RIVER 2013-2: S&P Affirms 'B (sf)' Rating on Class E-2-R Debt
WIND RIVER 2021-1: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
[*] DBRS Reviews 64 Classes in 15 US RMBS Transactions
[*] Moody's Downgrades Rating on $53.9MM US RMBS Issued 2007
[*] Moody's Raises Ratings on $179MM of US RMBS Issued 2021-2022
[*] Moody's Upgrades Ratings on $131MM of US RMBS Issued 2019
[*] Moody's Upgrades Ratings on $35MM of US RMBS Issued 2021
[*] Moody's Upgrades Ratings on $6.5MM of US RMBS Issued 1996-1998
[*] S&P Takes Various Action on 17 Classes From Three LCM Deals
*********
A&D MORTGAGE 2024-NQM4: S&P Assigns B-(sf) Rating on Cl. B-2 Certs
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to A&D Mortgage
Trust 2024-NQM4's mortgage-backed certificates.
The note issuance is an RMBS transaction backed by first- and
second-lien, fixed- and adjustable-rate, fully amortizing
residential mortgage loans (some with interest-only periods) to
both prime and nonprime borrowers. The loans are primarily secured
by single-family residential properties, planned unit developments,
condominiums, townhomes, two- to four-family residential
properties, condotels, mixed-use properties, manufactured housing,
and five- to 10-unit multifamily residences. The pool consists of
1,055 loans, which are qualified mortgage (QM) safe harbor (average
prime offer rate), QM rebuttable presumption (average prime offer
rate), ability to repay-exempt loans and non-QM/ability to
repay-compliant loans.
The preliminary ratings are based on information as of Aug. 23,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The pool's collateral composition and geographic
concentration;
-- The transaction's credit enhancement, associated structural
mechanics, and representation and warranty framework;
-- The mortgage originator, A&D Mortgage LLC;
-- The 100% due diligence results consistent with represented loan
characteristics; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "Per our latest update to our third-quarter
macroeconomic outlook, we have recalibrated our views on the
trajectory of interest rates in the U.S. We now expect 50 basis
points (bps) of rate cuts coming this year and another 100 bps of
cuts coming next year, with the balance of risks tilting toward
more of those cuts happening sooner rather than later. Our
base-case forecast for GDP growth and inflation have not changed,
and we attribute the recent loosening of the labor market to
normalization, not to an economy that's about to slip into a
recession. A soft landing remains the most likely scenario, at
least into 2025. We therefore maintain our current market outlook
as it relates to the 'B' projected archetypal foreclosure frequency
of 2.50%, which reflects our benign view of the mortgage and
housing market as demonstrated through general national-level home
price behavior, unemployment rates, mortgage performance, and
underwriting."
Preliminary Ratings Assigned(i)
A&D Mortgage Trust 2024-NQM4
Class A-1A, $183,715,000: AAA (sf)
Class A-1B, $36,927,000: AAA (sf)
Class A-1, $220,642,000: AAA (sf)
Class A-2, $38,405,000: AA- (sf)
Class A-3, $50,591,000: A- (sf)
Class M-1, $22,157,000: BBB- (sf)
Class B-1A, $10,155,000: BB (sf)
Class B-1B, $7,016,000: BB- (sf)
Class B-2, $12,555,000: B- (sf)
Class B-3, $7,755,633: Not rated
Class A-IO-S, notional(ii): Not rated
Class X, notional(ii): Not rated
Class R, not applicable: Not rated
(i)The preliminary ratings address the ultimate payment of interest
and principal.
(ii)The notional amount will equal the aggregate stated principal
balance of the mortgage loans as of the first day of the related
due period and is initially $369,276,633.
ADAGIO XII: S&P Assigns B- (sf) Rating on Class F Notes
-------------------------------------------------------
S&P Global Ratings assigned its credit ratings to Adagio XII EUR
CLO DAC's class X, A, B, C, D, E, and F notes. At closing, the
issuer also issued unrated subordinated notes.
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 notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which is in line with
S&P's counterparty rating framework.
Portfolio benchmarks
S&P Global Ratings' weighted-average rating factor 2,773.87
Default rate dispersion 542.74
Weighted-average life (years) 4.59
Weighted-average life (years) extended
to cover the length of the reinvestment period 4.64
Obligor diversity measure 156.08
Industry diversity measure 22.28
Regional diversity measure 1.19
Transaction key metrics
Portfolio weighted-average rating
derived from S&P's CDO evaluator B
'CCC' category rated assets (%) 0.71
Covenanted 'AAA' weighted-average recovery (%) 35.00
Covenanted weighted-average spread (%) 3.90
Covenanted weighted-average coupon (%) 3.50
Rating rationale
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event (FSE) occurs starting from
April 2025. Following the FSE, the notes will switch to semiannual
payments. The portfolio's reinvestment period will end
approximately 4.64 years after closing.
The portfolio is well-diversified, primarily comprising broadly
syndicated speculative-grade senior secured term loans and senior
secured bonds. Therefore, S&P has conducted its credit and cash
flow analysis by applying its criteria for corporate cash flow
CDOs.
S&P said, "In our cash flow analysis, we used the EUR350 million
target par amount, and the portfolio's covenanted weighted-average
spread (3.90%), covenanted weighted-average coupon (3.50%). We have
considered the covenanted weighted-average recovery rate (35.00%)
at the 'AAA' rating level and the actual targeted weighted-average
recovery rates at all other rating levels. 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.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned ratings.
"Until the end of the reinvestment period on April 20, 2029, the
collateral manager may substitute assets in the portfolio for so
long as our CDO Monitor test is maintained or improved in relation
to the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain as established by
the initial cash flows for each rating, and it compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, as long as the initial ratings
are maintained.
"The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.
"The transaction's legal structure and framework is bankruptcy
remote, in line with our legal criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we believe our ratings are
commensurate with the available credit enhancement for all classes
of notes. Our credit and cash flow analysis indicates that the
available credit enhancement for the class B, C, D, and E notes
could withstand stresses commensurate with higher ratings than
those we have assigned. However, as the CLO is in its reinvestment
phase starting from closing, during which the transaction's credit
risk profile could deteriorate, we have capped our ratings assigned
to the notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class X to E notes
based on four hypothetical scenarios.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F notes."
The transaction securitizes a portfolio of primarily senior-secured
leveraged loans and bonds, and will be managed by AXA Investment
Managers US Inc.
Environmental, social, and governance
S&P regards the exposure to environmental, social, and governance
(ESG) credit factors in the transaction as being 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
certain activities, including, but not limited to the following:
-- climate risks; palm oil; controversial weapons; soft
commodities; tobacco; white phosphorous weapons; and UN Global
Compact violations.
Accordingly, since the exclusion of assets from these industries
does not result in material differences between the transaction and
its ESG benchmark for the sector, S&P has not made any specific
adjustments in its rating analysis to account for any ESG-related
risks or opportunities.
Ratings
AMOUNT CREDIT
CLASS RATING* (MIL. EUR) INTEREST RATE§ ENHANCEMENT (%)
X AAA (sf) 2.00 3mE + 0.45% N/A
A AAA (sf) 217.00 3mE + 1.32% 38.00
B AA (sf) 35.00 3mE + 1.90% 28.00
C A (sf) 21.00 3mE + 2.45% 22.00
D BBB- (sf) 26.25 3mE + 3.75% 14.50
E BB- (sf) 14.00 3mE + 6.25% 10.50
F B- (sf) 14.00 3mE + 8.32% 6.50
Sub notes NR 23.70 N/A N/A
*The ratings assigned to the class X, A, and B notes address timely
interest and ultimate principal payments. The ratings assigned to
the class C, D, E, and F 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.
NR--Not rated.
N/A--Not applicable.
3mE--Three-month Euro Interbank Offered Rate.
6mE--Six-month Euro Interbank Offered Rate.
ANGEL OAK 2024-8: Fitch Assigns 'B(EXP)sf' Rating on Cl. B-2 Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Angel Oak Mortgage
Trust 2024-8 (AOMT 2024-8).
Entity/Debt Rating
----------- ------
AOMT 2024-8
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
R LT NR(EXP)sf Expected Rating
Transaction Summary
Fitch expects to rate the RMBS to be issued by Angel Oak Mortgage
Trust 2024-8, series 2024-8 (AOMT 2024-8), as indicated above. The
certificates are supported by 949 loans with a balance of $413.41
million as of the cutoff date. This represents the 41st Fitch-rated
AOMT transaction and the eighth Fitch-rated AOMT transaction in
2024.
The certificates are secured by mortgage loans mainly originated
(60.2%) by Angel Oak Mortgage Solutions LLC (AOMS) and Angel Oak
Home Loans LLC (AOHL). The remaining 39.8% of the loans were
originated by various third-party originators. Fitch considers AOMS
and AOHL to be average originators. The servicer of the loans is
Select Portfolio Servicing, Inc. (Fitch rating: RPS1-/Negative).
Of the loans, 52.0% are designated as nonqualified mortgage
(non-QM) loans and 48.0% are exempted mortgage loans that were not
subject to the Ability-to-Repay (ATR) Rule.
There are nine adjustable-rate mortgage 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 10.4% 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.
Non-QM Credit Quality (Mixed): The collateral consists of 949 loans
totaling $413.41 million and seasoned at about 14 months in
aggregate, according to Fitch, and 12 months, per the transaction
documents. The borrowers have a relatively strong credit profile,
with a 747 nonzero FICO and a 45.5% debt-to-income ratio (DTI), as
determined by Fitch. They have relatively moderate leverage, with
an original combined loan-to-value (CLTV) ratio of 71.0%, as
determined by Fitch, which translates to a Fitch-calculated
sustainable LTV (sLTV) of 76.5%.
Its analysis of the pool shows that 50.6% represents loans in which
the borrower maintains a primary or secondary residence, while the
remaining 49.4% comprises investor properties. Its analysis
considers the 22 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 14.9% of the
loans were originated via a retail channel.
Additionally, 52.0% of the pool is designated as non-QM, while the
remaining 48.0% is exempt from QM status, as this comprises
investor loans. The pool contains 73 loans over $1.00 million, with
the largest amounting to $4.38 million. Loans on investor
properties represent 49.4% of the pool, as determined by Fitch,
including 11.3% underwritten to the borrower's credit profile and
38.0% investor cash flow or no ratio loans.
Furthermore, only 0.8% of the borrowers were viewed by Fitch as
having a prior credit event within the past seven years. 0.2% 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 0.2% 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 22 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 the co-borrower are 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 California (28.5%),
followed by Florida (26.1%) and Texas (8.5%). The largest MSA is
Los Angeles (13.8%), followed by Miami (11.5%) and New York (7.8%).
The top three MSAs account for 33.1% 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 95.0% 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 52.7% 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, 37.9% constitute a debt
service coverage ratio (DSCR) product and 0.8% are an asset
qualifier product.
One loan in the pool (0.2%) is a no-ratio DSCR loan. For no-ratio
loans, employment and income are considered to be "no
documentation" in Fitch's analysis, and Fitch assumes a DTI of
100%. This is in addition to the loan being treated as investor
occupied.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent (DQ) 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 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 September 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 September 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 41.8% 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, Evolve, Infinity, Inglet Blair, Recovco, Maxwell, 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,
Evolve, Infinity, Inglet Blair, Recovco, Maxwell, 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.
APIDOS CLO XXX: S&P Assigns BB- (sf) Rating on Class D Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1A-R, A-2-R,
B-R, C-R, and D-R replacement debt from Apidos CLO XXX/Apidos CLO
XXX LLC, a CLO originally issued in September 2018 that is managed
by CVC Credit Partners U.S. CLO Management LLC. S&P did not rate
the replacement class A-1B-R debt. At the same time, S&P withdrew
its ratings on the original class A-1A, A-2, B, C, and D debt
following payment in full on the Aug. 29, 2024, refinancing date.
S&P did not previously rate the class A-1B debt.
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.
28, 2025.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-1A-R, $276.26 million: Three-month CME term SOFR +
1.08%
-- Class A-1B-R, $40.85 million: Three-month CME term SOFR +
1.25%
-- Class A-2-R, $78.00 million: Three-month CME term SOFR + 1.50%
-- Class B-R (deferrable), $39.00 million: Three-month CME term
SOFR + 1.85%
-- Class C-R (deferrable), $38.45 million: Three-month CME term
SOFR + 3.00%
-- Class D-R (deferrable), $24.40 million: Three-month CME term
SOFR + 5.75%
Original debt
-- Class A-1A, $276.26 million: Three-month CME term SOFR + 1.14%
+ CSA(i)
-- Class A-1B, $40.85 million: Three-month CME term SOFR + 1.43% +
CSA(i)
-- Class A-2, $78.00 million: Three-month CME term SOFR + 1.60% +
CSA(i)
-- Class B (deferrable), $39.00 million: Three-month CME term SOFR
+ 2.00% + CSA(i)
-- Class C (deferrable), $38.45 million: Three-month CME term SOFR
+ 3.00% + CSA(i)
-- Class D (deferrable), $24.40 million: Three-month CME term SOFR
+ 5.60% + 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
Apidos CLO XXX/Apidos CLO XXX LLC
Class A-1A-R, $276.26 million: AAA (sf)
Class A-2-R, $78.00 million: AA (sf)
Class B-R (deferrable), $39.00 million: A (sf)
Class C-R (deferrable), $38.45 million: BBB- (sf)
Class D-R (deferrable), $24.40 million: BB- (sf)
Ratings Withdrawn
APIDOS CLO XXX/APIDOS CLO XXX LLC
Class A-1A to not rated from 'AAA (sf)'
Class A-2 to not rated from 'AA (sf)'
Class B to not rated from 'A (sf)'
Class C to not rated from 'BBB- (sf)'
Class D to not rated from 'BB- (sf)'
Other Debt
APIDOS CLO XXX/APIDOS CLO XXX LLC
Class A-1B-R, $40.85: Not rated
Subordinated notes, $64.60 million: Not rated
ARBOR REALTY 2022-FL1: DBRS Confirms B(low) Rating on G Notes
-------------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of notes issued
by Arbor Realty Commercial Real Estate Notes 2022-FL1, Ltd. as
follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stability of
the transaction, which benefits from being solely composed of loans
backed by multifamily properties, which have historically proved to
better retain property value and cash flow when compared with other
property types. In its analysis for the review, Morningstar DBRS
determined the majority of individual borrowers are progressing
with their business plans to increase property cash flow and value;
however, many additional borrowers have incurred stress between
increased construction costs, slowed rent growth, and increased
debt service costs, which has increased the execution risk on
select business plans and loan exit strategies. The unrated,
first-loss bond of $187.1 million serves as a mitigant to this
increased risk to the transaction. In conjunction with this press
release, Morningstar DBRS has published a Surveillance Performance
Update report with in-depth analysis and credit metrics for the
transaction as well as business plan updates on select loans.
The initial collateral consisted of 44 floating-rate mortgages
secured by 59 transitional multifamily properties with a cut-off
date balance totaling $1.61 billion. Most loans were in a period of
transition with plans to stabilize performance and improve the
asset value. The trust reached its maximum funded balance of $2.05
billion in June 2022. The transaction is a managed vehicle with a
30-month reinvestment period scheduled to expire with the August
2024 Payment Date.
As of the July 2024 remittance, the pool comprises 54 loans secured
by 69 properties with a cumulative trust balance of $1.85 billion
as the Reinvestment Account has a cash balance of $195.8 million.
Morningstar DBRS expects the issuer to use the majority if not all
of the remaining cash to purchase additional loan collateral into
the trust prior to the August 2024 Payment Date. Twenty-six of the
original loans in the transaction at closing, representing 61.1% of
the current trust balance, remain in the trust. Since issuance, 27
loans with a former cumulative trust balance of $715.5 million have
been successfully repaid from the pool, including 16 loans totaling
$457.1 million since the previous Morningstar DBRS credit rating
action. An additional 13 loans, totaling $348.0 million, have been
added to the trust since the previous Morningstar DBRS credit
rating action.
The loans are primarily secured by properties in suburban markets
as 48 loans, representing 88.8% of the pool, are secured by
properties in suburban markets, as defined by Morningstar DBRS,
with a Morningstar DBRS Market Rank of 3, 4, or 5. An additional
three loans, representing 6.2% of the pool, are secured by
properties with a Morningstar DBRS Market Rank of 1 and 2, denoting
rural and tertiary markets, while three loans, representing 5.0% of
the pool, is secured by a property with a Morningstar DBRS Market
Rank of 6 or 7, denoting an urban market. In comparing the
transaction to issuance, properties in suburban markets represented
89.5% of the collateral, properties in tertiary and rural markets
represented 8.3% of the collateral, and properties in urban markets
represented 2.2% of the collateral.
Leverage across the pool has increased slightly as of July 2024
reporting when compared with issuance metrics as the current
weighted-average (WA) as-is appraised value loan-to-value ratio
(LTV) is 83.0%, with a current WA stabilized LTV of 69.6%. In
comparison, these figures were 78.5% and 72.3%, respectively, at
issuance. Morningstar DBRS recognizes that select property values
may be inflated as the majority of the individual property
appraisals were completed in 2021 and 2022 and may not reflect the
current rising interest rate or widening capitalization rate
environments. In the analysis for this review, Morningstar DBRS
applied LTV adjustments to 17 loans, representing 47.8% of the
current trust balance, generally reflective of higher cap rate
assumptions as compared with the implied cap rates based on the
appraisals.
Through March 2024, the lender had advanced $157.6 million in
cumulative loan future funding to 33 of the outstanding individual
borrowers to aid in property stabilization efforts, including $84.6
million since the previous Morningstar DBRS credit rating action in
August 2023. The largest advance to a single borrower ($25.1
million) has been made to the Diplomat Tower loan, which is secured
by a 2022-vintage multifamily property in Hallandale Beach,
Florida. The borrower's business plan is to complete the initial
lease-up phase of the property. Future funding of up to $30.1
million was available at loan closing to fund operating and debt
service shortfalls as well as an earnout tied to the borrower
achieving multiple occupancy benchmarks. According to the April
2024 rent roll, the property was 76.4% occupied with an average
rental rate of $5,127 per unit. Property cash flow does not
currently cover debt service as the trailing 12-month ended April
30, 2024, debt service coverage ratio (DSCR) was 0.28 times (x).
The collateral manager reported two loans, representing 2.8% of the
current pool balance, as specially serviced. The largest loan in
special servicing, Gainesville Portfolio (Prospectus ID#19, 2.4% of
the current pool balance) is secured by a portfolio of two
multifamily properties totaling 380 units in Gainesville, Florida.
The loan transferred to special servicing in December 2023 for
payment default. A notice of default was sent to the borrower and,
ultimately, an affiliate of the sponsor remitted the November
payment. The collateral manager confirmed the borrower remains
dedicated to completing the business plan; however, a loan
modification was requested by the borrower in April 2024 to defer
monthly tax, insurance, and replacement reserve escrow payments for
four months. The request is under review and no formal agreement
has been provided. The loan has a maturity date in October 2024 and
while the borrower has largely completed its business plan to
complete $5.0 million in capital expenditures across the portfolio,
including upgrades to 300 units, property cash flow remains well
below stabilized expectations and the loan is likely overleveraged.
As such, Morningstar DBRS applied upward LTV adjustments as well as
an increased probability of default penalty in its current
analysis, with the resulting loan expected loss approximately 1.5x
greater than the expected loss for the overall pool.
The second loan in special servicing, Beldon Spring Lake
(Prospectus ID#42, 0.4% of the current pool balance), is secured by
a 100-unit multifamily property in Columbia, South Carolina. The
loan transferred to special servicing in December 2023 for payment
default following the borrower's inability to make the November
2023 loan payment. The property is currently listed for sale and,
reportedly, a purchase and sale agreement has been executed at a
price in excess of the outstanding loan balance of $6.8 million. If
the potential property sale falls through, the collateral manager
plans to initiate foreclosure proceedings. The property was
appraised in December 2023 for $7.6 million, above the original
As-Is valuation of $7.3 million. The borrower's original business
plan was to spend $1.7 million to renovate unit interiors and
property exteriors and address deferred maintenance items. As of
the March 2024 reporting, $1.0 million of future funding had been
disbursed with an average rental rate of $992 per unit, which
exceeded the appraiser's original projection of $957 per unit. In
its analysis, Morningstar DBRS analyzed the loan with a liquidation
scenario, resulting in a loss severity of approximately 20.0%.
The servicer did not report loans on the servicer's watchlist as of
March 2024 reporting; however, using the most recently available
trailing 12-month cash flow reporting for all loans in trust,
ranging from March 31, 2024, to May 31, 2024, only one loan,
representing 1.1% of the current pool balance was reporting a DSCR
above 1.0x. In total, 30 loans, representing 68.6% of the current
pool balance, have been modified. Terms for individual loan
modifications vary; however, some common terms have allowed
borrowers to extend maturity dates without meeting required
property performance tests, extend renovation completion dates, and
waive or defer the requirement to purchase new interest rate cap
agreements with some borrowers securing subordinate preferred
equity financing to purchase new rate cap agreements. In return,
borrowers have made fresh equity deposits into renovation or
operating reserves.
Throughout 2024, 26 loans, representing 52.3% of the current pool
balance, have scheduled maturity dates. All 26 loans have extension
options and, if property performance does not qualify to exercise
the related options, Morningstar DBRS expects the borrower and
lender to negotiate mutually beneficial loan modifications to
extend loans, which would likely include fresh sponsor equity to
fund principal curtailments, fund carry reserves, or purchase a new
interest rate cap agreement.
Notes: All figures are in U.S. dollars unless otherwise noted.
ARES CLO LXIV: Moody's Assigns Ba3 Rating to $20MM Class E-R Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the Refinancing Notes) issued by Ares LXIV CLO
Ltd. (the Issuer):
US$320,000,000 Class A-R Senior Floating Rate Notes due 2039,
Assigned Aaa (sf)
US$20,000,000 Class E-R Mezzanine Deferrable Floating Rate Notes
due 2039, 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. At least
90.0% of the portfolio must consist of first lien senior secured
loans and up to 10.0% of the portfolio may consist of second lien
loans, senior unsecured loans, and permitted non-loan assets.
Ares CLO Management LLC (the Manager) will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, four other
classes of secured notes, and additional subordinated notes, a
variety of other changes to transaction features will occur in
connection with the refinancing. These include: extension of the
reinvestment period; extensions of the stated maturity and non-call
period; 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:
Portfolio par : $500,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2995
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL)(covenant/base case): 9.0/8.0 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
BALLYROCK CLO 27: S&P Assigns BB- (sf) Rating on Class D Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Ballyrock CLO 27
Ltd./Ballyrock CLO 27 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Ballyrock Investment Advisors LLC, an
affiliate of Fidelity Management & Research Co. LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Ballyrock CLO 27 Ltd./Ballyrock CLO 27 LLC
Class A-1a, $320.00 million: AAA (sf)
Class A-1b, $15.00 million: AAA (sf)
Class A-2, $45.00 million: AA (sf)
Class B (deferrable), $30.00 million: A (sf)
Class C-1 (deferrable), $30.00 million: BBB- (sf)
Class C-2 (deferrable), $5.00 million: BBB- (sf)
Class D (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $50.52 million: Not rated
BANK 2017-BNK6: S&P Lowers Class X-F Certs Rating to 'CCC- (sf)'
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on nine classes of
commercial mortgage pass-through certificates from BANK 2017-BNK6,
a U.S. CMBS transaction. At the same time, S&P affirmed its ratings
on six classes from the transaction.
Rating Actions
The downgrades on the class B, C, D, E, and F certificates and the
affirmations on the class A-SB, A-3, A-4, A-5, and A-S certificates
reflect the following:
-- S&P's lower revised net cash flow (NCF) for three loans (12.2%
of the pooled trust balance) that have deteriorating performance:
Starwood Capital Hotel Portfolio (7.2%), Sheraton Hotel Greensboro
(3.0%), and Hall Office G4 (2.0%).
-- S&P's higher revised capitalization rates for seven loans
(13.8% of the pooled trust balance) in accordance with its revised
capitalization rates for class B office buildings.
-- S&P's revised loss assumption on the specially serviced
Trumbull Marriott loan (2.3%).
S&P said, "The downgrade on class F also reflects our view that
this class, which has current accumulated interest shortfalls of
$65,623 as of the Aug. 16, 2024, trustee remittance report, is
expected to incur additional interest shortfalls. We expect that
these shortfalls will remain outstanding until the Trumbull
Marriott loan is liquidated.
"Although the class A-S model-indicated rating is lower, we
affirmed our rating on the class because we believe the Gateway Net
Lease Portfolio loan (6.3% of the pooled trust balance), which
matured in June 2024 and was granted a 60-day forbearance period to
seek refinancing, has a high likelihood of refinancing, given the
loan's stable performance since issuance and relatively high debt
service coverage (DSC) ratio.
"The downgrades on the class X-B, X-D, X-E, and X-F interest-only
(IO) certificates and the affirmation on the class X-A IO
certificates are based on our criteria for rating IO securities,
which states that the ratings on the IO securities would not be
higher than that of the lowest-rated reference class. The notional
amount of class X-A references classes A-1, A-2, A-SB, A-3, A-4,
and A-5, while class X-B references classes A-S, B, and C; class
X-D references class D; class X-E references class E; and class X-F
references class F.
"We will continue to monitor the performance of the transaction and
the collateral loans, including any developments around the three
loans for which we revised our NCF and the resolution of the
specially serviced Trumbull Marriott loan. To the extent future
developments differ meaningfully from our underlying assumptions,
we may take further rating actions as we determine necessary."
Loan Details
Below S&P provides additional details on the four loans mentioned
above: three of which are on the master servicer's watchlist and
one is a specially serviced loan.
Starwood Capital Hotel Portfolio ($59.3 million; 7.21% of the
pooled trust balance)
The loan is the third-largest loan in the pool. It is secured by
the borrower's fee simple and leasehold interests in 65 limited
service and extended stay lodging properties totaling 6,366 rooms
in 21 states. The hotels are operated under 16 different franchises
affiliated with either Larkspur Landing (11 hotels; 34.4% by
allocated loan amount), Marriott (21 hotels; 28.1%), Hilton (19
hotels; 25.0%), IHG (11 hotels; 11.1%), Choice (two hotels; 1.0%),
or Carlson (one hotel; 0.4%).
The trust loan represents a pari passu portion within a larger
whole loan. As of the August 2024 trustee remittance report, the
trust and whole loan balances totaled $59.3 million and $577.3
million, respectively--the same as in our last review in August
2020. The whole loan is IO, pays an annual fixed interest rate of
4.486%, and matures on June 1, 2027. The loan allows for mezzanine
debt, subject to certain performance thresholds, but has not
incurred mezzanine debt to date.
The loan is currently on the master servicer's watchlist because of
life safety issues at two properties. Furthermore, the loan has
been in a cash trap since November 2020 due to low DSC. As of the
August 2024 remit, $36.3 million is held in reserves. The portfolio
performance has not recovered to pre-pandemic levels and appears to
have stagnated recently: servicer-reported occupancy and NCF are
67.0% and $37.4 million, respectively, for year-end 2023, down from
73.0% and $44.5 million in 2022 and well below pre-pandemic levels
of 74.0% and $63.3 million in 2019. The servicer-reported DSC was
1.43x in 2023 and 1.69x in 2022.
S&P said, "In our current analysis, we revised our NCF to be in
line with the 2022 NCF of $44.5 million, which is 32.3% lower than
our NCF from our August 2020 review. Using the same
weighted-average S&P Global Ratings capitalization rate of 9.88%
and deducting $46.6 million for estimated property improvement plan
(PIP) costs as in our last review, we derived an S&P Global Ratings
expected-case value of $403.8 million, or $63,427 per guestroom.
Our revised expected case value is 54.4% lower than the issuance
appraisal value of $884.7 million ($138,973 per guestroom)."
Gateway Net Lease Portfolio ($52.4 million; 6.3% of the pooled
trust balance)
The loan is the fourth-largest loan in the pool. It is secured by
the borrower's fee and leasehold interests in 41 triple-net lease,
single-tenant properties (24 industrial, 10 office, and seven
health care) located in 20 states.
The trust loan represents a pari passu portion within a larger
whole loan. As of the August 2024 trustee remittance report, the
trust and whole loan balances totaled $52.4 million and $304.0
million, respectively, down from $60.9 million and $353.0 million
in our last review. According to the master servicer, Wells Fargo
Bank N.A. (Wells Fargo), the paydown is a result of property
releases. However, all 41 original collateral properties are active
in the August 2024 CRE Finance Council Investor Reporting Package
(CREFC IRP). The whole loan is IO, pays an annual fixed interest
rate of 3.563%, and matures on June 5, 2027. The loan has
subordinate debt of $170.0 million.
The loan is currently on the master servicer's watchlist due to
pending maturity. The loan matured on June 5, 2024, but was granted
a 60-day forbearance period to seek refinancing. The subservicer,
Midland Loan Services, indicates that the borrower plans to
refinance the loan but may seek an extension of the forbearance
period. The servicer-reported occupancy and NCF have been stable
since issuance and were 100.0% and $11.3 million, respectively, as
of the three months ended March 31, 2024, compared with 96.0% and
$47.9 million as of year-end 2023. The servicer-reported DSC ratio
on the senior debt was 3.81x as of year-to-date March 2024,
unchanged from year-end 2023. The loan is being cash managed due to
its post-maturity status and has $5.8 million held in reserves as
of the August 2024 trustee remittance report.
S&P said, "In our current analysis, we retained our $39.4 million
NCF, revised our weighted-average S&P Global Ratings capitalization
rate lower to 7.68% to reflect our updated capitalization rates for
industrial properties, and retained our $3.8 million add-to-value
for certain tenant rent steps to derive an S&P Global Ratings
expected-case value of $517.5 million, or $98 per sq. ft. Because
the property performance is stable and DSC is sufficiently high, we
qualitatively considered that this loan is a candidate to secure
refinancing. However, if the loan fails to repay as expected, we
may revisit our assumptions."
Sheraton Hotel Greensboro ($25.0 million; 3.0% of the pooled trust
balance)
The loan is the 11th-largest loan in the pool. It is secured by the
borrower's fee simple interest in a 985-guestroom, full-service
hotel in Greensboro, N.C. The property, built in stages between
1970 and 1996, was last renovated in 2015 and includes over 250,000
sq. ft. of meeting and convention space. Amenities include five
food and beverage outlets, an indoor-outdoor pool, a fitness
center, a business center, approximately 1,088 surface parking
spaces, and the signature Sheraton Club with a city view.
The trust loan represents a pari passu portion within a larger
whole loan. As of the August 2024 trustee remittance report, the
trust and whole loan balances totaled $25.0 million and $37.5
million, respectively--down from $28.0 million and $42.0 million at
in our last review. The loan amortizes on a 25-year schedule, pays
fixed interest rate of 5.160%, and matures on May 11, 2027.
The loan is currently on the master servicer's watchlist due to low
DSC, which the servicer reported as 1.17x as of the
trailing-12-months (TTM) ended Oct. 31, 2023, down from 1.30x for
the TTM ended Oct. 31, 2022. Occupancy has increased year-over-year
since 2020, but NCF has been slow to recover. The servicer reported
that occupancy and NCF were 42.0% and $3.8 million, respectively,
for the TTM ended Oct. 31, 2023, compared with $48.0% and $10.0
million for the TTM ended Oct. 31, 2019.
According to the October 2023 STR report, the property had an
occupancy of 41.6%, average daily rate (ADR) of $167.86, revenue
per available room (RevPAR) of $69.90, and RevPAR penetration rate
of 75.0% for the running 12 months.
S&P said, "In our current analysis, we revised our NCF to $4.9
million, which is 27.8% lower than our NCF from our August 2020
review. We increased our S&P Global Ratings capitalization rate to
11.00%, up from 9.50% in our last review, to arrive at an S&P
Global Ratings expected-case value of $44.5 million, or $45,203 per
guestroom. Our revised expected case value is 51.1% lower than the
issuance appraisal value of $91.0 million ($92,386 per
guestroom)."
Trumbull Marriott ($19.5 million; 2.3% of the pooled trust
balance)
The loan is the 12th-largest loan in the pool. It is secured by the
borrower's fee simple interest in a 325-guestroom, full-service
hotel in Trumbull, Conn. The property was built in 1986 and
renovated in 2012.
The loan has a trust balance of $19.5 million (down from $22.0
million at issuance) and a total exposure of $24.3 million as of
the August 2024 trustee remittance report. It amortizes on a
30-year schedule, pays fixed interest rate of 4.650%, and matures
on July 11, 2027. The loan, which has a reported 90-plus days
delinquent payment status, was transferred to the special servicer
on May 20, 2020, due to imminent monetary default. The special
servicer, LNR Partners LLC (LNR), stated that it is currently
negotiating a receivership sale.
S&P said, "In our current analysis, we assumed a liquidation of the
loan based on the current bid price as reported by LNR. Based on
our revised expected-case value, we expect a significant loss
(greater than 60.0%) upon the eventual resolution of the loan."
Transaction Summary
As of the Aug. 16, 2024, trustee remittance report, the collateral
pool balance was $829.5 million, which is 88.9% of the pool balance
at issuance. The pool currently includes 68 fixed-rate loans, down
from 72 loans at issuance. One loan ($19.5 million; 2.3% of the
pooled trust balance) is with the special servicer, 13 loans
($236.6 million; 28.5%) are on the master servicer's watchlist, one
loan ($10.2 million; 1.2%) is a corrected mortgage, and six loans
($44.9 million; 5.4%) are defeased.
Excluding the specially serviced and six defeased loans, and
adjusting the servicer-reported numbers, S&P calculated an S&P
Global Ratings weighted average DSC of 2.44x and an S&P Global
Ratings weighted average loan-to-value ratio of 79.5%, using a
7.75% S&P Global Ratings weighted average capitalization rate.
According to the August 2024 trustee remittance report, the trust
incurred monthly interest shortfalls totaling $82,166 primarily
from interest not advanced of $77,974 and special servicing fees of
$4,192. The current shortfalls affected the interest on the class
F, G, and RR certificates. Of these classes, only class F is rated
by S&P Global Ratings. The trust has not experienced any principal
losses to date. S&P expects losses to reach approximately 0.1% of
the original pool trust balance upon the eventual resolution of the
specially serviced Trumbull Marriott loan.
Ratings Lowered
BANK 2017-BNK6
Class B to 'AA- (sf)' from 'AA (sf)'
Class C to 'A- (sf)' from 'A (sf)'
Class D to 'BB- (sf)' from 'BBB- (sf)'
Class E to 'B- (sf)' from 'B+ (sf)'
Class F to 'CCC- (sf)' from 'B (sf)'
Class X-B to 'A- (sf)' from 'A (sf)'
Class X-D to 'BB- (sf)' from 'BBB- (sf)'
Class X-E to 'B- (sf)' from 'B+ (sf)'
Class X-F to 'CCC- (sf)' from 'B (sf)'
Ratings Affirmed
BANK 2017-BNK6
Class A-SB: AAA (sf)
Class A-3: AAA (sf)
Class A-4: AAA (sf)
Class A-5: AAA (sf)
Class A-S: AAA (sf)
Class X-A: AAA (sf)
BANK5 2024-5YR8: DBRS Finalizes BB(high) Rating on G-RR Certs
-------------------------------------------------------------
DBRS, Inc. finalized provisional credit ratings on the following
classes of Commercial Mortgage Pass-Through Certificates Series,
2024-5YR8 (the Certificates) issued by BANK5 2024-5YR8 (the
Trust):
-- Class A-1 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-3-1 at AAA (sf)
-- Class A-3-2 at AAA (sf)
-- Class A-3-X1 at AAA (sf)
-- Class A-3-X2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class A-S at AAA (sf)
-- Class A-S-1 at AAA (sf)
-- Class A-S-2 at AAA (sf)
-- Class A-S-X1 at AAA (sf)
-- Class A-S-X2 at AAA (sf)
-- Class B at AAA (sf)
-- Class B-1 at AAA (sf)
-- Class B-2 at AAA (sf)
-- Class B-X1 at AAA (sf)
-- Class B-X2 at AAA (sf)
-- Class C at AA (low) (sf)
-- Class C-1 at AA (low) (sf)
-- Class C-2 at AA (low) (sf)
-- Class C-X1 at AA (low) (sf)
-- Class C-X2 at AA (low) (sf)
-- Class X-D at A (low) (sf)
-- Class D at A (sf)
-- Class E at BBB (high) (sf)
-- Class F-RR at BBB (low) (sf)
-- Class G-RR at BB (high) (sf)
All trends are Stable.
Morningstar DBRS discontinued and withdrew its ratings on the Class
A-2 certificates initially contemplated in the offering documents,
as they were removed from the transaction.
Classes X-D, D, E, F-RR, and G-RR will be privately placed.
The Class A-3-1, A-3-2, A-3-X1, A-3-X2, A-S-1, A-S-2, A-S-X1,
A-S-X2, B-1, B-2, B-X1, B-X2, C-1, C-2, C-X1, and C-X2 certificates
are also offered certificates. Such classes of certificates,
together with the Class A-3, A-S, B, and C certificates, constitute
the Exchangeable Certificates. The Class A-1, D, E, F-RR, G-RR, and
J-RR certificates, together with the Exchangeable Certificates with
a certificate balance, are referred to as the principal balance
certificates.
The collateral of the BANK5 2024-5YR8 transaction consists of 32
fixed-rate loans secured by 33 commercial and multifamily
properties with an aggregate cut-off date balance of $690.48
million. Two loans (640 5th Avenue and Stonebriar Centre),
representing 19.4% of the pool, are shadow-rated investment grade
by Morningstar DBRS. The conduit pool was analyzed to determine the
provisional ratings, reflecting the long-term probability of loan
default within the term and its liquidity at maturity. The
transaction has a sequential-pay pass-through structure.
640 5th Avenue and Stonebriar Centre, together representing 19.4%
of the pool, exhibited credit characteristics consistent with
investment-grade shadow ratings. The credit characteristics of 640
5th Avenue were consistent with an AA (high) shadow rating and
Stonebriar Centre was consistent with an AA shadow rating.
Seven loans, representing 21.8% of the pool, are in areas with
Morningstar DBRS Market Ranks of 7 or 8, which are indicative of
dense urban areas that benefit from increased liquidity driven by
consistently strong investor demand, even during times of economic
stress. Markets with these rankings benefit from lower default
frequencies than less dense suburban, tertiary, and rural markets.
Urban markets represented in the deal include Boston, Los Angeles,
and New York. Additionally, 13 loans, representing 30.4% of the
pool, are in Morningstar DBRS MSA Group 3, which is the
best-performing group in terms of historical commercial
mortgage-backed securities (CMBS) default rates among the top 25
metropolitan statistical areas (MSAs).
Sixteen loans, representing 60.0% of the pool, have issuance
loan-to-value ratios (LTVs) below 59.3%, a threshold historically
indicative of relatively low-leverage financing and generally
associated with below-average default frequency. Even with the
exclusion of the shadow-rated loans, which represent 19.4% of the
pool, the transaction exhibits a weighted-average (WA) Morningstar
DBRS Issuance LTV of 60.4%. There are only three loans in the pool
(2568-2574 Broadway, Hamish Business Park, and CVS Waterford MI)
with LTVs above 70.0%.
Five loans, representing 45.8% of the sample and 37.8% of the pool,
received a property quality assessment of Average +. The remaining
loans in the pool received a property quality assessment of
Average. Higher-quality properties are more likely to retain
existing tenants/guests and more easily attract new tenants/guests,
resulting in a more stable performance.
The pool contains 32 loans and is concentrated with a lower
Herfindahl score of 16.7, with the top 10 loans representing 69.8%
of the pool. These metrics are lower than those in the Morningstar
DBRS-rated BANK5 2024-5YR7 transaction, which had a Herfindahl
score of 21.2. The pool's low diversity is accounted for in the
Morningstar DBRS model, raising the transaction's credit
enhancement levels to account for the more concentrated pool.
The pool has a relatively high concentration of loans secured by
office and retail properties at 10 loans, representing 51.5% of the
pool balance. These property types were some of those most affected
by the coronavirus pandemic. Future demand for office space is
uncertain due to the post-pandemic growth of work from home or
hybrid work, resulting in less office use and, in some cases,
companies downsizing their office footprints. Retail will continue
to be affected by decreasing consumer sentiment and spending, with
many retail companies closing stores as a result of decreased
sales. One of the loans secured by a retail property, Stonebriar
Centre, which represents 9.4% of the pool, is shadow-rated
investment grade by Morningstar DBRS. Two of the three retail
properties and two of the four office properties sampled were
assessed as having Average + property quality. All office loans and
three of the six retail properties in the pool were sampled, which
represents 91.1% of the property type's trust balance.
In today's challenging interest rate environment, debt service
payments have nearly doubled from mid-2022. Rising interest rates
over the past several quarters have severely constrained DSCRs and
the subject transaction has WA DSCRs of 1.44 times (x) and 1.35x
when excluding shadow-rated loans. While it is adequate to service
debt, the ratio is considerably lower than historical conduit
transactions and provides for a smaller cushion should cash flows
be disrupted. Eighteen loans, representing 62.4% of the pool, have
a Morningstar DBRS DSCR of 1.32x or above, a ratio that has
historically had lower default frequencies than loans with issuance
DSCRs below this threshold. Loans with lower DSCRs receive a
probability of default (POD) penalty in the Morningstar DBRS
model.
Twenty-eight, or 83.1%, of the 32 loans in the pool have
interest-only (IO) payment structures and do not benefit from any
amortization. The remaining four loans amortize over their full
loan terms with no periods of IO payments. One of the IO loans,
Stonebriar Centre, which represents 9.4% of the pool, is
shadow-rated investment grade by Morningstar DBRS. The IO loans
have a WA LTV of 58.1%, indicative of lower leverage transactions.
Of the 28 loans with full-term IO periods, nine loans, representing
30.9% of the pool, are in areas with Morningstar DBRS Market Ranks
of 6 or higher, while 11.8% of the pool are in Morningstar DBRS
Market Ranks of 7 or 8. These urban markets benefit from increased
liquidity even during times of economic stress.
Twenty-eight loans, representing 88.4% of the total pool balance,
are refinancing or recapitalizing existing debt. Morningstar DBRS
views loans that refinance existing debt as more credit negative
compared with loans that finance an acquisition. Acquisition
financing typically includes a meaningful cash investment by the
sponsor, which aligns its interests more closely with the lender's,
whereas refinance transactions may be cash-neutral or cash-out
transactions, the latter of which may reduce the borrower's
commitment to a property. The loans that are refinancing existing
debt exhibit relatively low leverage. Specifically, the Morningstar
DBRS WA Issuance and Balloon LTVs of these loans are 55.0% and
54.4%, respectively.
Twenty-six of the 32 loans in the pool exhibit negative leverage,
defined as the issuer's implied cap rate (issuer's net cash flow
divided by the appraised value), less the current interest rate. On
average, the transaction exhibits -0.65% of negative leverage.
While cap rates have been increasing over the last few years, they
have not surpassed the current interest rates. In the short term,
this suggests borrowers are willing to have their equity returns
reduced in order to secure financing. In the longer term, should
interest rates hold steady, the loans in this transaction could be
subject to negative value adjustments that may affect the
borrower's ability to refinance its loans.
Notes: All figures are in U.S. dollars unless otherwise noted.
BANK5 2024-5YR8: Fitch Assigns Final B-sf Rating on Cl. G-RR Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Ratings Outlooks to
the BANK5 2024-5YR8 commercial mortgage pass-through certificates,
series 2024-5YR8 as follows:
- $8,100,000 class A-1 'AAAsf'; Outlook Stable;
- $475,236,000a class A-3 'AAAsf'; Outlook Stable;
- $0a class A-3-1 'AAAsf'; Outlook Stable;
- $0ab class A-3-X1 'AAAsf'; Outlook Stable;
- $0a class A-3-2 'AAAsf'; Outlook Stable;
- $0ab class A-3-X2 'AAAsf'; Outlook Stable;
- $483,336,000b class X-A 'AAAsf'; Outlook Stable;
- $56,965,000a class A-S 'AAAsf'; Outlook Stable;
- $0a class A-S-1 'AAAsf'; Outlook Stable;
- $0ab class A-S-X1 'AAAsf'; Outlook Stable;
- $0a class A-S-2 'AAAsf'; Outlook Stable;
- $0ab class A-S-X2 'AAAsf'; Outlook Stable;
- $36,250,000a class B 'AA-sf'; Outlook Stable;
- $0a class B-1 'AA-sf'; Outlook Stable;
- $0ab class B-X1 'AA-sf'; Outlook Stable;
- $0a class B-2 'AA-sf'; Outlook Stable;
- $0ab class B-X2 'AA-sf'; Outlook Stable;
- $27,619,000a class C 'A-sf'; Outlook Stable;
- $0a class C-1 'A-sf'; Outlook Stable;
- $0ab class C-X1 'A-sf'; Outlook Stable;
- $0a class C-2 'A-sf'; Outlook Stable;
- $0ab class C-X2 'A-sf'; Outlook Stable;
- $120,834,000b class X-B 'AA-sf'; Outlook Stable;
- $18,125,000c class D 'BBBsf'; Outlook Stable;
- $7,333,000c class E 'BBB-sf'; Outlook Stable;
- $25,458,000bc class X-D 'BBB-sf'; Outlook Stable;
- $18,560,000cd class F-RR 'BB-sf'; Outlook Stable;
- $12,947,000cd class G-RR 'B-sf'; Outlook Stable.
Fitch does not rate the following class:
- $29,345,939cd class J-RR.
(a) Exchangeable Certificates. The class A-3, class A-S, class B
and class C are exchangeable certificates. Each class of
exchangeable certificates may be exchanges for the corresponding
classes of exchangeable certificates and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the surrendered
classes of certificates.
The class A-3 may be surrendered (or received) for the received (or
surrendered) classes A-3-1, A-3-X1, A-3-2 and A-3-X2. The class A-S
may be surrendered (or received) for the received (or surrendered)
classes A-S-1, A-S-X1, A-S-2 and A-S-X2. The class B may be
surrendered (or received) for the received (or surrendered) classes
B-1, B-X1, B-2 and B-X2. The class C may be surrendered (or
received) for the received (or surrendered) classes C-1, C-X1, C-2
and C-X2. The ratings of the exchangeable classes would reference
the ratings of the associate referenced or original classes.
(b) Notional amount and interest only.
(c) Privately placed and pursuant to Rule 144A.
(d) Horizontal Risk Retention Interest classes.
Additionally, at the time the presale was issued, class X-B (which
is tied to the classes A-S, B, and C) was rated 'A-sf(EXP)',
reflecting class C, the lowest rated tranche. Since Fitch published
its expected ratings, the class C pass-through rates were finalized
and will be variable rate (WAC), equal to the weighted average of
the net mortgage interest rates on the mortgage loan, and therefore
its payable interest will not have an impact on the IO payments for
class X-B. Fitch updated class X-B to 'AA-sf' (from A-sf(EXP) at
the time of the presale) reflecting the lowest tranche (class B)
whose payable interest has an impact on the IO payments. This is
consistent with Appendix 4 of Fitch's Global Structured Finance
Rating Criteria.
The ratings are based on information provided by the issuer as of
Aug. 15, 2024.
Transaction Summary
The certificates represent the beneficial ownership interest in the
trust, the primary assets of which are 32 fixed-rate, commercial
mortgage loans with an aggregate principal balance of $690,480,940
as of the cutoff date. The mortgage loans are secured by the
borrowers' fee and leasehold interests in 33 commercial properties.
The loans were contributed to the trust by Bank of America,
National Association, Wells Fargo Bank, National Association,
Morgan Stanley Mortgage Capital Holdings, LLC, Bank of America,
National Association and JPMorgan Chase Bank, National
Association.
The master servicer is expected to be Wells Fargo Bank, National
Association and the special servicer is expected to be Greystone
Servicing Company LLC. The trustee and certificate administrator
are expected to be Computershare Trust Company, National
Association. The certificates will follow a sequential paydown
structure.
Since Fitch published its expected ratings on July, 24, 2024, class
A-2 was removed from the transaction structure by the issuer. At
that time, the class A-2 and class A-3 initial certificate balances
were unknown and were expected to total $475,236,000 in the
aggregate. Fitch has withdrawn the expected ratings of 'AAA(EXP)sf'
from class A-2, class A-2-1, class A-2-2, class A-2-X1 and class
A-2-X2 because the classes were removed from the final deal
structure by the issuer. The classes above reflect the final
ratings and deal structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 20 loans
totaling 90.3% of the pool by balance. Fitch's resulting net cash
flow (NCF) of $151.2 million represents a 17.1% decline from the
issuer's underwritten NCF of $182.3 million.
Higher Fitch Leverage: The pool has higher leverage compared to
recent multiborrower transactions rated by Fitch. The pool's Fitch
loan-to-value ratio (LTV) of 97.0% is higher than both the 2024 YTD
and 2023 averages of 89.1% and 88.3%, respectively. The pool's
Fitch NCF debt yield (DY) of 9.9% is worse than both the 2024 YTD
and 2023 averages of 11.3% and 10.9%, respectively.
Investment Grade Credit Opinion Loans: One loan representing 10.0%
of the pool balance received an investment grade credit opinion.
640 5th Avenue received a standalone credit opinion of 'BBB+sf*'.
The pool's total credit opinion percentage is below the YTD 2024
average of 14.3% and the 2023 average of 17.8%. Fitch NCF DY and
LTV net of the credit opinion loan are 9.7% and 100.2%,
respectively.
Higher Loan Concentration: The largest 10 loans constitute 69.8% of
the pool, which is higher than both the 2024 YTD and 2023 average
of 59.1% and 63.7%, respectively. Fitch measures loan concentration
risk with an effective loan count, which accounts for both the
number and size of loans in the pool. The pool's effective loan
count is 16.9. Fitch views diversity as a key mitigant to
idiosyncratic risk. Fitch raises the overall loss for pools with
effective loan counts below 40.
Lower Geographic Diversity: The transaction has a less geographic
diversity compared to recent multiborrower transactions Fitch has
rated. The top three MSA concentrations are New York-Newark-Jersey
City, NY-NJ-PA (21.5%), Atlanta-Sandy Springs-Roswell, GA (11.2%)
and Las Vegas-Henderson-Paradise, NV (10.0%). The pool's effective
geographic count of 9.6 is below the YTD 2024 and 2023 averages of
11.3 and 13.3, respectively. Pools that have a greater
concentration by geographic region are at greater risk of losses,
all else being equal. Fitch therefore raises the overall losses for
pools with effective geographic counts below 15 MSAs.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Reduction in cash flow decreases property value and capacity to
meet its debt service obligations.
The table below indicates the model implied rating sensitivity to
changes to the same variable, Fitch NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Decline:
'AA-sf'/'A-sf'/'BBBsf'/'BB+sf'/'BBsf'/'B-sf'/less than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Similarly, improvement in cash flow increases property value and
capacity to meet its debt service obligations.
The list below indicates the model implied rating sensitivity to
changes in one variable, Fitch NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Increase:
'AAAsf'/'AAsf'/'Asf'/'BBB+sf'/'BBBsf'/'BBsf'/'Bsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP and Deloitte & Touche LLP. The
third-party due diligence described in Form 15E focused on a
comparison and re-computation of certain characteristics with
respect to each of the mortgage loans. Fitch considered this
information in its analysis and it did not have an effect on
Fitch's analysis or conclusions.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BARINGS CLO 2018-II: S&P Assigns B- (sf) Rating on Class F-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, B-1a-R,
B-1b-R, B-2-R, C-R, D-1-R, and D-2-R debt and the 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. At the same time, S&P withdrew its
ratings on the original class X and A-1A debt following payment in
full on the Aug. 23, 2024, refinancing date.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The replacement class X-R, A-1-R, A-2-R, B-1a-R, B-1b-R, B-2-R,
C-R, and D-1-R debt was issued at a floating spread, replacing the
current floating spread. The D-2-R debt was issued at a fixed
coupon.
-- The new class E-R, F-R, and X-R debt was issued at a floating
spread. The class X-R debt will be paid down using interest
proceeds during the first 10 payment dates beginning with the
payment date in January 2025.
-- The class B-1a-R, B-1b-R, and B-2-R debt will pay pro rata with
a split sequential tranche, where the class B-1a-R and B-1b-R debt
are paying sequentially.
-- The stated maturity, reinvestment period, and non-call period
were extended 6.25 years.
Replacement And Original Debt Issuances
Replacement debt
-- Class X-R, $2.50 million: Three-month CME term SOFR + 1.15%
-- Class A-1-R, $245.40 million: Three-month CME term SOFR +
1.36%
-- Class A-2-R, $14.60 million: Three-month CME term SOFR + 1.60%
-- Class B-1a-R, $12.40 million: Three-month CME term SOFR +
1.65%
-- Class B-1b-R, $8.60 million: Three-month CME term SOFR + 1.85%
-- Class B-2-R, $23.00 million: Three-month CME term SOFR + 1.75%
-- Class C-R (deferrable), $24.00 million: Three-month CME term
SOFR + 2.10%
-- Class D-1-R (deferrable), $20.00 million: Three-month CME term
SOFR + 3.10%
-- Class D-2-R (deferrable), $8.00 million: 8.85%
-- Class E-R (deferrable), $11.00 million: Three-month CME term
SOFR + 6.90%
-- Class F-R (deferrable), $3.00 million: Three-month CME term
SOFR + 8.61%
-- Subordinated notes, $49.00 million: Not applicable
Original debt
-- Class X, $2.00 million: Three-month CME term SOFR + 0.60% +
CSA(i)
-- Class A-1A, $282.50 million: Three-month CME term SOFR + 0.93%
+ CSA(i)
-- Class A-1B, $37.50 million: Three-month CME term SOFR + 1.22% +
CSA(i)
-- Class A-2, $40.75 million: Three-month CME term SOFR + 1.55% +
CSA(i)
-- Class B (deferrable), $40.50 million: Three-month CME term SOFR
+ 1.90% + CSA(i)
-- Class C (deferrable), $31.50 million: Three-month CME term SOFR
+ 2.70% + CSA(i)
-- Class D (deferrable), $27.25 million: Three-month CME term SOFR
+ 5.55% + CSA(i)
-- Subordinated notes, $49.00 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
Barings CLO Ltd. 2018-II/Barings CLO 2018-II LLC
Class A-1-R, $245.40 million: AAA (sf)
Class B-1a-R, $12.40 million: AA (sf)
Class B-1b-R, $8.60 million: AA (sf)
Class B-2-R, $23.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-1-R (deferrable), $20.00 million: BBB (sf)
Class D-2-R (deferrable), $8.00 million: BBB- (sf)
Class E-R (deferrable), $11.00 million: BB- (sf)
Class F-R (deferrable), $3.00 million: B- (sf)
Ratings Withdrawn
Barings CLO Ltd. 2018-II/Barings CLO 2018-II LLC
Class X to NR from 'AAA (sf)'
Class A-1A to NR from 'AAA (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, $14.60 million: Not rated
Subordinated notes, $49.00 million: Not rated
BBCMS MORTGAGE 2019-C4: Fitch Cuts Rating on 2 Tranches to CCsf
---------------------------------------------------------------
Fitch Ratings has downgraded six and affirmed 11 classes of BBCMS
Mortgage Trust 2019-C4 Commercial Mortgage Pass-Through
Certificates, Series 2019-C4 (BBCMS 2019-C4). Following the
downgrades to class E and X-D, the classes were assigned a Negative
Rating Outlook. Additionally, the Outlooks for affirmed classes C,
D and X-B have been revised to Negative from Stable.
Fitch has also affirmed 16 classes of BANK 2018-BNK14 Commercial
Mortgage Pass-Through Certificates. The Outlooks for affirmed
classes F, G, X-F and X-G have been revised to Negative from
Stable.
Entity/Debt Rating Prior
----------- ------ -----
BANK 2018-BNK14
A-2 06035RAP1 LT AAAsf Affirmed AAAsf
A-3 06035RAR7 LT AAAsf Affirmed AAAsf
A-4 06035RAS5 LT AAAsf Affirmed AAAsf
A-S 06035RAU0 LT AAAsf Affirmed AAAsf
A-SB 06035RAQ9 LT AAAsf Affirmed AAAsf
B 06035RAV8 LT AA-sf Affirmed AA-sf
C 06035RAW6 LT A-sf Affirmed A-sf
D 06035RAX4 LT BBBsf Affirmed BBBsf
E 06035RAZ9 LT BBB-sf Affirmed BBB-sf
F 06035RBB1 LT BB-sf Affirmed BB-sf
G 06035RBD7 LT B-sf Affirmed B-sf
X-A 06035RBH8 LT AAAsf Affirmed AAAsf
X-B 06035RAT3 LT AA-sf Affirmed AA-sf
X-D 06035RAA4 LT BBB-sf Affirmed BBB-sf
X-F 06035RAC0 LT BB-sf Affirmed BB-sf
X-G 06035RAE6 LT B-sf Affirmed B-sf
BBCMS 2019-C4
A-2 07335CAB0 LT AAAsf Affirmed AAAsf
A-3 07335CAC8 LT AAAsf Affirmed AAAsf
A-4 07335CAE4 LT AAAsf Affirmed AAAsf
A-5 07335CAF1 LT AAAsf Affirmed AAAsf
A-S 07335CAG9 LT AAAsf Affirmed AAAsf
A-SB 07335CAD6 LT AAAsf Affirmed AAAsf
B 07335CAH7 LT AA-sf Affirmed AA-sf
C 07335CAJ3 LT A-sf Affirmed A-sf
D 07335CAT1 LT BBBsf Affirmed BBBsf
E 07335CAV6 LT BBsf Downgrade BBB-sf
F 07335CAX2 LT CCCsf Downgrade B+sf
G 07335CAZ7 LT CCsf Downgrade CCCsf
X-A 07335CAK0 LT AAAsf Affirmed AAAsf
X-B 07335CAL8 LT A-sf Affirmed A-sf
X-D 07335CAM6 LT BBsf Downgrade BBB-sf
X-F 07335CAP9 LT CCCsf Downgrade B+sf
X-G 07335CAR5 LT CCsf Downgrade CCCsf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Transaction-level 'Bsf'
ratings case losses are 5.44% in BBCMS 2019-C4 and 3.41% in BANK
2018-BNK14. The BBCMS 2019-C4 transaction has 15 loans (21.2% of
the pool) that have been identified as Fitch Loans of Concern
(FLOCs), including five loans (5.9%) in special servicing. The BANK
2018-BNK14 transaction has six FLOCs (17.6%).
Downgrades of classes E, F, G, X-D, X-F and X-G in the BBCMS
2019-C4 transaction reflect increased pool loss expectations, from
4.77% at the prior rating action, driven by primarily by the value
decline of the specially serviced Meidinger Tower (2.2%). The
Negative Outlooks on classes C, D, E, X-B and X-D reflect the
elevated concentration of office loans (33.4%) and the potential
for downgrades should the FLOCs deteriorate further and/or higher
than expected losses from the specially serviced loans/assets, most
notably the Meidinger Tower.
The Negative Outlooks for classes F, G, X-F and X-G in the BANK
2018-BNK14 transaction reflect concerns with underperforming office
and hotel loans including the Starwood Hotel Portfolio (5.3%),
Executive Towers West (4.6%) as well as exposure to two specially
serviced loans, Doubltree Grand Naniloa Hotel (3.7%) and Apple
Valley Office (0.6%).
The largest contributor and largest increase to expected losses in
the BBCMS 2019-C4 transaction is Meidinger Tower, which transferred
to special servicing in August 2023 for imminent monetary default.
The loan is secured by a 26-story office building totaling
331,054-sf located in Louisville, KY. Many of the largest tenants
at issuance have vacated upon their respective lease expirations in
2023 including Computershare (34% of NRA; October 2023), Mountjoy
Chilton Medley (11.3%; May 2023) and River Road Asset Management
(6%; August 2023). As a result, property occupancy has declined to
36% from 88% at issuance.
A pre-negotiation letter has been signed and the special servicer
is pursuing a consensual receivership/foreclosure action. Fitch
expects significant losses due to the deterioration in performance,
expectation for the loan to become real estate owned (REO) and low
recovery prospects upon liquidation given the lack of demand and
liquidity for office properties. Fitch's 'Bsf' rating case loss
(prior to concentration add-on) of 79.5% reflects a stressed value
of approximately $18/sf.
The second and third largest contributors to expected losses in
BBCMS 2019-C4 are two REO hotel assets, Holiday Inn Express &
Suites El Reno and Hampton Inn El Reno (combined, 1.5%), located in
El Reno, OK. Both loans transferred to special servicing in March
2020 for imminent monetary default and the assets became REO in
late 2020. Third-party property management is in place and is
working to increase RevPAR, with the servicer indicating potential
asset sales in late 2024. Fitch's 'Bsf' rating case loss (prior to
concentration add-on) is 73.8% and 62.5%, respectively, and is
based on a stress to the most recent appraisal values.
The largest contributor to expected losses in BANK 2018-BNK14 is
the Doubletree Grand Naniloa Hotel asset (3.7%), which is a
388-unit lodging property located in Hilo, HI. The loan transferred
to special servicing in June 2020 as a result of the Covid-19
pandemic. Foreclosure occurred in February 2024 and the property is
REO. Per the January 2024 STR report, occupancy, ADR and RevPAR
rates were 73.4%, $190.69 and $139.92, respectively. Per the most
recent servicer updates, sales strategies were explored and a sale
is expected by YE 2025. Fitch's 'Bsf' rating case loss (prior to
concentration add-on) of 14.7% is based on a stress to a recent
appraisal and reflects a value of approximately $119,500/key.
The second largest contributor to expected losses in BANK
2018-BNK14 is the Starwood Hotel Portfolio loan (5.3%). 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 net cash flow.
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.
Changes in Credit Enhancement (CE): As of the July 2024
distribution date, the aggregate balances of the BBCMS 2019-C4 and
BANK 2018-BNK14 transactions have been paid down by 7.25% and
10.4%, respectively, since issuance. There are five loans (3.8% of
the pool) that are defeased within the BBCMS 2019-C4 transaction.
The BANK 2018-BNK14 transaction includes one loan (0.7% of the
pool) that has fully defeased.
Cumulative interest shortfalls of approximately $2 million are
affecting the non-rated class H-RR in BBCMS 2019-C4 and
approximately $910,000 are affecting the non-rated class H in BANK
2018-BNK14.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not likely due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly or interest shortfalls occur or are
expected to occur.
Downgrades to the junior 'AAAsf' rated class A-S would be likely
with continued performance deterioration of the FLOCs, increased
expected losses and limited to no improvement in class CE, or if
interest shortfalls occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs or more loans than expected
experience performance deterioration or default at or before
maturity.
Downgrades to the 'BBBsf', 'BBsf' and 'Bsf' categories are possible
with higher than expected losses from specially serviced assets
(namely Meidinger Tower in BBCMS 2019-C4) and/or continued
underperformance of the FLOCs, in particular office loans with
deteriorating performance. Loans of particular concern in the BBCMS
2019-C4 transaction include Meidinger Tower, New Orleans MOB
Portfolio and the REO assets Hampton Inn El Reno and Holiday Inn
Express & Suites El Reno. Loans of particular concern in the BANK
2018-BNK10 transaction include Starwood Hotel Portfolio, Executive
Towers West and the specially serviced loans, Doubletree Grand
Naniloa Hotel and Apple Valley Office.
Downgrades to classes with distressed ratings 'CCCsf' and 'CCsf'
would occur if additional loans transfer to special servicing or
default, as losses are realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' 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.
BEAR STEARNS 2007-AR4: Moody's Hikes Rating on II-A-1 Debt From Ba1
-------------------------------------------------------------------
Moody's Ratings, on August 27, 2024, upgraded the ratings of three
bonds from two US residential mortgage-backed transactions (RMBS),
backed by option ARM and subprime mortgages issued by multiple
issuers.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Bear Stearns Mortgage Funding Trust 2007-AR4
Cl. I-A-1, Upgraded to Baa2 (sf); previously on Oct 1, 2021
Upgraded to Baa3 (sf)
Cl. II-A-1, Upgraded to Baa2 (sf); previously on Jan 6, 2023
Upgraded to Ba1 (sf)
Issuer: RAMP Series 2003-RS7 Trust
M-II-1, Upgraded to A1 (sf); previously on Oct 23, 2023 Upgraded to
A3 (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 growth in credit enhancement
since Moody's last review. Moody's analysis also considered the
existence of historical interest shortfalls for some of the bonds.
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, credit enhancement and other
qualitative considerations.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
BEAR STEARNS 2007-AR5: Moody's Ups Cl. I-A-1A Certs Rating to B1
----------------------------------------------------------------
Moody's Ratings has downgraded the rating of one certificate issued
by Structured Asset Mortgage Investments II Trust 2007-AR4 (SAMI II
Trust 2007-AR4) and also upgraded the ratings of six certificates
from SAMI II Trust 2007-AR4 and two other US residential mortgage
backed transactions (RMBS) issued in 2006 and 2007. The collateral
backing these deals consists of option ARM mortgages.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Bear Stearns Mortgage Funding Trust 2007-AR5
Cl. I-A-1A, Upgraded to B1 (sf); previously on Mar 21, 2016
Upgraded to Caa1 (sf)
Cl. II-A-1, Upgraded to Baa2 (sf); previously on Jun 1, 2022
Upgraded to Ba1 (sf)
Underlying I-A-1B, Upgraded to B1 (sf); previously on Mar 21, 2016
Upgraded to Caa1 (sf)
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR8
Cl. A-1A, Upgraded to B1 (sf); previously on Dec 14, 2010
Downgraded to Caa2 (sf)
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR4
Cl. A-4A, Upgraded to B1 (sf); previously on Oct 1, 2018 Upgraded
to B3 (sf)
Cl. Grantor Trust A-4B, Downgraded to Caa1 (sf); previously on Oct
1, 2018 Upgraded to B3 (sf)
Cl. Underlying A-4B, Upgraded to B1 (sf); previously on Oct 1, 2018
Upgraded to B3 (sf)
RATINGS RATIONALE
The rating actions reflect the current levels of credit enhancement
available to the certificates, the recent performance of the
transactions, and Moody's updated loss expectations on the
underlying pools. The downgrade of the rating on Grantor Trust
Certificate Class A-4B from SAMI II Trust 2007-AR4 also reflects a
correction to Moody's modeling of the transaction's cash flows.
The rating upgrades are the result of the improving performance of
the related pools, and improved loss coverage for the certificates.
Moody's analysis also considered the existence of historical
interest shortfalls, which, while still outstanding for a number of
the upgraded bonds, are eventually expected to be repaid.
The rating downgrade on SAMI II Trust 2007-AR4 Grantor Trust
Certificate Class A-4B to Caa1 reflects a correction in Moody's
cash flow modeling for this certificate. As per the transaction
documents, payments on the Grantor Trust Certificate Class A-4B
will be made indirectly from the underlying Class A-4B certificate.
Both interest and principal payments received from the underlying
Class A-4B certificates are available to the Grantor Trust
Certificate Class A-4B, with all collections available to pay
interest. Once interest payments are made, any remaining amount is
available to pay principal, up to the amount of principal collected
in that period. In prior actions, however, Moody's cash flow
modeling incorrectly allocated any interest collections solely to
pay interest and any principal collections solely to pay principal.
In addition, the Grantor Trust Certificate Class A-4B is structured
with an interest-rate swap which was not reflected in Moody's prior
cash flow modeling. The correction of these errors resulted in the
downgrade of the rating on the Grantor Trust Certificate Class
A-4B.
No actions were taken on the other rated classes in each of these
transactions because the expected losses remain commensurate with
the current ratings, after taking into account the updated
performance information, structural features, credit enhancement
and other qualitative considerations.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate certificates 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.
BELLEMEADE RE 2024-1: DBRS Finalizes B Rating on Class B-1 Notes
----------------------------------------------------------------
DBRS, Inc. finalized the following provisional credit ratings on
the Mortgage Insurance-Linked Notes, Series 2024-1 (the Notes)
issued by Bellemeade Re 2024-1 Ltd. (BMIR 2024-1 or the Issuer):
-- $35.0 million Class M-1A at BBB (low) (sf)
-- $53.6 million Class M-1B at BB (high) (sf)
-- $37.3 million Class M-1C at BB (low) (sf)
-- $25.6 million Class M-2 at B (high) (sf)
-- $11.7 million Class B-1 at B (sf)
The BBB (low) (sf) credit rating reflects 5.75% of credit
enhancement, provided by subordinated notes in the transaction. The
BB (high) (sf), BB (low) (sf), B (high) (sf), and B (sf) credit
ratings reflect 4.60%, 3.80%, 3.25%, and 3.00% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
BMIR 2024-1 is Arch Mortgage Insurance Company's (Arch MI) and
United Guaranty Residential Insurance Company's (UGRIC;
collectively the ceding insurers) 19th rated mortgage insurance
(MI)-linked note transaction. The Notes are backed by reinsurance
premiums, eligible investments, and related account investment
earnings, in each case relating to a pool of MI policies linked to
residential loans. The Notes are exposed to the risk arising from
losses the ceding insurer pays to settle claims on the underlying
MI policies. As of the Cut-Off Date, the pool of insured mortgage
loans consists of 91,613 fully amortizing first-lien fixed- and
variable-rate mortgages. They all have been underwritten to a full
documentation standard, have original loan-to-value ratios less
than or equal to 100.0%, and have never been reported to the ceding
insurer as 60 or more days delinquent. As of the Cut-Off Date,
these loans have not been reported to be in a payment forbearance
plan. The mortgage loans have MI policies effective in or after
January 2023 and in or before June 2024.
Approximately 1.7% (by balance) of the underlying insured mortgage
loans in this transaction are not eligible to be acquired by
Freddie Mac and Fannie Mae (government-sponsored enterprises or
agencies).
All of the mortgage loans (by Cut-Off Date) are insured under the
new master policy that was introduced on March 1, 2020, to conform
to government-sponsored enterprises' revised rescission relief
principles under the Private Mortgage Insurer Eligibility
Requirements guidelines (see the Representations and Warranties
section of the related presale report for more detail). On the
Closing Date, the Issuer will enter into the Reinsurance Agreement
with the ceding insurer. As per the agreement, the ceding insurer
will get protection for the funded portion of the MI losses. In
exchange for this protection, the ceding insurer will make premium
payments related to the underlying insured mortgage loans to the
Issuer.
The Issuer is expected to use the proceeds from the sale of the
Notes to purchase certain eligible investments that will be held in
the reinsurance trust account. The eligible investments are
restricted to at least Aaa-mf by Moody's or AAAm by S&P rated U.S.
Treasury money-market funds and securities. Unlike other
residential mortgage-backed security (RMBS) transactions, cash flow
from the underlying loans will not be used to make any payments;
rather, in MI-linked notes (MILN) transactions, a portion of the
eligible investments held in the reinsurance trust account will be
liquidated to make principal payments to the noteholders and to
make loss payments to the ceding insurer when claims are settled
with respect to the MI policy.
The Issuer will use the investment earnings on the eligible
investments, together with the ceding insurer's premium payments,
to pay interest to the noteholders.
The calculation of principal payments to the Notes will be based on
the reduction in aggregate exposed principal balance on the
underlying MI policy that is allocated to the Notes. The
subordinate Notes will receive their pro rata share of available
principal funds if the performance tests; minimum credit
enhancement test and delinquency test; are satisfied. This is the
first MILN transaction with dynamic thresholds for performance
tests. The minimum credit enhancement test has been set to fail at
the Closing Date, thus locking out the rated classes from initially
receiving any principal payments until the subordinate percentage
reaches target credit enhancement percentage. The delinquency test
will be satisfied if the three-month average of the 60+ day
delinquency percentage is below the applicable delinquency
threshold percentage times the subordinate percentage.
Additionally, if these performance tests are met and the
subordinate percentage is greater than the target credit
enhancement percentage, then the subordinate Notes will be entitled
to accelerated principal payments until the subordinate percentage
comes down to the target credit enhancement. See the Cash Flow
Structure and Features section of the related report for more
detail.
The coupon rates for the Notes are based on the Secured Overnight
Financing Rate (SOFR). There are replacement provisions in place in
the event that SOFR is no longer available; please see the Offering
Circular for more details. Morningstar DBRS did not run interest
rate stresses for this transaction, as the interest is not linked
to the performance of the underlying loans. Instead, interest
payments are funded via (1) premium payments that the ceding
insurer must make under the reinsurance agreement and (2) earnings
on eligible investments.
On the Closing Date, the ceding insurer will establish a cash and
securities account, the premium deposit account. In case of the
ceding insurer's default in paying coverage premium payments to the
Issuer, the amount available in this account will be used to make
interest payments to the noteholders. The premium deposit account
will not be funded at closing. The ceding insurer will make a
deposit into this account up to the applicable target balance only
when one of the following Premium Deposit Events occur. Please
refer to the related report for more detail.
The Notes are scheduled to mature on August 2034, but will be
subject to early redemption at the option of the ceding insurer (1)
for a 10% clean-up call or (2) on or following the payment date in
August 2029, among others. The Notes are also subject to mandatory
redemption before the scheduled maturity date upon the termination
of the Reinsurance Agreement. Additionally, there is a provision
for the Ceding Insurers to issue a tender offer to reduce all or a
portion of the outstanding Notes.
Arch MI and UGRIC, together, act as the ceding insurers. The Bank
of New York Mellon (rated AA (high) with a Stable trend by
Morningstar DBRS) will act as the Indenture Trustee, Paying Agent,
Note Registrar, and Reinsurance Trustee.
The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns June 2024 Update," published on June 28, 2024. These
baseline macroeconomic scenarios replace Morningstar DBRS' moderate
and adverse coronavirus pandemic scenarios, which were first
published in April 2020.
Notes: All figures are in U.S. dollars unless otherwise noted.
BENCHMARK 2020-B21: Fitch Affirms B Rating on Class X-G Debt
------------------------------------------------------------
Fitch Ratings has downgraded six and affirmed 14 classes of
Benchmark 2020-B20 Mortgage Trust (BMARK 2020-B20). Negative Rating
Outlooks were assigned to classes F, X-F, G and X-G following their
downgrades. The Outlooks for affirmed classes D, E and X-D have
been revised to Negative from Stable.
Fitch has also affirmed 17 classes of Benchmark 2020-B21 Mortgage
Trust (BMARK 2020-B21). The Outlooks for affirmed classes F, X-F, G
and X-G have been revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
BMARK 2020-B21
A-1 08163LAA7 LT AAAsf Affirmed AAAsf
A-2 08163LAC3 LT AAAsf Affirmed AAAsf
A-4 08163LAE9 LT AAAsf Affirmed AAAsf
A-5 08163LAG4 LT AAAsf Affirmed AAAsf
A-AB 08163LAJ8 LT AAAsf Affirmed AAAsf
A-S 08163LAQ2 LT AAAsf Affirmed AAAsf
B 08163LAS8 LT AA-sf Affirmed AA-sf
C 08163LAU3 LT A-sf Affirmed A-sf
D 08163LBC2 LT BBBsf Affirmed BBBsf
E 08163LBE8 LT BBB-sf Affirmed BBB-sf
F 08163LBG3 LT BBsf Affirmed BBsf
G 08163LBJ7 LT Bsf Affirmed Bsf
X-A 08163LAL3 LT AAAsf Affirmed AAAsf
X-B 08163LAN9 LT A-sf Affirmed A-sf
X-D 08163LBU2 LT BBB-sf Affirmed BBB-sf
X-F 08163LAW9 LT BBsf Affirmed BBsf
X-G 08163LAY5 LT Bsf Affirmed Bsf
BMARK 2020-B20
A-S 08162XBL7 LT AAAsf Affirmed AAAsf
A-SB 08162XBH6 LT AAAsf Affirmed AAAsf
A1 08162XBC7 LT AAAsf Affirmed AAAsf
A2 08162XBD5 LT AAAsf Affirmed AAAsf
A3 08162XBE3 LT AAAsf Affirmed AAAsf
A4 08162XBF0 LT AAAsf Affirmed AAAsf
A5 08162XBG8 LT AAAsf Affirmed AAAsf
B 08162XBM5 LT AA-sf Affirmed AA-sf
C 08162XBN3 LT A-sf Affirmed A-sf
D 08162XAL8 LT BBBsf Affirmed BBBsf
E 08162XAN4 LT BBB-sf Affirmed BBB-sf
F 08162XAQ7 LT B+sf Downgrade BB+sf
G 08162XAS3 LT B-sf Downgrade BB-sf
H 08162XAU8 LT CCCsf Downgrade B-sf
X-A 08162XBJ2 LT AAAsf Affirmed AAAsf
X-B 08162XBK9 LT A-sf Affirmed A-sf
X-D 08162XAA2 LT BBB-sf Affirmed BBB-sf
X-F 08162XAC8 LT B+sf Downgrade BB+sf
X-G 08162XAE4 LT B-sf Downgrade BB-sf
X-H 08162XAG9 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Deal-level 'Bsf' rating case
losses are 5.44% in BMARK 2020-B20 and 2.84% in BMARK 2020-B21.
Fitch Loans of Concern (FLOCs) comprise six loans (13.9% of the
pool) in BMARK 2020-B20, including one loan in special servicing
(2.7%), and four loans (16.3%) in the BMARK 2020-B21 transaction.
BMARK 2020-B20: The downgrades in the BMARK 2020-B20 transaction
reflect higher overall pool losses since the prior rating action,
driven by performance deterioration of office FLOCs, including
Northern Trust Office (4.5%) and the specially serviced Troy
Technology Park (2.7%).
The Negative Outlooks on classes D through G in BMARK 2020-B20
reflect the concentration of office loans within the pool (51.6%)
and the potential for downgrades should performance of the FLOCs,
specifically Troy Technology Park (2.7%), Northern Trust Office
(4.5%), 2665 North First (3.2%), 711 Fifth Avenue (1.7%), and 6655
Wedgwood (1.1%), fail to stabilize, and/or with additional declines
in performance.
BMARK 2020-B21: The affirmations in the BMARK 2020-B21 transaction
reflect generally stable pool performance and loss expectations
since Fitch's prior rating action.
The Negative Rating Outlooks in BMARK 2020-B21 reflect the office
concentration of 35.7% in the pool including the FLOCs, The
Standard (2.8%), 32-42 Broadway (7.0%), 711 Fifth Avenue (5.6%) and
3100 Research Boulevard (0.9%).
Largest Contributors to Loss: The largest increase in loss
expectations since the prior rating action and the largest
contributor to overall pool loss expectations in the BMARK 2020-B20
transaction is Troy Technology Park, a 425,192-sf, mixed-use (flex
industrial/R&D and office) property located in Troy, MI, 15 miles
north of downtown Detroit.
The asset transferred to special servicing in December 2023 due to
mortgage fraud by the borrower and became REO in July 2024. A
lawsuit against the guarantor has been initiated. Property
performance has deteriorated since issuance with September 2023
occupancy falling to 77% from 86% at issuance. The second largest
tenant from issuance, Raytheon Company II (9.5% of the NRA),
vacating at lease expiration in 2022 contributed to the decline.
Additionally, the servicer has indicated that the Troy submarket
has seen limited leasing activity in the past two years, and it is
expected that the submarket vacancy will continue to rise over the
next 12 months to 18 months.
Fitch's 'Bsf' rating case loss of 63.6% (prior to concentration
adjustments) reflects a discount to the most recent appraisal value
reflecting a Fitch-stressed value of $37 psf, which is
approximately 42.2% below the issuance appraisal.
The fourth largest increase in loss expectations since the prior
rating action in the BMARK 2020-B20 transaction is the Northern
Trust Office loan (4.5%), secured by a 149,371-sf office property
located in Tempe, AZ.
The property is fully leased to The Northern Trust Company
('AA-'/Stable) with a lease expiration in March 2032. However,
CoStar reports the entire property is listed as available for
sublease. According to the servicer, the lease remains in full
force and the tenant is paying as agreed. Additionally, the South
Tempe/Ahwatukee office submarket remains challenged, reporting a
vacancy rate of 24.5% according to CoStar as of 2Q24.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 6.0% reflects a 9.5% cap rate (100 bps higher than issuance) and
10% stress to the YE 2023 NOI to account for the single tenant
exposure, fully dark property and high submarket vacancy.
The largest increase in loss expectations since the prior rating
action and the largest contributor to overall pool loss
expectations in the BMARK 2020-B21 transaction is The Standard
loan, secured by a 284,459-sf office property located in Farmington
Hills, MI.
The largest tenant, TD Auto Finance (54.5% of the NRA) announced
intentions to vacate the property at lease expiration in May 2025.
The disclosure triggered the cash sweep. According to CoStar,
184,349 sf (64.8%) is listed as available for direct lease, which
includes the space of TD Auto Finance. Due to the departure of the
major tenant, occupancy is expected to decline to 35%, with an
estimated drop in NOI DSCR to 1.05x.
Fitch's 'Bsf' rating case loss of 19.4% (prior to concentration
adjustments) reflects an elevated 10.5% cap rate, 25% stress to the
YE 2023 NOI and factors a higher probability of default due to the
departure of a major tenant, high availability and term default
risk.
The second largest contributor to overall pool loss expectations in
the BMARK 2020-B21 transaction is the 32-42 Broadway loan, secured
by two adjacent office buildings totaling 521,573 sf, located in
the Financial District of Lower Manhattan. Property performance has
declined since issuance, with March 2024 occupancy falling to 76%
from 90% at issuance.
The reported NOI as of YE 2023 is 15% below the originator's
underwritten NOI at issuance. CoStar reports an availability of
159,860 sf (30% of the NRA), which includes the entire space of
major tenant, Magilla Entertainment (7%). The August 2024
remittance reflects $8.5 million escrowed into reserves.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 5.7% reflects a 9.25% cap rate (100 bps higher than issuance)
and 10% stress to the YE 2023 NOI to reflect the performance
decline and high availability.
Changes in Credit Enhancement (CE): As of the July 2024
distribution date, the aggregate balances of the BMARK 2020-B20 and
BMARK 2020-B21 transactions have been paid down by 1.2% and 0.9%,
respectively, since issuance.
The BMARK 2020-B20 transaction includes one loan (2.9% of the pool)
that has fully defeased and BMARK 2020-B21 has no defeased loans.
Cumulative interest shortfalls of $109,310 are affecting the
non-rated class NR in BMARK 2020-B20 and $2,711 is affecting the
non-rated class H in BMARK 2020-B21.
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
could occur should performance of the FLOCs, most notably Troy
Technology Park and Northern Trust Office in BMARK 2020-B20, and
The Standard and 32-42 Broadway in BMARK 2020-B21, deteriorate
further or if more loans than expected default at or prior to
maturity.
Downgrades for the 'BBBsf', 'BBsf' 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
Troy Technology Park and Northern Trust Office in BMARK 2020-B20,
and The Standard and 32-42 Broadway in BMARK 2020-B21.
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.
BENCHMARK 2020-B22: Fitch Affirms B- Rating on 2 Tranches
---------------------------------------------------------
Fitch Ratings has affirmed 17 classes of Benchmark 2020-B22
Mortgage Trust (BMARK 2020-B22). The Rating Outlooks for affirmed
classes E, X-D, F, X-F, G and X-G have been revised to Negative
from Stable.
Entity/Debt Rating Prior
----------- ------ -----
BMARK 2020-B22
A-1 08163BBC4 LT AAAsf Affirmed AAAsf
A-2 08163BAZ4 LT AAAsf Affirmed AAAsf
A-4 08163BBE0 LT AAAsf Affirmed AAAsf
A-5 08163BBA8 LT AAAsf Affirmed AAAsf
A-M 08163BBG5 LT AAAsf Affirmed AAAsf
A-SB 08163BBD2 LT AAAsf Affirmed AAAsf
B 08163BBB6 LT AA-sf Affirmed AA-sf
C 08163BBH3 LT A-sf Affirmed A-sf
D 08163BAL5 LT BBBsf Affirmed BBBsf
E 08163BAN1 LT BBB-sf Affirmed BBB-sf
F 08163BAQ4 LT BB-sf Affirmed BB-sf
G 08163BAS0 LT B-sf Affirmed B-sf
X-A 08163BBF7 LT AAAsf Affirmed AAAsf
X-B 08163BAA9 LT A-sf Affirmed A-sf
X-D 08163BAC5 LT BBB-sf Affirmed BBB-sf
X-F 08163BAE1 LT BB-sf Affirmed BB-sf
X-G 08163BAG6 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
'Bsf' Loss Expectations: The affirmations reflect the generally
stable pool performance and loss expectations since Fitch's prior
rating action. Deal-level 'Bsf' rating case losses are 4.05%
compared to 3.74% at the last rating action. Fitch Loans of Concern
(FLOCs) comprise seven loans (18.0% of the pool). No loans are
currently in special servicing.
The Negative Rating Outlooks on classes E, X-D, F, X-F, G and X-G
reflect the 38% office concentration in the pool and the potential
for downgrades should performance of the office and retail FLOCs,
including 350 West Broadway (1.7%), Medici Office Park (2.1%),
Rugby Pittsburgh Portfolio (6.1%), SDC Annex (0.7%) and 32-42
Broadway (3.1%), fail to stabilize and/or with additional valuation
declines of the aforementioned FLOCs.
Largest Contributors to Loss: The largest increase in loss
expectations since the prior rating action and the largest
contributor to overall pool loss expectations is the 350 West
Broadway loan (1.7%), secured by a 14,000-sf, mixed-use
(office/retail) property located in the heart of SoHo in Manhattan,
New York.
The single tenant, Amazon (100% of the NRA) vacated the property
prior to lease expiration in December 2024. A cash trap was
activated in March 2024 as a result of the tenant departure. The
July 2024 remittance reflects $150,307 escrowed into lockbox
reserve. According to CoStar, the entire space is listed as
available for lease. Given the collateral location and layout, the
borrower is pursuing a retail tenant.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 32.7% reflects an 8.25% cap rate, 30% stress to the YE 2023 NOI
and factors a higher probability of default to account for the
departure of the single tenant and term default risk.
The second largest increase in loss expectations since the prior
rating action and the second largest contributor to overall pool
loss expectations is the Medici Office Park loan (2.1%), secured by
a three-building, multi-tenant, 131,054-sf office park located in
Aurora, CO.
Property performance has deteriorated with the most recently
reported Q3 2023 occupancy falling to 87% from 100% at YE 2022 and
YE 2021. In addition, the largest tenant, Veterans Administration
(25.2% of the NRA) has two leases (22.2%) that have expired in
April 2024 and July 2024, respectively. An update was unavailable
as to the renewal status of the expired tenants.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 22.1% reflects a 10% cap rate (100 bps higher than issuance),
25% stress to the YE 2023 NOI and factors a higher probability of
default to account for the occupancy decline and imminent lease
expiration of the major tenant.
The third largest increase in loss expectations since the prior
rating action is the SDC Annex loan (0.7%), secured by a 25,468-sf,
mixed-use (office/industrial flex) property located in the
neighborhood of Georgetown in Seattle, WA.
The largest tenant at issuance, Knack (45.2% of the NRA) vacated
the property prior to lease expiration in September 2024 causing
property occupancy to decline to 55%. YE 2022 NOI DSCR was covering
at 2.02x which declined to 1.30x as of YE 2023 and is expected to
fall further to 1.21x.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 36.8% reflects a 10% cap rate (100 bps higher than issuance),
10% stress to the YE 2023 NOI and factors a higher probability of
default to account for the departure of the major tenant and lack
of leasing momentum.
The fourth largest contributor to overall pool loss expectations is
the Rugby Pittsburgh Portfolio loan (6.1%), secured by a
15-building, 1.1-million-sf suburban office portfolio located in
Pittsburgh, PA. Portfolio performance has deteriorated since
issuance with July 2024 occupancy down to 76% from 90% at issuance.
According to CoStar, 337,522 sf (28.6% of the NRA) is available for
lease, which includes 1.9% from the third largest tenant, Tetra
Tech (4.2%).
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 4.6% reflects a 10.5% cap rate (100 bps higher than issuance)
and 20% stress to the YTD annualized September 2023 NOI to reflect
the occupancy decline and high availability.
Changes in Credit Enhancement (CE): As of the June 2024
distribution date, the pool's aggregate balances have been paid
down by 0.7% since issuance.
No loans have been defeased. Cumulative interest shortfalls of
$2,442 are affecting the non-rated class H. Of the pool balance, 24
loans (77.1%) are full-term, interest-only and the remaining 22.9%
of the pool is amortizing.
Credit Opinion Loans: Two loans, The Grace Building and MGM Grand &
Mandalay Bay, representing 19.2% of the pool, had credit opinions
assigned at issuance and remain as credit opinion loans.
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 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
could occur should performance of the FLOCs, most notably 350 West
Broadway, Medici Office Park, Rugby Pittsburgh Portfolio and SDC
Annex, deteriorate further or if more loans than expected default
at or prior to maturity.
Downgrades for the 'BBBsf', 'BBsf' 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 new delinquent or specially
serviced loans.
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
350 West Broadway, Medici Office Park, Rugby Pittsburgh Portfolio
and SDC Annex.
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.
BENEFIT STREET XXVII: S&P Assigns BB-(sf) Rating on Cl. E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-1-R, D-2-R, and E-R floating-rate replacement debt from Benefit
Street Partners CLO XXVII Ltd./Benefit Street Partners CLO XXVII
LLC, a CLO originally issued in August 2022 and was not rated by
S&P Global Ratings.
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 BSP CLO Management LLC, a subsidiary
of Franklin Templeton Investments LLC.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period was extended to Oct. 20, 2026.
-- The reinvestment period was extended to Oct. 20, 2029.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) were extended to Oct. 20, 2037.
-- The target initial par amount was increased to $500 million.
Additionally, the ratings reflect S&P's assessment of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
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."
Ratings Assigned
Benefit Street Partners CLO XXVII Ltd./
Benefit Street Partners CLO XXVII LLC
Class A-R, $320.00 million: AAA (sf)
Class B-R, $60.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-1-R (deferrable), $30.00 million: BBB- (sf)
Class D-2-R (deferrable), $5.00 million: BBB- (sf)
Class E-R (deferrable), $15.00 million: BB- (sf)
Other Debt
Benefit Street Partners CLO XXVII Ltd./
Benefit Street Partners CLO XXVII LLC
Subordinated notes, $31.95 million: Not rated
BLUEMOUNTAIN FUJI I: S&P Affirms BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings took various rating actions on 16 classes of
notes from BlueMountain CLO 2015-4 Ltd., BlueMountain Fuji US CLO I
Ltd., and BlueMountain Fuji US CLO III Ltd., U.S. broadly
syndicated CLO transactions managed by BlueMountain Fuji Management
LLC. Three of the ratings were placed on CreditWatch negative on
May 31, 2024, due to a combination of an increase in
defaults/obligations rated in the 'CCC' category 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 enhancement levels have improved for each
transaction. Of those placed on CreditWatch, S&P affirmed all three
ratings and simultaneously removed them from CreditWatch negative.
Additionally, of the ratings not on CreditWatch, S&P raised six and
affirmed seven.
S&P said, "The rating actions follow our review of each
transaction's performance using data from the July 1, 2024, and
July 9, 2024, trustee reports. In our 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."
The transactions have all exited their reinvestment period 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 exposure to
collateral obligations rated in the 'CCC' category and to defaulted
obligations. 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
overcollateralization (O/C) tests 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 each 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. Additionally, the cash flow analysis showed improvements
on the junior rated classes since being placed on CreditWatch
negative."
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.
S&P said, "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 our view that the available credit
enhancement for each respective class is still commensurate with
the assigned ratings.
"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 list
RATING
ISSUER
CLASS CUSIP TO FROM
BlueMountain CLO 2015-4 Ltd.
A-1-R 09628NAN2 AAA (sf) AAA (sf)
MAIN RATIONALE: Currently paying down, and cash flows passing
at current rating level with additional cushion.
BlueMountain CLO 2015-4 Ltd.
A-2-R 09628NAQ5 NR NR
MAIN RATIONALE: This class is not rated.
BlueMountain CLO 2015-4 Ltd.
B-R 09628NAS1 AA+ (sf) AA (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. Although S&P's base-case analysis indicated a
higher rating, its rating action considered the current credit
enhancement level, which is commensurate with the raised rating
rather than a higher rating level.
BlueMountain CLO 2015-4 Ltd.
C-R 09628NAU6 A+ (sf) A (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. Although S&P's base-case analysis indicated a
higher rating, its rating action considered the current credit
enhancement level, which is commensurate with the raised rating
rather than a higher rating level.
BlueMountain CLO 2015-4 Ltd.
D-R 09628NAW2 BBB- (sf) BBB- (sf)
MAIN RATIONALE: Senior note paydowns and passing cash flows.
S&P said, "Although our base-case analysis indicated a higher
rating, our affirmation considers the sensitivity test results on
the elevated exposures to assets rated in the 'CCC' rating category
and assets with distressed market prices. We additionally consider
the current credit enhancement level, which in our opinion is
commensurate with the current rating level."
BlueMountain CLO 2015-4 Ltd.
E-R 095766AG6 BB- (sf) BB- (sf) / CW Negative
MAIN RATIONALE: Passing cash flows and O/C improvements since
being placed on CW negative. S&P affirmed the rating and removed it
from CW negative based on the current credit enhancement, passing
O/C levels, and passing cash flows, which show the rating to be
commensurate with its current rating level.
BlueMountain CLO 2015-4 Ltd.
F-R 095766AJ0 CCC+ (sf) CCC+ (sf)
MAIN RATIONALE: S&P said, "Although our base-case analysis
indicated a lower rating, we considered the margin of failure on
the cash flow runs and current credit enhancement levels. In our
opinion, the metrics are commensurate with the affirmed rating
level rather than a lower rating. Additionally, the class continues
to meet the 'CCC' criteria for being dependent on favorable
conditions."
BlueMountain CLO 2015-4 Ltd.
Sub notes NR NR
MAIN RATIONALE: The subordinated notes are not rated.
BlueMountain Fuji US CLO I Ltd.
A-1-R 09629CAL9 AAA (sf) AAA (sf)
MAIN RATIONALE: Currently paying down, and cash flows passing
at current rating level with additional cushion.
BlueMountain Fuji US CLO I Ltd.
A-2 09629CAC9 NR NR
MAIN RATIONALE: This class is not rated.
BlueMountain Fuji US CLO I Ltd.
B-R 09629CAQ8 AA+ (sf) AA (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. S&P said, "Although our base-case analysis
indicated a higher rating, our rating action considered the current
credit enhancement level, which is commensurate with the raised
rating rather than a higher rating level."
BlueMountain Fuji US CLO I Ltd.
C-R 09629CAS4 A+ (sf) A (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. S&P said, "Although our base-case analysis
indicated a higher rating, our rating action considered the current
credit enhancement level, which is commensurate with the raised
rating rather than a higher rating level."
BlueMountain Fuji US CLO I Ltd.
D 09629CAJ4 BBB (sf) BBB (sf)
MAIN RATIONALE: Senior note paydowns and passing cash flows.
S&P said, "Although our base-case analysis indicated a higher
rating, our affirmation considers the sensitivity test results on
the elevated exposures to assets rated in the 'CCC' rating category
and assets with distressed market prices. We additionally consider
the current credit enhancement level, which in our opinion is
commensurate with the current rating level."
BlueMountain Fuji US CLO I Ltd.
E 09629DAA1 BB- (sf) BB- (sf) / CW Negative
MAIN RATIONALE: S&P said, "Although our base-case analysis
indicated a lower rating, we considered the margin of failure on
the cash flow runs, current credit enhancement levels, and O/C
improvements since being placed on CW negative. In our opinion, the
metrics are commensurate with the affirmed rating level rather than
a lower rating."
BlueMountain Fuji US CLO I Ltd.
Sub notes NR NR
MAIN RATIONALE: The subordinated notes are not rated.
BlueMountain Fuji US CLO III Ltd.
A-1 09628FAA7 AAA (sf) AAA (sf)
MAIN RATIONALE: Currently paying down, and cash flows passing
at current rating level with additional cushion.
BlueMountain Fuji US CLO III Ltd.
A-2 09628FAC3 NR NR
MAIN RATIONALE: This class is not rated.
BlueMountain Fuji US CLO III Ltd.
B 09628FAE9 AA+ (sf) AA (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. S&P said, "Although our base-case analysis
indicated a higher rating, our rating action considered the current
credit enhancement level, which is commensurate with the raised
rating rather than a higher rating level."
BlueMountain Fuji US CLO III Ltd.
C 09628FAG4 A+ (sf) A (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. S&P said, "Although our base-case analysis
indicated a higher rating, our rating action considered the current
credit enhancement level, which is commensurate with the raised
rating rather than a higher rating level."
BlueMountain Fuji US CLO III Ltd.
D 09628FAJ8 BBB- (sf) BBB- (sf)
MAIN RATIONALE: Senior note paydowns and passing cash flows.
S&P said, "Although our base-case analysis indicated a higher
rating, our affirmation considers the sensitivity test results on
the elevated exposures to assets rated in the 'CCC' rating category
and assets with distressed market prices. We additionally consider
the current credit enhancement level, which in our opinion is
commensurate with the current rating level."
BlueMountain Fuji US CLO III Ltd.
E 09628HAA3 BB- (sf) BB- (sf) / CW Negative
MAIN RATIONALE: Passing cash flows and O/C improvements since
being placed on CW negative. S&P affirmed the rating and removed
from CW negative based on the current credit enhancement, passing
O/C levels, and passing cash flows, which show the rating to be
commensurate with its current rating level.
BlueMountain Fuji US CLO III Ltd.
Sub notes NR NR
MAIN RATIONALE: The subordinated notes are not rated.
NR--Not rated.
O/C--Overcollateralization.
CW--CreditWatch.
BMO 2024-5C5: Fitch Assigns 'B-sf' Final Rating on Class G-RR Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to BMO
2024-5C5 Mortgage Trust Commercial Mortgage Pass-Through
Certificates series 2024-5C5 as follows:
- $2,235,000 class A-1 'AAAsf'; Outlook Stable;
- $69,000,000 class A-2 'AAAsf'; Outlook Stable;
- $640,435,000 class A-3 'AAAsf'; Outlook Stable;
- $711,670,000a class X-A 'AAAsf'; Outlook Stable;
- $94,042,000 class A-S 'AAAsf'; Outlook Stable;
- $52,104,000 class B 'AA-sf'; Outlook Stable;
- $41,938,000 class C 'A-sf'; Outlook Stable;
- $188,084,000a class X-B 'A-sf'; Outlook Stable;
- $22,875,000b class D 'BBBsf'; Outlook Stable;
- $22,875,000ab class X-D 'BBBsf'; Outlook Stable;
- $10,167,000bc class E-RR 'BBB-sf'; Outlook Stable;
- $20,333,000bc class F-RR 'BB-sf'; Outlook Stable;
- $13,979,000bc class G-RR 'B-sf'; Outlook Stable;
The following class is not rated by Fitch:
- $ 49,563,502bc class J-RR.
Notes:
(a) Notional amount and interest only (IO).
(b) Privately places and pursuant to Rule 144A.
(c) Classes E-RR, F-RR, G-RR and J-RR certificates comprise the
transaction's horizontal risk retention interest.
The ratings are based on information provided by the issuer as of
Aug. 15, 2024.
Transaction Summary
The certificates represent the beneficial ownership interest in a
trust, the primary assets of which are 36 fixed-rate, commercial
mortgage loans with an aggregate principal balance of
$1,016,671,503 as of the cutoff date. The mortgage loans are
secured by the borrowers' fee and leasehold interests in 65
commercial properties.
The loans were contributed to the trust by Bank of Montreal, Citi
Real Estate Funding Inc., Starwood Mortgage Capital LLC, German
American Capital Corporation, UBS AG, Societe Generale Financial
Corporation, Goldman Sachs Mortgage Company, Greystone Commercial
Mortgage Capital LLC, Zions Bancorporation, N.A., BSPRT CMBS
Finance, LLC, and LMF Commercial, LLC. The master servicer is
Midland Loan Services and the special servicer is LNR Partners,
LLC. Computershare Trust Company, N.A. is the trustee and
certificate administrator. The certificates follow a sequential
paydown structure.
Since Fitch published its expected ratings on July 25, 2024, the
following changes have occurred: the balances for classes A-2 and
A-3 were finalized. At the time the expected ratings were
published, the initial aggregate certificate balance of the A-2
class was expected to be in the $0-$350,000,000 range, and the
initial aggregate certificate balance of the A-3 class was expected
to be in the $359,435,000- $709,435,000 range. The final class
balances for classes A-2 and A-3 are $69,000,000 and $640,435,000,
respectively.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 31 loans
totaling 94.5% of the pool by balance. Fitch's cash flow sample
included the largest 20 loans in the pool, as well as 11 loans
outside the top 20. Fitch's resulting net cash flow (NCF) of $96.2
million represents a 13.5% decline from the issuer's underwritten
NCF of $111.3 million.
Higher Fitch Leverage: The transaction has higher Fitch leverage
compared to recent multiborrower transactions. The pool's Fitch
weighted average (WA) trust loan-to-value ratio (LTV) is 101.9%,
higher than the YTD 2024 and 2023 multiborrower averages of 89.1%
and 88.3% respectively. Additionally, the pool's Fitch debt yield
(DY) of 9.5% is lower than the YTD 2024 and 2023 averages of 11.3%
and 10.9% respectively.
Office Concentration: In general, the pool's property type
diversity is comparable to recent Fitch transactions; the pool's
effective property type count of 4.1 is in-line with the YTD 2024
and 2023 averages of 4.1 and 4.0, respectively. However, the second
largest property type concentration is office (26.0% of the pool),
which is higher than the YTD 2024 office average of 18.8% and
marginally lower than the 2023 office average of 27.6%. In
particular, the office concentration includes three of the largest
10 loans (15.6% of the pool).
Shorter-Duration Loans: Loans with five-year terms comprise 100% of
the pool, whereas Fitch-rated multiborrower transactions have
historically included mostly loans with 10-year terms. Fitch's
historical loan performance analysis shows that five-year loans
have a modestly lower probability of default (PD) than 10-year
loans, all else equal. This is mainly attributed to the shorter
window of exposure to potential adverse economic conditions. Fitch
considered its loan performance regression in its analysis of the
pool.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf'
/ 'BB-sf' / 'B-sf';
- 10% NCF Decline: 'AAsf' / 'A-sf' / 'BBB-sf' / 'BBsf' / 'BB-sf' /
'B-sf' / '
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf'
/ 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AA+sf' / 'Asf' / 'BBB+sf' / 'BBBsf'
/ 'BB+sf' /'B+sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on 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.
BRAVO RESIDENTIAL 2024-NQM6: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to BRAVO Residential
Funding Trust 2024-NQM6 (BRAVO 2024-NQM6).
Entity/Debt Rating
----------- ------
BRAVO 2024-NQM6
A-1-A LT AAA(EXP)sf Expected Rating
A-1-B LT AAA(EXP)sf Expected Rating
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
SA LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
Transaction Summary
The BRAVO 2024-NQM6 notes are supported by 600 loans with a total
balance of approximately $325.4 million as of the cutoff date.
Approximately 73.2% of the loans in the pool were originated by
Citadel (Citadel; dba Acra Lending), 15.3% by LoanStream Mortgage
dbs OCMBS, Inc., 11.4% by Arc Home LLC, and the remainder by
another originator which originated 0.1% of the mortgage loans.
Approximately 73.2% of the loans will be serviced by Citadel
Servicing Corporation (Citadel), primarily subserviced by
ServiceMac, 11.4% by Shellpoint Mortgage Servicing (Shellpoint),
and the remaining 15.3% will be transferred to Shellpoint on or
prior to Sept. 17, 2024.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices Fitch sees home price values of
this pool as 10% above a long-term sustainable level, versus 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.
Non-Qualified Mortgage Credit Quality (Mixed): The collateral
consists of 600 loans totaling approximately $325 million and
seasoned at approximately three months in aggregate, calculated by
Fitch (one month per the transaction documents). The borrowers have
a moderate credit profile, a 727 model FICO and a 43% debt to
income (DTI) ratio, accounting for Fitch's approach of mapping debt
service coverage ratio (DSCR) loans to DTI, and moderate leverage
of 78% for a sustainable loan to value (sLTV) ratio.
Of the pool, 62.6% of loans are treated as owner-occupied, while
37.4% are treated as an investor property or second home, which
include loans to foreign nationals or loans where the residency
status was not confirmed. In addition, 3.4% of the loans were
originated through a retail channel. Of the loans, 60.9 are
non-qualified mortgages (non-QMs), 3.2% are Safe Harbor QM (SHQM),
and 0.1% are high-priced qualified mortgages (HPQM), while the
Ability to Repay/Qualified Mortgage Rule (ATR) is not applicable
for the remaining portion.
Loan Documentation (Negative): Approximately 90.3% of the pool
loans were underwritten to less than full documentation, as
determined by Fitch, and 54.7% were underwritten to a 12-month or
24-month bank statement program for verifying income, which is not
consistent with Appendix Q standards and Fitch's view of a full
documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Financial Protections Bureau's (CFPB)
ATR, which reduces the risk of borrower default arising from lack
of affordability, misrepresentation or other operational quality
risks due to the rigors of the ATR mandates regarding underwriting
and documentation of a borrower's ability to repay.
In addition, 22.9% of the loans are a DSCR product (including 2.7%
no ratio), while the remainder comprise a mix of asset depletion,
profit and loss (P&L), 12- or 24-month tax returns, and verbal
verification of employment products. Separately, 2.5% were
originated to foreign nationals and 0.8% have unknown borrower
residency status.
Modified Sequential-Payment Structure (Mixed): The structure
distributes principal pro rata among the senior notes while
shutting out the subordinate bonds from principal until all senior
classes are reduced to zero. If a cumulative loss trigger event or
delinquency trigger event occurs in a given period, principal will
be distributed sequentially to class A-1A, A-1B, A-2 and A-3 notes
until they are reduced to zero.
The structure includes a step-up coupon feature whereby the fixed
interest rate for classes A-1A, A-1B, A-2 and A-3 will increase by
100 bps, subject to the net WAC, after four years. This reduces the
modest excess spread available to repay losses. Interest
distribution amounts otherwise allocable to the unrated class B-3,
to the extent available, may be used to reimburse any unpaid cap
carryover amount for classes A-1A, A-1B, A-2 and A-3 prior to the
payment of any current interest and interest carryover amounts due
to the class B-3 notes on such payment date. The class B-3 notes
will not be reimbursed for any amounts that were paid to the senior
classes as cap carryover amounts.
While Fitch has previously analyzed transactions using an interest
rate cut, this stress is not being applied for this transaction.
Given the lack of evidence of interest rate modifications being
used as a loss mitigation tactic, the application of the stress was
overly punitive. If this reemerges as a common form of loss
mitigation or if certain structures are overly dependent on excess
interest, Fitch may apply additional sensitivities to test the
structure.
On or after the September 2028 payment date, the unrated class B-3
interest allocation will redirect toward the senior cap carryover
amount for as long as there is an unpaid cap carryover amount. This
increases the principal and interest (P&I) allocation for the
senior classes as long as class B-3 is not written down and helps
ensure payment of the 100bps step-up.
No P&I Advancing (Mixed): There will be no servicer advancing of
delinquency principal and interest. The lack of advancing reduces
loss severities, as a lower amount is repaid to the servicer when a
loan liquidates and liquidation proceeds are prioritized to cover
principal repayment over accrued but unpaid interest.
The downside to this is the additional stress on the structure, as
there is limited liquidity in the event of large and extended
delinquencies. The structure has enough internal liquidity through
the use of principal to pay interest, excess spread and credit
enhancement to pay timely interest to senior notes during stressed
delinquency and cash flow periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model-projected 10% at the base case. The
analysis indicates that there is some potential for rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by multiple third-party review firms. The third-party due
diligence described in Form 15E focused on credit, compliance and
property valuation review. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustments to
its analysis:
- A 5% Probability of Default (PD) credit was applied at the loan
level for all loans graded either 'A' or 'B';
- Fitch lowered its loss expectations by approximately 50bps as a
result of the diligence review.
ESG Considerations
BRAVO 2024-NQM6 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, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BRSP LTD 2024-FL2: Fitch Assigns 'B-sf' Rating on Class G Notes
---------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks 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 rated by Fitch:
- $42,188,000b Preferred Shares.
(a) Privately placed and pursuant to Rule 144A.
(b) Horizontal risk retention interest, comprising 13.500% of the
securities.
The approximate collateral interest balance as of the cutoff date
is $590,177,364 and does not include future funding.
The ratings are based on information provided by the issuer as of
Aug. 15, 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 KeyBank, National Association and the special
servicer is BrightSpire Capital Asset Management, LLC. The trustee
is Wilmington Trust, National Association, and the note
administrator is Computershare Trust Company, N.A. The notes follow
a sequential-paydown structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch 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.
BSPRT 2021-FL7: DBRS Confirms B(low) Rating on Class H Notes
------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by BSPRT 2021-FL7, Ltd. as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (low) (sf)
-- Class H at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stability of
the transaction as the majority of loan collateral, including 27
loans, representing 82.5% of the current trust balance, is secured
by multifamily properties. Multifamily properties have historically
proven to better retain property value and cash flow compared with
other property types. In its analysis for the review, Morningstar
DBRS determined the majority of individual borrowers are
progressing with their business plans to increase property cash
flow and property value; however, there are some borrowers whose
business plans and loan exit strategies have lagged for a variety
of reasons, including increased construction costs, slowed rent
growth, and increased debt service costs, which have increased the
execution risk. The unrated first-loss bond of $82.1 million
provides significant cushion against realized losses should the
increased risks for those loans ultimately result in defaults and
dispositions. In conjunction with this press release, Morningstar
DBRS has published a Surveillance Performance Update report with
in-depth analysis and credit metrics for the transaction as well as
business plan updates on select loans.
As of the July 2024 remittance, the transaction had an outstanding
balance of $826.5 million with 36 loans secured by 57 properties
remaining in the trust. There has been a collateral reduction of
8.2% since the transaction became static in December 2023,
following the post-closing, 24-month Reinvestment Period. Of the
original 26 loans from the transaction closing in December 2021, 16
loans, representing 63.9% of the current pool balance, remain in
the trust. Since the previous Morningstar DBRS credit rating action
in August 2023, seven loans, representing 5.6% of the current pool
balance, have been added to the trust while seven loans with a
former cumulative trust balance of $108.4 million were successfully
paid in full.
Beyond the multifamily concentration noted above, five loans,
representing 9.4% of the current trust balance, are secured by
hotel properties; one loan, representing 4.0% of the current trust
balance, is secured by a student-housing property; two loans,
representing 1.9% of the current trust balance, are secured by
office properties; and one loan, representing 2.3% of the current
trust balance, is secured by a portfolio of industrial properties.
In comparison with the pool as of August 2023, multifamily
collateral represented 82.0% of the trust balance while hotel
collateral represented 9.9% of the trust balance.
The pool collateral is concentrated in properties located in
suburban markets as 25 loans, representing 70.8% of the pool, are
secured by properties in such markets, as defined by Morningstar
DBRS, with Morningstar DBRS Market Ranks of 3, 4, or 5. An
additional eight loans, representing 22.9% of the pool, are secured
by properties with Morningstar DBRS Market Ranks of 1 and 2,
denoting rural and tertiary markets, while the remaining three
loans, representing 6.3% of the pool, are secured by properties
with Morningstar DBRS Market Ranks of 6 or 7, denoting urban
markets. Those proportions compare with the pool as of August 2023,
when properties in suburban markets represented 75.3% of the
collateral, properties in tertiary and rural markets represented
17.6% of the collateral, and properties in urban markets
represented 7.0% of the collateral.
Leverage across the pool has remained similar since issuance as the
current weighted-average (WA) as-is appraised value loan-to-value
ratio (LTV) is 71.0% with the current WA stabilized LTV of 63.4%.
In comparison, these figures were 70.8% and 64.4%, respectively, at
issuance. Morningstar DBRS recognizes these appraised values may be
inflated as the individual property appraisals were completed in
2021 or 2022 and do not reflect the current higher interest rate or
widening capitalization rate environments. In the analysis for this
review, Morningstar DBRS applied LTV adjustments to 16 loans,
representing 71.8% of the current trust balance, generally
reflective of higher cap rate assumptions compared with the implied
cap rates based on the appraisals.
As of July 2024, one loan, Cedar Grove Multifamily Portfolio
(Prospectus ID#59; 1.5% of the current pool balance) is delinquent
and specially serviced. The loan transferred to the special
servicer in January 2024 for payment default. The sponsor, GVA Real
Estate Group (GVA), has incurred stress across its commercial real
estate portfolio as a result of slowed rental rate growth, rising
construction costs, and increased debt service payments. The loan
was originally secured by 15 properties across North Carolina,
South Carolina, and Oklahoma with the majority of properties
located throughout the Charlotte, North Carolina, metropolitan
statistical area. The borrower's business plan was to complete unit
interior and property wide upgrades across the portfolio, financed
by loan future funding of $26.2 million.
Prior to the loan becoming delinquent in October 2023, the lender
had advanced future funding of $20.8 million to the borrower for
property renovations. Given the loan delinquency and the ongoing
foreclosure proceedings, the borrower has ceased the capital
expenditure plan with cash flows being used to pay debt service.
The loan is currently paid through June 2024. The borrower is now
focused on stabilizing individual property operations in order to
sell assets and pay down the loan balance. One property has been
released to date, which resulted in a principal paydown of $16.8
million. As of July 2024, the A-note has a balance of $135.4
million with a $12.5 million piece held in the trust. According to
the collateral manager, the borrower has stated it believes it will
be able to successfully sell additional properties throughout the
remainder of 2024 with several assets under contract or in various
stages of negotiation. In its current analysis, Morningstar DBRS
applied increased LTV and probability of default adjustments to the
loan, which resulted in a loan expected loss in excess of the
expected loss for the overall pool.
Six loans, representing 9.3% of the current trust balance, are on
the servicer's watchlist as of the July 2024 reporting. The loans
have generally been flagged for low debt service coverage ratios
(DSCRs). The largest loan on the servicer's watchlist, August Flats
(Prospectus ID48; 3.5% of the current trust balance), is secured by
a 2021 vintage multifamily property in San Antonio, Texas. The
borrower's business plan is to complete the initial lease-up phase
and burn off concession loss, which has taken longer than initially
anticipated. The loan matured in January 2024 and the borrower
exercised the first of up to three 12-month extension options,
purchasing a new interest rate cap agreement with a 3.0% strike
price. According to Q1 2024 reporting provided by the collateral
manager, the property was 85.1% occupied with an average rental
rate of $1,670 per unit, which is $205 per unit below the issuer's
stabilized projection. Net cash flow (NCF) of $1.7 million for the
trailing 12 months (T-12) ended March 31, 2024, equated to a DSCR
of 0.62x and is below the issuer's stabilized NCF of $2.8 million.
Throughout 2024, 18 loans, representing 55.0% of the current trust
balance, have scheduled maturity dates. Fourteen of these loans,
representing 50.5% of the current trust balance, have extension
options and, if property performance does not qualify to exercise
the related options, Morningstar DBRS expects the borrower and
lender to negotiate mutually beneficial loan modifications to
extend the loans, which would likely include fresh sponsor equity
to fund principal curtailments, fund carry reserves, or purchase a
new interest rate cap agreement.
Through June 2024, the lender had advanced $80.9 million in
cumulative loan future funding to 22 of the outstanding individual
borrowers to aid in property stabilization efforts, including $34.8
million since the previous Morningstar DBRS rating action in August
2023. The largest advance to a single borrower ($20.8 million) has
been made to the previously mentioned Cedar Grove Multifamily
Portfolio loan. The second-largest advance ($8.5 million) has been
made to the borrower of the Lake Village North loan, which is
secured by an 848-unit multifamily property in Garland, Texas. The
borrower's business plan is to complete a significant $11.6 million
capex program across the property. According to the Q1 2024 update
from the collateral manager, the cost of the planned renovations
increased to $14.1 million with the difference to be funded from
additional sponsor equity. The borrower has completed the property
exterior and common area upgrades as well as 385 unit upgrades. The
renovated units have achieved a monthly premium of $120 over
non-renovated units and as of March 2024, the property was 84.8%
occupied with an overall average rental rate of $1,142 per unit.
The loan remains current; however, according to the financials
provided by the collateral manager for the T-12 ended March 31,
2024, property operations do not support debt service as the DSCR
was 0.60x. While an additional $2.7 million of future funding
remains available to the borrower for unit renovations, the pace of
upgrades has stalled as only $0.2 million of future funding has
been advanced to the borrower since August 2023.
An additional $30.3 million of loan future funding allocated to 18
individual borrowers remains available. The largest amount ($5.4
million) is available to the borrower of the Cedar Grove
Multifamily Portfolio; however, given the status of the loan,
Morningstar DBRS does not expect the lender to advance any
remaining funds. An additional $5.1 million is allocated to the
borrower of the Deerfield Corporate Center loan, which is secured
by an office property in Alpharetta, Georgia. The available funds
are for accretive leasing costs; however, the borrower has made
little progress in its business plan since loan closing in December
2019 as the occupancy rate at the property was 28.3% as of February
2024. The loan exhibits increased credit risk with minimal cash
flow and loan maturity in January 2025; however, there is minimal
exposure to the trust as only $0.2 million of the $28.6 million
loan is held in the trust. Morningstar DBRS analyzed the loan with
increased LTV and probability of default adjustments with a loan
expected loss in excess of the expected loss for the overall pool.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX COMMERCIAL 2021-MC: S&P Affirms B- (sf) Rating on Class F Certs
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from BX Commercial
Mortgage Trust 2021-MC, a U.S. CMBS transaction. At the same time,
S&P affirmed its ratings on two other classes from the transaction.
This is a U.S. standalone (single-borrower) CMBS transaction that
is backed by a floating-rate, interest-only (IO) mortgage loan,
secured by the borrower's fee simple interest in two class A office
buildings and a parking structure in Miami.
Rating Actions
The downgrades on classes B, C, D, and E and the affirmation on
class F primarily reflect that:
-- The servicer reported the property's net cash flow (NCF) has
declined by over 20.0% in 2023 from 2022, which we attributed
primarily to an extended rent abatement period for the largest
tenant (20.4% of the net rentable area [NRA]) and
higher-than-expected expenses.
-- S&P revised its expected-case valuation for the property, which
is now 7.5% lower than the valuation we derived at issuance in
2021. While S&P assumed higher rents--albeit at lower than the face
amount starting in 2025 (as per the March 2024 rent roll)--after
its rent-free period burns off for the largest tenant, it only
partly offset the higher-than-expected expenses and leasing costs
assumptions.
S&P said, "Our view that the sponsor may face challenges
refinancing the loan upon its final maturity date in April 2026
(the next maturity date is April 2025), if the property's
performance does not materially improve and the prevailing interest
rate environment remains elevated. As of year-end 2023, the
servicer reported a debt service coverage (DSC) of 0.58x. Using our
revised NCF, which considers the free rent periods burning off and
higher operating expenses and tenant improvement (TI) costs, and
the loan's floating interest rate (a 5.443% one-month term SOFR,
according to the August 2024 trustee remittance report, and a 1.75%
weighted average spread), we calculated a DSC of 0.72x. Using the
current 5.50% cap rate (based on the replacement interest rate cap
agreement that the sponsor obtained when it exercised the second
extension option) yielded a 0.71x DSC. Even though DSC is below
1.00x, the borrower has been current on its debt service payments
through August 2024."
Despite a lower model-indicated rating on class A, S&P affirmed its
'AAA (sf)' rating because we qualitatively considered the
following:
-- The potential that the property's operating performance could
improve above our expectations. S&P considered the possibility that
the borrower is able to decrease operating expenses at the
property, tenants with near-term expirations renewing their leases
at higher rental rates, and/or new tenants signing leases at higher
than in place rental rates. According to CoStar, the property's
office submarket has improved since 2021.
-- The relatively low debt per sq. ft. of $161 per sq. ft. for the
class.
-- The senior position of the class in the payment waterfall.
S&P said, "We will continue to monitor the interest rate trends,
payment status, tenancy and performance of the property and the
loan. If we receive information that differs materially from our
expectations, we may revisit our analysis and take rating actions
as we determine necessary."
Property-Level Analysis
The collateral consists of the 10-story, 194,907 sq. ft. office
component of 2 Miami Central, a 17-story mixed-use (office, retail,
and residential) complex with a 288-space parking garage that is
adjacent to Miami Central Station, a transit hub that connects
Miami, Fort Lauderdale, and West Palm Beach by rail, and 3 Miami
Central, a 134,353-sq.-ft., four-story, class A office building
atop an eight-story, 1,076-space parking garage and 28,480 sq. ft.
of ground floor retail space that is majorly leased to Publix Super
Markets Inc., a grocery store. The collateral property, which
features open floor plans and floor-to-ceiling windows with
unobstructed views, totaled 329,260 sq. ft. and was built in 2018.
On-site amenities include a conference center, fitness center and
covered amenity deck. The property is part of the larger Miami
Central development that includes the 18,000 sq. ft. Central Fare
food hub, retail space, office space, and over 800 rental apartment
units.
At issuance, the property was 97.4% occupied. However, since the
Downtown Miami office submarket had high vacancy rate, we assumed a
13.8% weighted average vacancy rate (14.0% on the office component
and 12.3% on the retail component), $50.81 per sq. ft. S&P Global
Ratings' gross rent, and 45.7% operating expense ratio to derive
S&P's long-term sustainable NCF of $9.0 million.
Since then, as of the March 31, 2024, rent roll, the property was
91.4% leased, primarily due to a tenant (6.0% of NRA) vacating upon
its lease expiration in August 2023. S&P said, "The servicer
reported declining NCFs: $10.5 million (2022), $8.3 million (2023),
and $7.8 million (trailing-12-months ended March 31, 2024), which
we attributed primarily to, based on our review of the March 2024
rent roll, a two-year rent abatement period starting in 2023 for
the sponsor affiliated tenant, Blackstone administrative Services
(Blackstone), and higher-than-expected expenses. While not yet
confirmed by the master servicer, KeyBank Real Estate Capital, we
believed that the sponsor-affiliated lease was amended in 2023 with
an increase in base rent that is over $10.00 per sq. ft. higher
than at issuance, a lease extension to January 2034 from November
2026, and an expansion of its footprint to 20.4% of NRA currently
from 12.6% of NRA at issuance. According to the transaction
documents, Blackstone had a one-time termination option on its
entire premise effective in January 2024 with 12-months' notice and
a termination fee payment. If the tenant does not exercise its
termination option, it would receive four and a half months of free
rent and common area maintenance charges. However, based on the
reported NCF and March 2024 rent roll, we assessed that in addition
to higher base rents, more leased sq. ft., and a lease extension,
the free rent period was extended from the original term. It is
unclear if Blackstone has any termination options in the amended
lease."
According to the March 2024 rent roll, the five largest tenants,
which comprised 62.8% of the collateral NRA, are:
-- Blackstone (20.4% of NRA; 25.6% of in-place gross rent, as
calculated by S&P Global Ratings; January 2034 lease expiration).
Instead of using the tenant's gross rent as outlined in the March
2024 rent roll because we assessed that it is higher than CoStar's
submarket asking rent and the average in-place gross rent at the
property, we assumed a net effective rent, after factoring in the
rent-free periods, for the tenant. As a result, our assumed gross
rent is in line with the submarket asking rent.
-- Carlton Fields P.A. (16.9%; 19.6%; May 2031). At issuance, we
noted that the tenant has a one-time termination option effective
June 2028 with 12 months' notice and a termination fee.
-- Venevision International (9.0%; 9.3%; April 2031).
-- Ernst & Young U.S. LLP (8.3%; 8.2%; August 2027).
-- Publix Super Markets, Inc. (8.2%; 4.9%; May 2041).
-- The property has minimal (10.0% of NRA or less) tenant rollover
each year through 2028. Tenant rollover is elevated in 2029 (11.9%
of NRA; 12.9% of S&P Global Ratings' in-place gross rent), 2031
(26.5%, 29.7%), and 2034 (20.4%, 25.6%).
According to CoStar, the Downtown Miami office submarket, where the
property is located, benefits from an increase in population due to
its public transportation infrastructure and live/work/play
environment that has drawn many young professionals and companies
in the area. Accordingly, the 4- and 5-star properties in the
submarket had experienced a decline in vacancy rate to 13.3% as of
year-to-date August 2024 from 17.1% at issuance in 2021 and higher
asking rent of $64.60 per sq. ft. from $54.22 per sq. ft. for the
same period. While CoStar noted that there is new supply coming
online in the submarket, vacancy is projected to be around 12.5% in
2028 and asking rent to increase slightly to $68.10 per sq. ft. for
the same period.
S&P said, "In our current analysis, assuming a 15.0% vacancy rate
(between the current submarket vacancy rate and availability rate
[19.3%]), a $56.34 per sq. ft. S&P Global Ratings' gross rent, a
50.3% operating expense ratio (due mainly to higher-than-expected
repair and maintenance and general and administrative expenses),
and higher TI costs, we arrived at a revised long-term sustainable
NCF of $8.4 million, 7.3% lower than our NCF of $9.0 million
derived at issuance. Using a 6.75% S&P Global Ratings'
capitalization rate, unchanged from issuance, we derived an S&P
Global Ratings' expected-case value of $124.2 million, or $377 per
sq. ft., which is 7.5% below our issuance value of $134.2 million
and 46.4% lower than the issuance appraised value of $231.9
million." This yielded an S&P Global Ratings' loan-to-value (LTV)
ratio of 128.1%.
Table 1
Servicer-reported collateral performance
TTM MARCH 2024
(I)(II) 2023(I) 2022(I) 2021(I)
Occupancy rate (%) 91.4 98.3 96.9 94.9
Net cash flow (mil. $) 7.8 8.3 10.5 5.9
Debt service coverage (x) 0.58 0.62 1.58 1.97
Appraisal value (mil. $) 231.9 231.9 231.9 231.9
(i)Reporting period.
(ii)TTM--Trailing 12 months.
Table 2
&P Global Ratings' key assumptions
CURRENT ISSUANCE
(AUGUST 2024)(I) (MAY 2021)(I)
Occupancy rate (%) 85.0 86.2
Net cash flow (mil. $) 8.4 9.0
Capitalization rate (%) 6.75 6.75
Value (mil. $) 124.2 134.2
Value per sq. ft. ($) 377 408
Loan-to-value ratio (%) 128.1 118.6
(i)Review period.
Transaction Summary
The two-year, floating-rate, IO mortgage loan had an initial and
current balance of $159.1 million (as of the Aug. 15, 2024, trustee
remittance report), pays a per annum floating interest rate indexed
to one-month term SOFR (replacing the referenced one-month LIBOR
following its cessation in mid-2023) plus a 1.75% weighted average
spread and initially matured on April 9, 2023. The borrower has
three 12-month extension options, of which it has already exercised
two of them. The loan currently matures on April 9, 2025, and has a
final maturity date in April 2026. To date, the trust has not
incurred any principal losses.
There is also an $18.0 million mezzanine loan outstanding.
Including the mezzanine loan, S&P Global Ratings' LTV ratio
increases to 142.6%.
Ratings Lowered
BX Commercial Mortgage Trust 2021-MC
Class B to 'A (sf)' from 'AA- (sf)'
Class C to 'BBB (sf)' from 'A- (sf)'
Class D to 'BB (sf)' from 'BBB- (sf)'
Class E to 'B (sf)' from 'BB- (sf)'
Ratings Affirmed
BX Commercial Mortgage Trust 2021-MC
Class A: AAA (sf)
Class F: B- (sf)
BX COMMERCIAL 2024-AIRC: Fitch Assigns BBsf Rating on Cl. HRR Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Ratings Outlooks to BX
Commercial Mortgage Trust 2024-AIRC, Commercial Mortgage
Pass-Through Certificates, Series 2024-AIRC:
- $1,938,200,000 class A 'AAAsf'; Outlook Stable;
- $295,900,000 class B 'AA-sf'; Outlook Stable;
- $224,100,000 class C 'A-sf'; Outlook Stable;
- $304,300,000 class D 'BBB-sf'; Outlook Stable;
- $40,000,000 class E 'BB+sf'; Outlook Stable;
- $147,500,000a class HRR 'BBsf'; Outlook Stable.
(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 interests in a trust that
holds a two-year, floating-rate, interest-only (IO) mortgage loan
with three one-year extension options. The mortgage will be secured
by the borrowers' fee simple or leasehold interests in 29
multifamily properties with a total of 8,831 units located across
nine states. The portfolio is 96.5% leased as of the May 2024 rent
rolls.
Loan proceeds, together with approximately $925.4 million in cash
equity, will be used to acquire the properties and pay closing
costs.
The certificates will follow a pro rata paydown structure for the
initial 30% of the loan amount and a standard senior sequential
paydown structure thereafter. The borrowers have a one-time right
to obtain a mezzanine loan. To the extent the mezzanine loan is
outstanding and no mortgage loan event of default (EOD) is
continuing, voluntary prepayments would be applied pro rata between
the mortgage and the mezzanine loan.
The loan is originated by Wells Fargo Bank, National Association,
Bank of Montreal, Goldman Sachs Bank USA, JPMorgan Chase Bank,
National Association, Barclays Capital Real Estate Inc., Bank of
America, N.A., Morgan Stanley Mortgage Capital Holdings LLC, German
American Capital Corporation and Societe Generale Financial
Corporation. Wells Fargo Bank, National Association is the servicer
and KeyBank National Association is the special servicer.
Computershare Trust Company, National Association is the trustee
and certificate administrator. Pentalpha Surveillance LLC is the
operating advisor.
KEY RATING DRIVERS
Net Cash Flow: Fitch's stressed net cash flow (NCF) for the
portfolio is estimated at $198.7 million. This is 7.02% lower than
the issuer's NCF and 1.2% lower than the YE23 NCF. Fitch applied a
6.5% cap rate, resulting in a Fitch value of approximately $3.1
billion.
Moderate Fitch Leverage: The $2.95 billion total mortgage loan
($334,051/unit) has a Fitch stressed debt service coverage ratio
(DSCR), loan-to-value ratio (LTV) and debt yield (DY) of 0.90x,
96.5% and 6.7%, respectively. The loan represents approximately
76.7% of the as-portfolio appraised value of $3.848 billion. The
Fitch market LTV at 'BBsf' is 88.4%.
Best in Class Collateral: The loan is collateralized by a diverse
portfolio of high-quality multifamily properties with stable
operating history, located in core markets, with institutional
sponsorship. This unique combination of positive credit
characteristics compares favorably to other portfolios rated by
Fitch. Multifamily properties have continued to exhibit stable
performance with significantly lower than average delinquency
rates, defaults and losses relative to other major commercial
property types. Fitch capital structure assumptions have been
adjusted for strong collateral.
Diverse Portfolio: The portfolio is secured by 8,831 units across
29 high-rise, mid-rise, and garden-style multifamily properties
located in nine states and 11 markets. The portfolio is granular,
with no property comprising more than 8.7% of the total units or
9.7% of allocated loan amount (ALA). No state or market represents
more than 30.4% or 30.4% of the ALA, respectively.
Institutional Sponsorship: The loan sponsor AIR Communities (AIR)
was acquired by Blackstone in June 2024. Apartment Income REIT
Corp. (NYSE: AIRC), known as AIR Communities, is the owner and
operator of 77 apartment communities totaling over 27,000 apartment
homes located in 10 states and the District of Columbia. AIR
Communities professionally manages high-quality properties in many
major U.S. markets, including Miami, Los Angeles, Washington, D.C.
and Boston.
Blackstone is one of the world's leading investment firms, with
approximately $1 trillion of assets under management (AUM) as of
Dec. 31, 2023. Blackstone's Real Estate group began investing in
real estate in 1991 and is a global leader in real estate investing
with $337 billion of AUM.
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'/'BB+sf'/'BBsf';
- 10% NCF Decline: 'AAsf'/BBB+sf '/'BBB-sf'/'BBsf'/'BB-sf'/'B+sf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes to the same one
variable, Fitch NCF:
- Original Rating: 'AAAsf'/'AA-sf
'/'A-sf'/'BBB-sf'/'BB+sf'/'BBsf';
- 10% NCF Increase: 'AAAsf'/'AA+sf
'/'A+sf'/'BBB+sf'/'BBBsf'/'BBB-sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by KPMG LLP. The third-party due diligence described in
Form 15E focused on a comparison and re-computation of certain
characteristics with respect to the mortgage loan. Fitch considered
this information in its analysis and it did not have an effect on
Fitch's analysis or conclusions.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BX TRUST 2018-GW: DBRS Confirms B(low) Rating on Class G Certs
--------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of the
Commercial Mortgage Pass-Through Certificates, Series 2018-GW
issued by BX Trust 2018-GW as follows:
-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class X-EXT at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The credit rating confirmations and Stable trends are reflective of
the continued stable performance of the underlying asset and the
excellent property quality bolstered by continued investments by
the sponsor. The subject collateral is the Grand Wailea, a luxury
resort hotel property in Wailea Beach, on the island of Maui,
Hawaii. The Grand Wailea is a 776-key, Four-Diamond, oceanfront
luxury resort, operated under the Waldorf Astoria flag. The resort
includes 120 noncollateral villas, 62 of which are enrolled in the
hotel's rental program. The $800.0 million whole loan consists of
$510.5 million held within the trust in the form of a two-year
floating-rate interest-only (IO) loan with five 12-month extension
options, fully extending to May 2025. An additional $289.5 million
in mezzanine debt is held outside of the trust, which is
co-terminus with the senior debt. The borrower exercised its final
maturity extension in May 2024 and has an upcoming final maturity
in May 2025.
The loan was previously on the servicer's watchlist because of
water damage at the Spa Grande in 2021, resulting in an insurance
claim of $25.0 million. Since the last credit rating action, the
spa reopened as Kilolani Spa following a $55 million renovation,
which was part of a larger $300 million capital project that
included updates to rooms, club lounges, and restaurants.
As of the March 2024 STR report, the subject reported a trailing
12-month (T-12) occupancy, average daily rate (ADR), and revenue
per available room (RevPAR) of 56.3%, $834.28, and $469.56,
respectively, for the period ended March 31, 2024. RevPAR continues
to trend positively, though ADR is down slightly from the prior
year and the property is underperforming its competitive set in
terms of occupancy. The subject's RevPAR penetration has improved
to 89.7% from 77.1% last year. Room revenue and net cash flow (NCF)
remain well above issuance expectations as of the YE2023 reporting;
however, NCF has fluctuated some over the past few years. This may
be a delayed result of the wildfires that devastated Maui in the
summer of 2023. The events deeply strained the island's
infrastructure and visitors were urged to reconsider travel plans
while local communities grappled with the impact and worked to
rebuild.
The reported YE2023 NCF was $53.7 million, down from $59.0 million
at YE2022 and in line with the YE2021 NCF of $53.3 million. The
loan's corresponding debt service coverage ratio (DSCR) declined to
0.93 times (x) from 1.97x at YE2022 and 2.46x at YE2021. The
decline in NCF is primarily attributable to a lag in Other Income,
described by the servicer as travel and tourism memberships, resort
fees, and parking, among other expenses. The decrease in DSCR is
primarily due to the increased debt service payments tied to the
loan's floating-rate coupon. However, the borrower is required to
maintain an interest rate cap agreement that would result in a
minimum 1.10x DSCR on the combined mortgage and mezzanine debt.
Morningstar DBRS maintained its loan-to-value (LTV) Sizing approach
for this asset from the prior credit rating action. The concluded
Morningstar DBRS value of $606.7 million is based on an NCF of
$47.0 million and a cap rate of 7.75%. Although this figure is
exceeded by the YE2023 NCF, Morningstar DBRS notes the
year-over-year fluctuation in performance and upcoming maturity in
2025. Positive qualitative adjustments totaling 4.5% were
maintained to account for the asset's excellent property quality
and irreplaceable beachfront location in a constrained market.
Blackstone's significant investment in improvements for the
property demonstrate strong commitment in investing back some of
the increased returns since the 2018 acquisition of the property.
Morningstar DBRS believes the loan is well positioned to refinance
at its final maturity.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX TRUST 2021-ARIA: DBRS Confirms BB Rating on Class G Certs
------------------------------------------------------------
DBRS Limited confirmed its credit ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2021-ARIA issued by BX
Trust 2021-ARIA as follows:
-- Class A at AAA (sf)
-- Class A-1 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class D at AA (low) (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (low) (sf)
-- Class G at BB (sf)
-- Class HRR at BB (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the collateral's overall
stable performance since issuance, as revenue per available room
(RevPAR) and net cash flow (NCF) continue to trend positively, in
line with Morningstar DBRS expectations. The loan benefits from
strong sponsorship, the collateral's prime location, and high
occupancy rates across the properties.
This transaction is collateralized by the borrower's leased-fee
interest in two high-profile Las Vegas resort hotel and casino
properties, the Aria Resort & Casino (Aria) and Vdara Hotel & Spa.
The properties together consist of more than 4,000 guest rooms in
various configurations, more than 370,000 square feet (sf) of
convention and meeting space, and more than 150,000 sf of casino
space centrally located along the Las Vegas Strip. The complex is
part of the larger CityCenter mixed-use development, which also
includes the Shops at Crystals, a 392-key Waldorf Astoria hotel,
and 670 condominium units in the Veer Towers. Both properties are
LEED Gold-certified resorts. The loan sponsor is Blackstone Real
Estate Partners IX L.P., an affiliate of The Blackstone Group,
which used the subject financing to acquire the properties from MGM
Resorts International (MGM) in a sale-leaseback transaction. An
affiliate of MGM continues to manage the properties in accordance
with a 30-year, triple-net master lease.
While both hotels were closed between April 2020 and June 2020
because of government restrictions as a result of the coronavirus
disease pandemic, performance has rebounded sharply since issuance.
According to a YE2023 operating statement, the combined occupancy,
average daily rate, and RevPAR were 93.1%, $353.91, and $329.49,
respectively, an increase over the prior year and issuance RevPAR
figures of $278.87 and $310.31, respectively. According to a Las
Vegas Convention and Visitors Authority Executive Summary report,
dated May 2024, there was a 4.2% year-over-year increase in total
visitor volume, and a 6.5% increase in RevPAR. The loan reported a
NCF of $443.3 million (representing a debt service coverage ratio
(DSCR) of 3.98 times (x)), relatively in line with the YE2022 NCF
of $455.4 million (representing a DSCR of 8.25x) and surpassing the
Morningstar DBRS NCF of $371.0 million. Debt service has increased
given the loan's floating rate coupon, which has driven down the
DSCR despite stable cash flow.
The $3.2 billion whole loan represents a loan-to-value (LTV) ratio
of 79.1% based on the Morningstar DBRS value. At issuance, the
sponsor contributed more than $763.4 million in cash equity as part
of its acquisition of the properties. The floating-rate loan is
interest-only and had a two-year initial term. The borrower
executed an extension option, pushing the current maturity date to
October 2024, and has two one-year extension options remaining.
These options are exercisable when certain requirements are met,
including the loan achieves the minimum debt yield threshold and
the existing interest rate cap agreement is extended or a new
agreement is executed.
There has been new supply added to the market since issuance,
including The Fontainebleau, which opened in December 2023 after
years of delays. Prior to the sponsor's acquisition, MGM had
invested nearly $700 million into the properties since 2012, with
plans to invest several hundred million dollars across both
properties over the loan term, including major room renovations at
the Aria. Furthermore, under the terms of the master lease, MGM is
required to invest a minimum of 4.0% of actual net revenue per year
into the properties throughout the loan term and between 2.5% and
3.0% per year thereafter. Morningstar DBRS believes the properties
will remain staples on the Las Vegas Strip and continue to perform
well despite heavy competition.
At issuance, Morningstar DBRS concluded a NCF of $371.0 million and
applied a 9.3% capitalization rate to derive a Morningstar DBRS
value of $4.0 billion, which represents a 31.3% haircut to the
appraiser's value of $5.8 billion. Although recent financial
reporting indicates improved performance, Morningstar DBRS
maintained its cash flow approach given the YE2023 statements
reflect only the second full year of servicer reporting since
issuance, and the recent opening of a major competitor. Morningstar
DBRS applied positive qualitative adjustments to its LTV Sizing
Benchmarks, totaling 7.0%, to reflect the property's quality,
stable cash flow expectations, and strong market fundamentals as
evidenced by Las Vegas' quick recovery post pandemic. Morningstar
DBRS' credit view remains unchanged from issuance given the
subject's prime location, luxury brand, and experienced
institutional sponsorship and expects the loan is well positioned
to execute its next extension option.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX TRUST 2021-LGCY: DBRS Confirms B(low) Rating on Class G Certs
----------------------------------------------------------------
DBRS Limited confirmed its ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2021-LGCY
issued by BX Trust 2021-LGCY:
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the consistent performance
of the underlying collateral, which remains healthy, as the
annualized Q1 2024 reported net cash flow (NCF) of $37.1 million is
above the Morningstar DBRS Net Cash Flow (NCF) of $28.8 million.
The collateral consists of the borrower's fee-simple interest in 12
Class A/B multifamily properties consisting of 3,030 units across
six states, with the largest concentrations in Texas, Florida, and
North Carolina. The majority of the underlying properties, built
between 1999 and 2014, are situated in highly desirable markets
with strong growth potential based on historical occupancy and
rental rate trends. No individual property accounts for more than
15.0% of the portfolio net operating income and no properties have
been released to date. The portfolio continues to benefit from its
strong sponsorship in Blackstone Real Estate Income Trust, Inc.,
stable occupancy, and geographic diversity.
The subject transaction totals $575.0 million and consists of three
componentized, floating-rate promissory notes. Loan proceeds and
sponsor equity were used to acquire the portfolio and fund closing
costs. Individual properties can be released, subject to customary
debt yield and loan-to-value (LTV) tests. Prepayment premiums for
the release of individual assets are 105.0% of the allocated loan
amount (ALA) for the first 30.0% of the original principal balance
and 110.0% of the ALA thereafter. The transaction has a partial pro
rata structure that allows for pro rata pay downs for the first
30.0% of the original principal balance.
The floating-rate loan had an initial maturity date of October 9,
2023, with three 12-month extension options and is interest only
throughout its five-year fully extended loan term. After exercising
one of the extension options last year, the loan's current maturity
date is October 9, 2024. The servicer expects the sponsor to
exercise the second extension, but no formal request has been
submitted as of the date of this press release. As a condition to
exercising its extension options, the borrower is required to enter
into an interest rate cap agreement with a strike rate equal to the
greater of 3.5% or a rate that results in a debt service coverage
ratio (DSCR) of at least 1.10 times (x).
The loan reported a Q1 2024 annualized NCF of $37.1 million, which
represents an increase from the YE2023 and YE2022 figures of $36.3
million and $32.3 million, respectively, as well as the Morningstar
DBRS NCF of $28.8 million. Although cash flow has increased year
over year, the DSCR has decreased as a result of the floating rate
nature of the loan. The loan reported a Q1 2024 annualized DSCR of
0.89x, down from the YE2023 DSCR of 0.96x and the Morningstar DBRS
DSCR of 2.78x. The overall cash flow growth is attributable to the
sustained healthy occupancy rate for the portfolio as a whole, as
well as rent growth since issuance. Per the Q1 2024 reporting, the
collateral reported a consolidated occupancy rate of 93.0%, which
remains in line with the YE2022 and YE2023 figures of 94.0%. Per
the March 2024 rent rolls, occupancy rates by property range from
90.6% to 96.6%.
For purposes of this review, Morningstar DBRS maintained the cash
flow and valuation assumptions used when ratings were assigned. The
Morningstar DBRS value of $443.6 million, based on the Morningstar
DBRS NCF of $28.8 million and a capitalization rate of 6.50%,
represents a loan-to-value ratio of 129.6%. Qualitative adjustments
totaling 6.50% were also maintained to represent the property's
strong historical occupancy and stable cash flow expectations,
property quality, and favorable locations.
Notes: All figures are in U.S. dollars unless otherwise noted.
CALI MORTGAGE 2019-101C: S&P Lowers X-A Certs Rating to 'BB(sf)'
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on eight classes of
commercial mortgage pass-through certificates from CALI Mortgage
Trust 2019-101C.
This is a U.S. standalone (single-borrower) CMBS transaction that
is backed by a portion ($515 million) of a 10-year, fixed-rate,
interest-only (IO) mortgage whole loan ($755 million) secured by
the borrower's fee simple interest in a 1983-built, 48-story, 1.25
million-sq.-ft. LEED platinum-certified class A office tower with
ground floor retail space, including an attached seven-story,
200,000-sq.-ft. annex building (leased fully by Chime Financial
Inc.) and a two-story, 210-space, subterranean parking garage at
101 California St. in San Francisco's Financial District office
submarket.
Rating Actions
The downgrades on classes A, B, C, D, E, F, and HRR primarily
reflect that:
Occupancy, which was 73.4% as of the June 30, 2024, rent roll, has
not materially improved since our last review in February 2024.
While the property has had new leasing activity, it is offset by
existing tenants vacating or downsizing. According to the June 30,
2024, rent roll, about 33.6% of the net rentable area (NRA), or
48.8% of in place gross rent as calculated by S&P Global Ratings,
rolls through the loan's maturity in 2029. CoStar noted that
tenants comprising 8.4% of NRA (Chime Financial Inc., Guidehouse,
Russell Reynolds Associates, and CoStar Group Inc.) are currently
marketing their spaces for sublease.
The office submarket continues to experience high vacancy (close to
30.0%) and availability (over 30.0%) rates. Consequently, the
sponsor has provided significant concessions and tenant improvement
(TI) packages to retain and attract tenants at the property.
According to the master servicer, Midland Loan Services, the rent
abatement period is generally between one and nine months, and the
TI allowance, which varies by floor and lease term, is on average
about $200 per sq. ft. on new leases and $75 per sq. ft. on renewal
leases. Given these factors, we assessed that the property's
performance would likely not significantly improve in the near
term.
S&P said, "Our expected-case valuation, while unchanged from our
last review, is 18.8% lower than the value we derived at issuance.
"The downgrades on class E to 'CCC (sf)' and classes F and HRR to
'CCC- (sf)' also reflect our view that these classes are 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 rating on the class X-A IO certificates based on
our criteria for rating IO securities, in which the rating on the
IO securities would not be higher than that of the lowest-rated
reference class. The notional amount of class X-A references
classes A, B, and C.
"We will continue to monitor the tenancy and performance of the
property and the loan. If we receive information that differs
materially from our expectations, we may revisit our analysis and
take additional rating actions as we determine necessary."
Property-Level Analysis Updates
S&P said, "In our February 2024 review, we noted that the
property's occupancy remained around 70.0%-80.0% and the office
submarket continued to be severely depressed, with vacancy and
availability rates over 30.0%. At that time, we assumed an in-place
25.8% vacancy rate, a $98.84-per-sq.-ft. S&P Global Ratings' gross
rent, a 39.5% operating expense ratio, and higher TI costs to
arrive at an S&P Global Ratings' long-term sustainable net cash
flow (NCF) of $46.9 million. Using a 7.25% S&P Global Ratings'
capitalization rate, we derived an S&P Global Ratings'
expected-case value of $650.3 million, or $520 per sq. ft."
Since that time, despite completing a two-year lobby and plaza
renovation for approximately $70.0 million and a two-year elevator
modernization for about $8.0 million in mid-2023, the property's
occupancy and NCF have not materially improved. The servicer
reported a NCF for year-end 2023 of $45.2 million (with a
corresponding debt service coverage of 1.41x), down 8.1% from the
year-end 2022 NCF of $49.2 million. While the sponsor was able to
sign new leases at the property, this was offset by existing
tenants vacating or downsizing. After adjusting the June 30, 2024,
rent roll for known tenant movements, S&P arrived at a property
occupancy of 74.6%, which is generally in line with its February
2024 review and CoStar's vacancy (28.7%) and availability (33.0%)
rates for 4- and 5-star properties in the Financial District office
submarket as of year-to-date August 2024. CoStar projects vacancy
to increase to 37.0% and asking rent to decline to $50.37 per sq.
ft. (from the current $54.26 per sq. ft.) by 2028.
S&P said, "In our current analysis, assuming a 28.0% vacancy rate,
a $99.58-per-sq.-ft. S&P Global Ratings' in place gross rent, a
41.2% operating expense ratio, and higher TI costs, we arrived at a
NCF of $46.9 million, the same as in our last review and 15.7%
lower than our issuance NCF of $55.6 million. Utilizing an S&P
Global Ratings' capitalization rate of 7.25%, we derived an S&P
Global Ratings' expected-case value of $650.3 million, or $520 per
sq. ft., unchanged from our last review, 18.8% below our issuance
value of $800.7 million, and 55.6% below the issuance appraised
value of $1.5 billion. This yielded an S&P Global Ratings'
loan-to-value ratio of 116.1% on the whole loan balance of $755.0
million."
Ratings Lowered
CALI Mortgage Trust 2019-101C
Class A to 'A+ (sf)' from 'AA (sf)'
Class B to 'BBB- (sf)' from 'A- (sf)'
Class C to 'BB (sf)' from 'BBB- (sf)'
Class D to 'B+ (sf)' from 'BB- (sf)'
Class E to 'CCC (sf)' from 'B- (sf)'
Class F to 'CCC- (sf)' from 'CCC (sf)'
Class HRR to 'CCC- (sf)' from 'CCC (sf)'
Class X-A to 'BB (sf)' from 'BBB- (sf)'
CANYON CLO 2020-3: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Canyon
CLO 2020-3, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Canyon CLO
2020-3, Ltd.
A-1R LT AAAsf New Rating AAA(EXP)sf
A-2R LT AAAsf New Rating AAA(EXP)sf
B-R LT AAsf New Rating AA(EXP)sf
C-R LT Asf New Rating A(EXP)sf
D-1R LT BBB-sf New Rating BBB-(EXP)sf
D-2R LT BBB-sf New Rating BBB-(EXP)sf
E-R LT BB-sf New Rating BB-(EXP)sf
F-R LT NRsf New Rating NR(EXP)sf
X-R LT NRsf New Rating NR(EXP)sf
Transaction Summary
Canyon CLO 2020-3, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by Canyon CLO
Advisors LLC that originally closed on Jan. 13, 2021. This is the
first refinancing where the existing secured notes are refinanced
in whole on Aug. 22, 2024. Net proceeds from the issuance of the
secured and subordinated notes 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'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
97.62% first-lien senior secured loans and has a weighted average
recovery assumption of 74.02%. 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 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1-R, between
'BBB+sf' and 'AA+sf' for class A-2-R, between 'BB+sf' and 'A+sf'
for class B-R, between 'B+sf' and 'BBB+sf' for class C-R, between
less than 'B-sf' and 'BB+sf' for class D-1-R, between less than
'B-sf' and 'BB+sf' for class D-2-R, and between less than 'B-sf'
and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R and class
A-2-R notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, '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 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.
CANYON CLO 2020-3: Moody's Assigns B3 Rating to $500,000 F-R Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes (the Refinancing Notes) issued by Canyon CLO
2020-3, Ltd. (the Issuer):
US$2,500,000 Class X-R Senior Secured Floating Rate Notes due 2037,
Definitive Rating Assigned Aaa (sf)
US$315,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2037, Definitive Rating Assigned Aaa (sf)
US$500,000 Class F-R Junior Secured Deferrable Floating Rate Notes
due 2037, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans and up to 10.0% of the portfolio may consist of second lien
loans, unsecured loans and bonds.
Canyon CLO Advisors L.P. (the Manager) will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes and the other
classes of secured notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; 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:
Portfolio par: $500,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2965
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 45.0%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the
Ratings:
The performance of the 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.
CARLYLE US 2017-1: Moody's Affirms Ba3 Rating on $24MM Cl. D Notes
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Carlyle US CLO 2017-1, Ltd.:
US$67,000,000 Class A-2-R Senior Secured Floating Rate Notes,
Upgraded to Aaa (sf); previously on Jul 20, 2021 Assigned Aa1 (sf)
US$32,500,000 Class B-R Senior Secured Deferrable Floating Rate
Notes, Upgraded to Aa2 (sf); previously on Jul 20, 2021 Assigned A2
(sf)
Moody's have also affirmed the ratings on the following notes:
US$387,761,078 (Current outstanding balance US$184,592,917) Class
A-1-R Senior Secured Floating Rate Notes, Affirmed Aaa (sf);
previously on Jul 20, 2021 Assigned Aaa (sf)
US$38,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes, Affirmed Baa3 (sf); previously on Jul 20, 2021 Upgraded to
Baa3 (sf)
US$24,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes, Affirmed Ba3 (sf); previously on Jul 20, 2021 Upgraded to
Ba3 (sf)
Carlyle US CLO 2017-1, Ltd., originally issued in April 2017 and
partially refinanced in July 2021, is a collateralised loan
obligation (CLO) backed by a portfolio of mostly high-yield senior
secured US loans. The portfolio is managed by Carlyle CLO
Management L.L.C. The transaction's reinvestment period ended in
April 2023.
RATINGS RATIONALE
The rating upgrades on the Class A-2-R and Class B-R notes are
primarily a result of the deleveraging of the Class A-1-R notes
following amortisation of the underlying portfolio since the
payment date in July 2023.
The affirmations on the ratings on the Class A-1-R, 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-R notes have paid down by approximately USD 203.17
million (52.40%) in the last 12 months. As a result of the
deleveraging, over-collateralisation (OC) has increased across
capital structure. According to the trustee report dated July 2024
[1] the Class A, Class B, Class C and Class D OC ratios are
reported at 137.61%, 124.66%, 112.15% and 105.55% compared to July
2023 [2] levels of 126.92%, 118.45%, 109.78%, and 104.99%
respectively. Moody's note that the July 2024 principal payments
are not reflected in the reported OC ratios.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements.
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: USD369.05m
Defaulted Securities: USD3.6m
Diversity Score: 64
Weighted Average Rating Factor (WARF): 3031
Weighted Average Life (WAL): 3.41 years
Weighted Average Spread (WAS): 3.24%
Weighted Average Recovery Rate (WARR): 47.53%
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. 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.
CARLYLE US 2022-5: Fitch Assigns BB-(EXP)sf Rating on Cl. E-R Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Carlyle US CLO 2022-5, Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Carlyle US
CLO 2022-5, Ltd.
A-1-R LT AAA(EXP)sf Expected Rating
A-2-R LT AAA(EXP)sf Expected Rating
B-R LT AA(EXP)sf Expected Rating
C-R LT A(EXP)sf Expected Rating
D-1-R LT BBB-(EXP)sf Expected Rating
D-2-R LT BBB-(EXP)sf Expected Rating
E-R LT BB-(EXP)sf Expected Rating
Transaction Summary
Carlyle US CLO 2022-5, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Carlyle CLO
Management L.L.C. that originally closed on Sept. 16, 2022. The
existing secured notes are expected to be refinanced in full on the
2024 closing date. Net proceeds from the issuance of the secured
refinancing notes and the existing 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 24.22 versus a maximum covenant, in accordance with
the initial expected matrix point of 26.52. 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
96.09% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.08% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.01%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 45.5% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1-R notes,
between 'BBB+sf' and 'AA+sf' for class A-2-R notes, between 'BB+sf'
and 'A+sf' for class B-R notes, between 'B+sf' and 'BBB+sf' for
class C-R notes, between less than 'B-sf' and 'BB+sf' for class
D-1-R notes, between less than 'B-sf' and 'BB+sf' for class D-2-R
notes, and between less than 'B-sf' and 'B+sf' for class E-R
notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R and class
A-2-R notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R notes, 'AA+sf' for class C-R
notes, 'A+sf' for class D-1-R notes, 'Asf' for class D-2-R notes,
and 'BBB+sf' for class E-R notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG CONSIDERATIONS
Fitch does not provide ESG relevance scores for Carlyle US CLO
2022-5, 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.
CD 2017-CD5: Fitch Affirms 'B-sf' Rating on Cl. F Debt, Outlook Neg
-------------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of CD 2017-CD5 Mortgage Trust
Series 2017-CD5 (CD 2017-CD5). The Rating Outlooks for classes D
and X-D have been revised to Negative from Stable. The Outlooks for
classes E, F and X-E remain Negative.
Entity/Debt Rating Prior
----------- ------ -----
CD 2017-CD5
A-2 12515HAX3 LT AAAsf Affirmed AAAsf
A-3 12515HAY1 LT AAAsf Affirmed AAAsf
A-4 12515HAZ8 LT AAAsf Affirmed AAAsf
A-AB 12515HBA2 LT AAAsf Affirmed AAAsf
A-S 12515HBB0 LT AAAsf Affirmed AAAsf
B 12515HBC8 LT AAsf Affirmed AAsf
C 12515HBD6 LT A-sf Affirmed A-sf
D 12515HAA3 LT BBB-sf Affirmed BBB-sf
E 12515HAC9 LT BB-sf Affirmed BB-sf
F 12515HAE5 LT B-sf Affirmed B-sf
X-A 12515HBJ3 LT AAAsf Affirmed AAAsf
X-B 12515HBK0 LT A-sf Affirmed A-sf
X-D 12515HAQ8 LT BBB-sf Affirmed BBB-sf
X-E 12515HBM6 LT BB-sf Affirmed BB-sf
KEY RATING DRIVERS
Stable Performance and Loss Expectations: The affirmations reflect
generally stable performance and loss expectations of the pool
since Fitch's prior rating action. Fitch has identified 14 Loans of
Concern (FLOCs; 42.1% of the pool balance). As of the August 2024
remittance, there are no delinquent or specially serviced loans.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
4.1%, a slight increase from 3.2% at Fitch's prior rating action.
The Negative Outlooks consider the increase in expected losses and
the high level of FLOCs, especially loans secured by office,
mixed-use, hospitality and retail properties, with performance
and/or refinancing concerns. These FLOCs include Gurnee Mills,
Starwood Capital Group Hotel Portfolio, 444 Spear and Presidio
Office. Additional large FLOCs are Olympic Tower (7.4% of the pool)
and 245 Park Avenue (6.4%); both loans are no longer considered
investment grade credit opinion loans. Office properties comprise
approximately 28.5% of the remaining pool.
The largest contributor to expected losses is the Gurnee Mills loan
(2.3% of the pool), which is secured by a 1.7 million-sf portion of
a 1.9 million-sf regional mall located in Gurnee, IL, approximately
45 miles north of Chicago. Non-collateral anchors include
Burlington Coat Factory, Marcus Cinema and Value City Furniture.
Collateral anchors include Macy's, Bass Pro Shops, Kohl's and a
vacant anchor box previously occupied by Sears. The loan previously
transferred to the special servicer in June 2020 for imminent
monetary default, returning to the master servicer in May 2021
after receiving forbearance.
Per the March 2024 rent roll, the property was 80% occupied,
compared to 76.4% at June 2023, 80% at YE 2022, 77% at YE 2021,
86.7% at YE 2020 and 93% at issuance. Occupancy declined in 2023
due to Bed, Bath, and Beyond (3.3%) vacating at their January 2023
lease expiration but has since increased due to Round 1 Bowling &
Amusement (4.2%) recently signing a lease with an expected opening
date in August 2024. The property faces near-term rollover, with
leases totaling 22% of the NRA expiring through 2025, including
Bass Pro Shops (8.1% of NRA; December 2025 lease expiration). The
NOI DSCR reported at YE 2023 was 1.87x compared to 2.06x at YE
2022, 1.86x at YE 2021, 1.24x at YE 2020, and 1.42x at YE 2019.
Fitch's 'Bsf' rating case loss of approximately 29% (prior to
concentration add-ons) reflects a 15% stress to the YE 2022 NOI and
a 12% cap rate, and factors an increased probability of default due
to the loan's heightened maturity default risk.
The second largest contributor to losses is the 444 Spear loan
(2.1% of the pool) which is secured by a 49,713 sf office property
located in the Rincon/South Beach submarket of San Francisco. The
servicer reported occupancy declined to 65.2% as of the June 2024
rent roll from 86% at YE 2022 due to the loss of a prior tenant in
2023. The largest tenant, Otis (approximately 31% of the NRA), has
a lease expiration in 2029.
Fitch's 'Bsf' rating case loss of approximately 29% (prior to
concentration add-ons) reflects a 30% stress to the YE 2023 NOI for
the recent rollover and a 10% cap rate, and factors an increased
probability of default due to the loan's heightened maturity
default risk and weak submarket.
The third largest contributor to losses is the Presidio Office loan
(1.6% of the pool) which is secured by a 57,856 sf office property
located in the West of Van Ness submarket of San Francisco, CA. The
servicer reported occupancy as of the May 2024 rent roll was 79%.
The largest tenant, Vintners Daughter (approximately 13% of the
NRA), extended two years to August 2026. Although the rent roll is
fairly granular, there is approximately 44% total rollover through
YE 2025 per the rent roll.
Fitch's 'Bsf' rating case loss of approximately 30% (prior to
concentration add-ons) reflects a 30% stress to the YE 2023 NOI and
a 10% cap rate, and factors an increased probability of default due
to the loan's heightened maturity default risk and weak submarket.
Starwood Capital Group Hotel Portfolio (5%) is secured by a
portfolio comprised of 65 hotels totaling 6,370 keys located across
21 states with 14 different franchises. The hotel portfolio's
performance is still recovering post-pandemic; the portfolio's
reported YE 2023 NOI was 37% lower than YE 2019. Total average
portfolio occupancy, ADR, and RevPAR improved to 69.0%, $118.26,
$82.92, respectively, as of the TTM ended September 2023, from
69.5%, $110.56, and $76.84, respectively, as of June 2022 and 66%,
$101.76, and $67.55 at YE 2021.
The Olympic Tower loan is secured by the leasehold interest in the
office and retail portions within 21 stories of a 52-story high-end
mixed-use property and three adjacent buildings located on Fifth
Avenue in Midtown Manhattan. The property was 90.2% leased as of
the September 2023 rent roll. Fitch's updated sustainable property
net cash flow (NCF) of $55.5 million is 12.9% below Fitch's
issuance NCF and reflects the declining retail base rents and
increasing expenses, particularly real estate taxes.
The 245 Park Avenue loan is secured by a 44-story class A,
LEED-Gold certified office building located on an entire block
bound by Park Avenue, Lexington Avenue and 46th and 47th Streets in
the Grand Central office submarket of Midtown Manhattan. The
property serves as the U.S. headquarters for Societe Generale and
Rabobank. Fitch's calculated occupancy improved to an estimated
83.3% from 74.7% at YE 2023, and included tenants expected to take
occupancy. Fitch's most recent sustainable property NCF was $91.5
million, which is 11.6% below Fitch's issuance NCF of $103.5
million based on the YE 2023 rent roll.
Increasing Credit Enhancement: As of the July 2024 distribution
date, the pool's aggregate balance has been reduced by 13.4% to
$806.4 million from $931.6 million at issuance. Eight loans (7.2%
of the pool) are fully defeased. Thirteen loans (48.2%) are
full-term interest-only (IO).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool level losses from
underperforming loans. Downgrades to the classes rated 'AAAsf' and
'AAsf' are not considered likely due to sufficient CE and expected
continued amortization but may occur at 'AAAsf' should interest
shortfalls occur or are expected to occur.
Downgrades to classes C and X-B, currently rated 'A-sf', are
possible should loss expectations increase significantly and/or the
performance of one or more large FLOCs, including Gurnee Mills, 444
Spear, Presidio Office or other large FLOCs, deteriorate further or
more loans than expected default at or prior to maturity.
Downgrades to classes D, X-D, E, X-E and F, currently on Rating
Outlook Negative and rated 'BBB-sf', 'BB-sf' and 'B-sf',
respectively, are expected should performance of the FLOCs fail to
stabilize and/or Fitch values decline further, or loans default
and/or transfer to special servicing.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with stable to improved asset performance
coupled with pay down and/or defeasance. Upgrades to classes B,
X-B, C, D and X-D could occur with increased paydown and/or
defeasance, combined with performance stabilization and may be
limited as concentrations increase. Classes would not be upgraded
above 'Asf' if there is a likelihood for interest shortfalls.
Upgrades to classes E, X-E and F are not likely unless performance
of the FLOCs stabilize and if the performance of the remaining pool
is stable and would not likely occur until later years in the
transaction assuming losses were minimal and there is sufficient
CE.
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.
CHASE HOME 2024-DRT1: DBRS Gives Prov. B(low) Rating on B-5 Notes
-----------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the
Mortgage-Backed Notes, Series 2024-DRT1 (the Notes) to be issued by
Chase Home Lending Mortgage Trust 2024-DRT1 (CHASE 2024-DRT1) as
follows:
-- $25.7 million Class A-2 at AAA (sf)
-- $25.7 million Class A-2-A at AAA (sf)
-- $25.7 million Class A-2-X at AAA (sf)
-- $9.2 million Class B-1 at AA (low) (sf)
-- $6.8 million Class B-2 at A (low) (sf)
-- $5.0 million Class B-3 at BBB (low) (sf)
-- $2.9 million Class B-4 at BB (low) (sf)
-- $0.8 million Class B-5 at B (low) (sf)
Classes A-2-X is interest-only (IO) notes. The class balances
represent notional amounts.
Classes A-2, and B-6-X are exchangeable notes. These classes can be
exchanged for combinations of base depositable or depositable notes
as specified in the offering documents.
The AAA (sf) credit ratings on the Notes reflect 5.10% of credit
enhancement provided by subordinated notes. The AA (low) (sf), A
(low) (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf) credit
ratings reflect 3.35%, 2.05%, 1.10%, 0.55%, and 0.40% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
Morningstar DBRS assigned provisional ratings to Chase Home Lending
Mortgage Trust 2024-DRT1 (CHASE 2024-DRT1), a securitization of a
portfolio of first-lien adjustable-rate prime residential mortgages
funded by the issuance of the Mortgage-Backed Notes, Series
2024-DRT1 (the Notes). The Notes are backed by 455 loans with a
total principal balance of $523,524,196 as of the Cut-Off Date
(July 31, 2024).
The pool consists of fully amortizing adjustable-rate mortgages
with original terms to maturity of 30 years and a weighted-average
(WA) loan age of 10 months. All of the loans are traditional,
nonagency, prime jumbo mortgage loans. Details on the underwriting
of conforming loans can be found in the Key Probability of Default
Drivers section. In addition, all the loans in the pool were
originated in accordance with the new general Qualified Mortgage
(QM) rule.
On or prior to the Closing Date, the Issuing Entity will enter into
a credit agreement where JPMCB will make all of the Class A-1 Loans
to the Issuing Entity. The Class A-1 Loans will be secured by the
Trust Estate and are not-offered debt. The Issuing Entity will use
the proceeds from the Class A-1 Loans to purchase the mortgage
loans from the Depositor. The Depositor will then use those amounts
and the proceeds from the sale of the Notes to purchase the
mortgage loans from the Mortgage Loan Seller. JPMCB is the
Originator of 100.0% of the pool.
The mortgage loans will be serviced by JPMCB. NewRez LLC doing
business as Shellpoint Mortgage Servicing (Shellpoint) will act as
Special Servicer for loans that become 90 days delinquent. Unique
to the CHASE 2024-DRT1 transaction, the largest holder of the most
subordinate class outstanding, initially the Class B-6 Notes
(Controlling Holder), will have the right to terminate the Servicer
and Special Servicer at any time post-closing without cause.
There will not be any advancing of delinquent principal and
interest (P&I) on any mortgages by the related Servicers or any
other party to the transaction; however, the related Servicers are
obligated to make advances in respect of homeowner's association
(HOA) fees in super lien states and in certain cases, taxes and
insurance as well as reasonable costs and expenses incurred in the
course of servicing and disposing of properties.
For this transaction, generally, the servicing fee payable for
mortgage loans is composed of three separate components: the base
servicing fee, the delinquent servicing fee, and the additional
servicing fee. These fees vary based on the delinquency status of
the related loan and will be paid from interest collections before
payment to the securities.
U.S. Bank Trust Company, National Association, rated AA with a
Stable trend by Morningstar DBRS, will act as Securities
Administrator and Collateral Trustee. JPMCB will act as Custodian.
Pentalpha Surveillance LLC (Pentalpha) will serve as the
Representations and Warranties (R&W) Reviewer.
The transaction employs a senior-subordinate cash flow structure
that incorporates performance triggers and credit enhancement
floors.
Notes: All figures are in U.S. dollars unless otherwise noted.
CHASE HOME 2024-DRT1: Fitch Assigns BB-sf Rating on Cl. B-5 Notes
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Chase Home Lending Mortgage Trust 2024-DRT1 (Chase 2024-DRT1).
Entity/Debt Rating Prior
----------- ------ -----
Chase 2024-DRT1
A-1 LT NRsf New Rating NR(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-2-A LT AAAsf New Rating AAA(EXP)sf
A-2-X LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-3 LT BBBsf New Rating BBB(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT BB-sf New Rating BB-(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
B-6-X LT NRsf New Rating NR(EXP)sf
Transaction Summary
The Chase 2024-DRT1 notes are supported by 455 loans with a total
balance of approximately $523.52 million as of the cutoff date.
The pool entirely consists of prime-quality hybrid adjustable-rate
mortgages (ARMs). All of the loans were originated by JPMorgan
Chase Bank, National Association (JPMCB). The loan-level
representations (reps) and warranties (R&Ws) are provided by the
main originator, JPMCB. All mortgage loans in the pool will be
serviced by JPMCB. The collateral quality of the pool is extremely
strong, with a large percentage of loans over $1.0 million.
Of the loans, 100.0% qualify as safe-harbor qualified mortgage
(SHQM) average prime offer rate (APOR) loans. There is no exposure
to Libor in this transaction. The collateral comprises 100%
adjustable-rate loans that are based on the SOFR index rate. The
notes are fixed rate and capped at the net weighted average coupon
(WAC), or are based on the net WAC; as a result, the notes have no
Libor exposure.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.2% 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.
High-Quality Prime Mortgage Pool (Positive): The pool consists of
455 high-quality, hybrid adjustable-rate, fully amortizing loans
with maturities of 30 years that total $523.52 million. In total,
100.0% of the loans qualify as SHQM APOR. The loans were made to
borrowers with strong credit profiles, relatively low leverage and
large liquid reserves.
The loans are seasoned at an average of 13.3 months, according to
Fitch. The pool has a weighted average (WA) FICO score of 776, as
determined by Fitch, and is based on the original FICO for newly
originated loans and the updated FICO for loans seasoned at 12
months or more, which is indicative of very high credit-quality
borrowers. A large percentage of the loans have a borrower with a
Fitch-derived FICO score equal to or above 750. Fitch determined
that 84.2% of the loans have a borrower with a Fitch-determined
FICO score equal to or above 750. Based on Fitch's analysis of the
pool, the original WA combined loan-to-value (CLTV) ratio is 75.4%,
which translates to a sustainable loan-to-value (sLTV) ratio of
78.9%. This represents moderate borrower equity in the property and
reduced default risk compared to a borrower with a CLTV over 80%.
Of the pool, 100.0% of the loans are designated as qualified
mortgage (QM) loans.
All the loans in the pool are adjustable-rate loans. To reflect the
additional risk that is present in adjustable-rate loans due to
payment shock, Fitch increased its probability of default (PD) by
1.11x.
The borrower maintains a primary or secondary residence for all the
pool loans. Single-family homes and planned unit developments
(PUDs) constitute 90.9% of the pool, while condominiums make up
8.2% and co-ops, 0.9%. Fitch viewed the fact that there are no
investor loans favorably.
The pool consists of loans with the following loan purposes, as
determined by Fitch: purchases (94.8%), cashout refinances (1.6%)
and rate-term refinances (3.6%). Fitch views favorably that no
loans are for investment properties and a majority of mortgages are
purchases.
Of the pool loans, 32.2% are concentrated in California, followed
by Washington and Colorado. The largest MSA concentration is in the
San Francisco MSA (7.9%), followed by the Seattle MSA (7.9%) and
the Los Angeles MSA (7.7%). The top three MSAs account for 23.5% of
the pool. As a result, no probability of default (PD) penalty was
applied for geographic concentration.
Pro-Rata Structure with Triggers and Subordination Floors (Mixed):
The mortgage cash flow allocations are based on available funds and
allocated to the senior classes first, and then to the subordinate
classes. The transaction is an IPIP structure where interest is
paid to the senior classes, and then principal; then the
subordinate classes are paid interest, and then principal
sequentially, starting with class B-1.
Principal is allocated among the senior and subordinate classes,
based on the senior/subordinate principal amounts (pro-rata
allocation). Performance triggers are in place to re-prioritize
unscheduled principal to the senior classes, as well as a lock-out
feature that re-allocates principal from a more junior class to pay
a more senior class until performance improves and the trigger is
no longer breached. The triggers are supportive of maintaining
credit enhancement and paying off more senior classes when the
transaction experiences performance issues.
The transaction will have a senior subordination floor of 0.90% and
a junior subordination floor of 0.55%.
Realized losses will be allocated reverse sequentially starting
with class B-6. Once all the subordinate classes are written off,
the senior classes will be allocated losses starting with the A-2-A
notes and then to the A-1 loans.
No Advancing of Delinquent P&I (Mixed): The servicer, JPMCB, will
not advance delinquent principal and interest (P&I) payments on
behalf of the loans. Not having full advancing will reduce the
loan-level loss severity (LS) compared to a similar transaction
with full advancing of delinquent (DQ) P&I payments, as the
servicer will not need to be reimbursed for DQ P&I advances from
liquidation proceeds (allowing more funds to flow to the notes).
However, the credit enhancement (CE) will be increased, as
principal will need to be used to pay interest to cover loans that
are DQ in an effort to provide liquidity to the transaction. The
transaction's structure prioritizes the payment of interest to the
'AAAsf' rated senior classes, which is supportive of these classes
receiving timely interest.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 42.3% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Digital Risk. The third-party due diligence described
in Form 15E focused on four areas: compliance review, credit
review, valuation review and data integrity. Fitch considered this
information in its analysis and, as a result, Fitch decreased its
loss expectations by 0.15% at the 'AAAsf' stress due to 100.0% due
diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100.0% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
Digital Risk was engaged to perform the review. Loans reviewed
under this engagement were given compliance, credit and valuation
grades and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
provided was considered comprehensive. The data contained in the
ResiPLS layout data tape were reviewed by the due diligence
companies, and no material discrepancies were noted
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CITIGROUP 2014-GC23: Fitch Lowers Rating on 2 Tranches to CCC
-------------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed six classes of
GS Mortgage Securities Trust Series 2014-GC20 commercial mortgage
pass-through certificates (GSMS 2014-GC20). The Rating Outlooks for
two of the affirmed classes were revised to Negative from Stable.
Fitch has also affirmed eight classes of Citigroup Commercial
Mortgage Trust, commercial mortgage pass-through certificates,
series 2014-GC21 (CGCMT 2014-GC21). The Rating Outlooks for four of
the affirmed classes remain Negative.
Fitch has also downgraded seven classes and affirmed one class of
Citigroup Commercial Mortgage Trust commercial mortgage
pass-through certificates series 2014-GC23 (CGCMT 2014-GC23).
Following their downgrades, Fitch has assigned Negative Rating
Outlooks to four classes. The Rating Outlook for the one affirmed
class was revised to Negative from Stable.
Fitch has also affirmed the four classes of GS Mortgage Securities
Trust Series 2014-GC18 commercial mortgage pass-through
certificates (GSMS 2014-GC18). Fitch has also subsequently
withdrawn all ratings in this transaction.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2014-GC21
A-4 17322MAV8 LT PIFsf Paid In Full AAAsf
A-5 17322MAW6 LT PIFsf Paid In Full AAAsf
A-AB 17322MAX4 LT PIFsf Paid In Full AAAsf
A-S 17322MAY2 LT PIFsf Paid In Full AAAsf
B 17322MAZ9 LT Asf Affirmed Asf
C 17322MBA3 LT BBBsf Affirmed BBBsf
D 17322MAA4 LT CCCsf Affirmed CCCsf
E 17322MAC0 LT CCsf Affirmed CCsf
F 17322MAE6 LT Csf Affirmed Csf
PEZ 17322MBD7 LT BBBsf Affirmed BBBsf
X-A 17322MBB1 LT PIFsf Paid In Full AAAsf
X-B 17322MBC9 LT BBBsf Affirmed BBBsf
X-C 17322MAJ5 LT CCsf Affirmed CCsf
CGCMT 2014-GC23
A-3 17322VAS5 LT PIFsf Paid In Full AAAsf
A-4 17322VAT3 LT PIFsf Paid In Full AAAsf
A-AB 17322VAU0 LT PIFsf Paid In Full AAAsf
A-S 17322VAV8 LT PIFsf Paid In Full AAAsf
B 17322VAW6 LT AAsf Affirmed AAsf
C 17322VAX4 LT BBB-sf Downgrade A-sf
D 17322VAE6 LT Bsf Downgrade BBsf
E 17322VAG1 LT CCCsf Downgrade Bsf
F 17322VAJ5 LT CCsf Downgrade CCCsf
PEZ 17322VBA3 LT BBB-sf Downgrade A-sf
X-A 17322VAY2 LT PIFsf Paid In Full AAAsf
X-B 17322VAZ9 LT BBB-sf Downgrade A-sf
X-C 17322VAA4 LT CCCsf Downgrade Bsf
GSMS 2014-GC20
A-4 36252WAW8 LT PIFsf Paid In Full AAAsf
A-5 36252WAX6 LT PIFsf Paid In Full AAAsf
A-AB 36252WAY4 LT PIFsf Paid In Full AAAsf
A-S 36252WBB3 LT PIFsf Paid In Full AAAsf
B 36252WBC1 LT Asf Affirmed Asf
C 36252WBE7 LT BBB-sf Affirmed BBB-sf
D 36252WAE8 LT Csf Downgrade CCCsf
E 36252WAG3 LT Dsf Affirmed Dsf
PEZ 36252WBD9 LT BBB-sf Affirmed BBB-sf
X-A 36252WAZ1 LT PIFsf Paid In Full AAAsf
X-B 36252WBA5 LT Asf Affirmed Asf
X-C 36252WAA6 LT Dsf Affirmed Dsf
GSMS 2014-GC18
D 36252RAG4 LT Dsf Affirmed Dsf
D 36252RAG4 LT WDsf Withdrawn Dsf
E 36252RAK5 LT Dsf Affirmed Dsf
E 36252RAK5 LT WDsf Withdrawn Dsf
F 36252RAN9 LT Dsf Affirmed Dsf
F 36252RAN9 LT WDsf Withdrawn Dsf
X-C 36252RAA7 LT Dsf Affirmed Dsf
X-C 36252RAA7 LT WDsf Withdrawn Dsf
Fitch has withdrawn the ratings as they are no longer considered by
Fitch to be relevant to the agency's coverage due to the
transaction no longer being outstanding.
KEY RATING DRIVERS
Increased Loss Expectations: All of the loans across the three
transactions are Fitch Loans of Concern (FLOC) as they are all past
their initial scheduled maturity dates. The GSMS 2014-GC20
transaction has four loans remaining in the pool, all of which are
in special servicing. The CGCMT 2014-GC21 transaction has five
loans remaining in the pool, including four loans (90.7% of the
pool) in special servicing. The CGCMT 2014-GC23 transaction has six
loans remaining in the pool, including five loans (87.7% of the
pool) in special servicing.
Due to the concentrated nature of the pools, Fitch performed a
paydown analysis that grouped the remaining loans based on their
current status, collateral quality, and loss expectation.
GSMS 2014-GC20: The Negative Outlook reflects the elevated
concentration of loans in special servicing within the pool.
Additionally, all of the remaining loans in the pool are beyond
their initial loan maturity dates. Downgrades are possible should
performance or appraisal values of the remaining loans in the pool
continue to deteriorate and expected recoveries of loans worsen.
CGCMT 2014-GC21: The Negative Outlook reflects the elevated
concentration of loans in special servicing within the pool.
Additionally, all of the remaining loans in the pool are beyond
their initial loan maturity dates. Downgrades are possible should
performance or appraisal values of the remaining loans in the pool
continue to deteriorate and expected recoveries of loans worsen.
CGCMT 2014-GC23: The downgrades reflect higher pool loss
expectations since Fitch's prior rating action driven by
performance deterioration of the FLOCs Selig Portfolio (40.9%) and
Chula Vista Center (25.6%). Negative Outlooks reflect the elevated
concentration of loans in special servicing within the pool along
with the reliance on recoveries from loans in special servicing to
repay classes. The Negative Outlooks reflect the potential for
further downgrades should performance of the remaining loans
continue to deteriorate and prospect for recoveries of loans in
special servicing worsen.
Largest Remaining Loans and Largest Contributors to Loss: The
largest contributor to overall loss expectations in GSMS 2014-GC20
is the Sheraton Suites Houston (24.4%) loan, which is secured by a
283-key, full-service hotel located near the Houston Galleria. The
loan had an initial loan maturity date of April 2024.
The loan transferred to the special servicer in May 2020 and the
asset became REO in February 2021 after the lender and borrower
executed a deed-in-lieu of foreclosure. A new franchise agreement
was executed and a rebranding effort has been recently completed.
The hotel has transitioned to a Hilton branded hotel (The Chifley)
after undergoing a $12.2 million (approximately $43,000/key)
property improvement plan (PIP).
The TTM February 2024 STR report showed occupancy, ADR, and RevPAR
of 48%, $155, and $74, respectively, underperforming its
competitive set on all metrics. The hotel is not currently being
marketed for sale.
Fitch's expected loss of 53.6% considers a recent appraisal value,
reflecting a stressed value of approximately $138,000 per key.
The largest loan in GSMS 2014-GC20 and second largest loan in CGCMT
2014-GC21 is the Greene Town Center (54.1% and 18.3%, respectively)
loan, which is an open-air, mixed-use lifestyle center located in
Beavercreek, OH. The loan had an initial loan maturity in December
2023 and subsequently transferred to special servicing.
The collateral consists of retail (566,634-sf), office (143,343-sf)
and residential space (206 units totaling 199,248-sf).
Non-collateral anchors include Von Maur (ground lease, 130,000-sf)
and a 14-screen Cinemark movie theater. The loan was designated a
Fitch Loan of Concern due to performance declines and upcoming loan
maturity.
Per the March 2024 rent roll, the property was 90.9% occupied,
compared to 91% at YE 2022, 94% at YE 2020, and 93% at YE 2019.
Largest collateral tenants include LA Fitness (7.2% of NRA;
November 2026), Nordstrom Rack (4.9%; September 2024), Books & Co.
(4.8%; January 2027), and University of Dayton (4.1% of NRA; May
2026).
Fitch's expected loss of 1.9% considers a recent appraisal value,
reflecting a stressed value of approximately $158 psf.
The largest loan in the pool and largest contributor to overall
loss expectations in CGCMT 2014-GC21 is the Maine Mall (58.4%)
loan, which is secured by a 747,660-sf portion of a 1,022,208-sf
regional mall located approximately six miles southwest of
Portland, ME. The loan is sponsored by Brookfield. The loan
transferred to special servicing in February 2024 for imminent
maturity default as the loan was scheduled to mature in April
2024.
Non-collateral anchors include Macy's and a dark anchor box
previously occupied by Sears. Collateral anchors include Jordan's
Furniture (which backfilled the majority of the former Bon-Ton
space that closed in August 2017; 16.0% of collateral NRA; July
2030) and JCPenney (11.5%; July 2028). Junior anchors include Best
Buy, Round 1 Bowling & Amusement, H&M and Old Navy. The mall also
features the only Apple store in the state of Maine.
The collateral was 91% occupied at YE 2023, compared to 91.1% at YE
2021, 93.9% at YE 2020 and 76% at YE 2019. There is upcoming lease
rollover of 14% in 2024 and 9% in 2025. The servicer reported NOI
debt service coverage ratio (DSCR) was 1.58x at YE 2023, 1.48x at
YE 2022, 1.40x YE 2021, 1.45x at YE 2020 and 1.70x at YE 2019.
Fitch's expected loss of 27.2% reflects a 12% cap rate, a 10%
stress to the annualized TTM March 2024 NOI, and factors an
elevated probability of default as the loan is past its initial
loan maturity date.
The largest loan in the pool and largest contributor to overall
loss expectations in CGCMT 2014-GC23 is the Selig Portfolio loan,
which is secured by portfolio of seven office properties totaling
1.1 million-sf, located in the CBD of Seattle, WA. The loan
transferred to special servicing in March 2024 due to its inability
to pay off at its May 2024 maturity.
Occupancy has declined to 59.6% as of the January 2024 rent roll,
down from 72% in 2022 and 84% in 2021. The servicer reported NOI
DSCR as of YE 2023 was 1.72x compared with 1.58x at YE 2022 and
2.12x at YE 2021. There is 10.8% of portfolio NRA rolling in 2024,
and 3.6% in 2025. Individual properties range from 42.6% to 85.4%
occupied.
Fitch's expected loss of 31.2% reflects a 10% cap rate, a 20%
haircut to the YE 2023 NOI to reflect the occupancy decline and
factors an elevated probability of default as the loan is past its
initial loan maturity date.
The second largest loan in the pool and second largest contributor
to overall loss expectations in CGCMT 2014-GC23 is the Chula Vista
Center loan, secured by a regional mall located in Chula Vista, CA
in the San Diego metro area. The loan transferred to special
servicing in July 2024 for non-performing maturity balloon ahead of
its initial maturity date of July 2024.
As of the March 2024 rent roll, mall occupancy was 67% occupied,
compared to 65% at YE 2023, 69% at YE 2022, and 64% at YE 2021.
Mall occupancy had previously declined to 64% from 89% due to Sears
(non-collateral, 28% of mall NRA), closing at the subject location
in February 2020 after filing for bankruptcy.
Non-collateral anchor Macy's (16%; November 2033) was converted to
a Macy's Backstage in 2018 aligning the tenant profile with the
off-price merchandising mix at the center. Collateral tenants
include Burlington (17% of the collateral NRA; April 2025) and
JCPenney (16% of the collateral NRA; November 2028). JCPenney
exercised their second of three, five-year extension options in
2023.
Fitch's expected loss of 39.5% reflects a 20% cap rate, a 7.5%
haircut to the YE 2023 NOI and factors an elevated probability of
default as the loan is past its initial loan maturity date.
Increased Credit Enhancement (CE), Concentrated Loan Maturities: As
of the August 2024 remittance report, the pool's aggregate balances
have been reduced by 88.3% in GSMS 2014-GC20, 79.4% in CGCMT
2014-GC21, and 80.7% in the CGCMT 2014-GC23 transaction. Each of
the transactions have incurred realized losses to date which
include $84,113,667 in GSMS 2014-GC20, $16,189,702 in CGCMT
2014-GC21, and $1,052,941 in CGCMT 2014-GC23. Cumulative interest
shortfalls of $11.1 million are currently affecting class D in the
GSMS 2014-GC20 transaction, $685k are affecting class G in CGCMT
2014-GC21, and $237k are affecting class G in CGCMT 2014-GC23.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The Negative Outlooks reflect the possibility for future
downgrades due to potential further declines in performance that
could result in higher expected losses on FLOCs and loans in
special servicing. These include larger loans and FLOCs including
Greene Town Center, Sheraton Suites Houston, Northgate Power Center
in GSMS 2014-GC20, Maine Mall, Greene Town Center, Regional One
Medical in CGCMT 2014-GC21, and Selig Portfolio and Chula Vista
Center in CGCMT 2014-GC23. If expected losses do increase,
downgrades to these classes are anticipated.
- Downgrades to the 'AAsf', 'Asf', and 'BBBsf' category rated
classes could occur if deal-level losses increase significantly on
non-defeased loans in the transactions and with outsized losses on
larger FLOCs.
- Downgrades to the 'Bsf' category classes are possible with higher
expected losses from continued performance declines of the FLOCs
and higher certainty of losses on the loan's in special servicing.
- Downgrades to distressed classes 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', '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 to the 'BBBsf' and 'Bsf' category rated classes would be
limited based on sensitivity to concentrations or the potential for
future concentration. Classes would not be upgraded above 'Asf' if
there is likelihood for interest shortfalls.
- Upgrades to distressed classes are not expected, but are 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.
CITIGROUP 2016-C1: Fitch Affirms 'B-sf' Rating on Class F Certs
---------------------------------------------------------------
Fitch Ratings has affirmed 12 classes of Citigroup Commercial
Mortgage Trust, commercial mortgage pass-through certificates
series 2016-C1 (CGCMT 2016-C1). The Rating Outlooks on all classes
remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2016-C1
A-2 17290YAP3 LT PIFsf Paid In Full AAAsf
A-3 17290YAQ1 LT AAAsf Affirmed AAAsf
A-4 17290YAR9 LT AAAsf Affirmed AAAsf
A-AB 17290YAS7 LT AAAsf Affirmed AAAsf
A-S 17290YAT5 LT AAAsf Affirmed AAAsf
B 17290YAU2 LT AA+sf Affirmed AA+sf
C 17290YAV0 LT A+sf Affirmed A+sf
D 17290YAA6 LT BBB-sf Affirmed BBB-sf
E 17290YAC2 LT BB-sf Affirmed BB-sf
EC 17290YAY4 LT A+sf Affirmed A+sf
F 17290YAE8 LT B-sf Affirmed B-sf
X-A 17290YAW8 LT AAAsf Affirmed AAAsf
X-B 17290YAX6 LT AA+sf Affirmed AA+sf
KEY RATING DRIVERS
Performance and 'Bsf' Loss Expectations: The affirmations in CGCMT
2016-C1 reflect generally stable pool performance and loss
expectations since the prior rating action. Deal-level 'Bsf' rating
case loss is 4.1% and the transaction has 10 Fitch Loans of Concern
(FLOCs; 26.9% of the pool), including one loan (1.9%) in special
servicing.
Largest Loss Contributors: The largest contributor to loss
expectations is The Strip (13.1%), which is also the largest loan
in the pool. The loan is secured by a 786,928 sf anchored retail
center located in North Canton, OH. The property is near downtown
Canton, Kent State University at Stark and the Pro Football Hall of
Fame. The property's major tenants include Walmart (19.0% of NRA,
leased through October 2026), Lowe's (16.6%, October 2026), Giant
Eagle (11.6%, January 2027), Cinemark (8.4%, December 2025) and
Bob's Discount Furniture (5.4%, July 2030).
Property performance has generally been stable as the YE 2023 NOI
DSCR was reported at 1.52x compared with 1.46x at YE 2022. The
property's occupancy was 95.0% as of March 2024. There is minimal
near-term rollover until 2025 when 11.0% of the NRA rolls. The
property's largest tenants, Walmart and Lowe's, have lease expiry
dates that are almost coterminous with the loan maturity date in
April 2026.
Fitch's 'Bsf' rating case loss of 8.6% (prior to concentration
add-ons) is based on a 9.0% cap rate, 7.5% stress to the YE 2023
NOI and a 50.0% probability of default to account for the rollover
risk associated with the anchor tenant leases that expire near the
loan maturity in April 2026.
The second largest contributor to loss expectations is the 46 Geary
Street (1.9%) loan, which is secured by an 18,002 sf mixed-use
property located in downtown San Francisco, CA. The loan
transferred to special servicing as of April 2024 due to payment
default and the lender filed for foreclosure and receivership in
July 2024. As of the December 2023 rent roll, the property's tenant
is F/X Entertainment (29.4% of NRA, leased through July 2024).
The property's occupancy was 52.4% as of YE 2023 and remains
unchanged from June 2023 and YE 2022, compared with 72.9% at YE
2021 and 100.0% at YE 2020. Occupancy declined due to TapFwd
(previously 27.1% of the NRA) vacating in 2020 ahead of the January
2021 lease expiration. Haus Services (previously 21.7% of the NRA)
vacated the property in January 2022 upon lease expiration. The
servicer previously noted that Paul Smith (23.0% of NRA; 75.2% of
base rental income), did not renew its lease at the property upon
lease expiry in February 2024, which will reduce the property's
occupancy further to 29.4%.
As of August 2024, online searches show that F/X Entertainment (dba
Hawthorn SF Nightclub and Lounge) continues to operate at the
subject property. Fitch has reached out to the servicer for a
leasing update for both tenants and a response is pending.
The property's NOI DSCR was 0.81x as of YE 2023, compared to 0.73x
at YE 2022, 1.22x at YE 2021, 1.31x at YE 2020 and 1.63x at YE
2019. The loan has been cash managed since 2016, and reported a
total $1.6 million ($88/sf) in reserves as of the August 2024 loan
reserve report.
Fitch's 'Bsf' rating case loss of 47.0% (prior to concentration
add-ons) is based on a 20.0% stress to the June 2024 draft
appraisal value.
The third largest contributor to loss expectations is 4455 LBJ
Freeway (3.6%), which is the sixth largest loan in the pool. The
loan is secured by a 294,850 sf suburban office located in Farmers
Branch, TX, approximately 10 miles north of the Dallas CBD. The
property's major tenants include AmTrust Financial Services (37.4%
of NRA; February 2028); National General Insurance (29.0% of NRA;
February 2028); EVO Payments International LLC (17.9%, August 2028)
and LoneStar Investment Advisors (4.1% of NRA; April 2025).
Property performance has been generally stable, as the YE 2023 NOI
DSCR was reported at 1.72x compared with 1.83x at YE 2022. The
property's occupancy was 95.0% as of March 2024. There is minimal
near-term rollover with 2.8% of the NRA rolling in 2024 and 4.1%
rolling in 2025.
Fitch's 'Bsf' rating case loss of 9.9% (prior to concentration
add-ons) is based on a 11.0% cap rate, 10.0% stress to the YE 2023
NOI, and a 50.0% probability of default to account for heightened
maturity default risk as the loan approaches maturity in 2026.
Increased Credit Enhancement (CE): As of the August 2024
distribution date, the pool's aggregate principal balance has been
reduced by 12.2% to $663.6 million from $755.7 million at issuance.
Eleven loans (11.6%) are fully defeased. Six loans, representing
18.7% of the pool, are full-term interest-only. Twenty loans,
representing 40.8% of the pool, are structured with a partial
interest-only component, all of which have commenced amortization.
All but two loans are scheduled to mature in the first half of
2026. To date, the trust has incurred $37,710 in realized losses
which has been absorbed by the non-rated class H.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades to 'AAAsf' rated classes are not expected due to the
position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur or
are expected to occur;
- Downgrades to 'AAsf' and 'Asf' category rated classes could occur
should performance on FLOCs, particularly The Strip, 4455 LBJ
Freeway, and 46 Geary Street, deteriorate further or if more loans
than expected default at or prior to maturity;
- Downgrades to the 'BBBsf', 'BBsf' and 'Bsf' category rated
classes are likely with higher than expected losses from the
aforementioned FLOCs, with deteriorating performance and with
greater certainty of losses on the specially serviced loan or other
FLOCs.
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
improved pool-level loss expectations of The Strip, 4455 LBJ
Freeway and 46 Geary Street FLOCs;
- Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'AA+sf' if there
is likelihood for interest shortfalls;
- Upgrades to 'BBsf' and 'Bsf' category rated classes are not
likely until the later years in a transaction and only if the
performance of the remaining pool is stable, recoveries on the
aforementioned loans and 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.
CITIGROUP 2017-B1: Fitch Affirms BB-sf Rating on 2 Tranches
-----------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Citigroup Commercial
Mortgage Trust, commercial mortgage pass-through certificates,
series 2017-B1 (CGCMT 2017-B1). The Rating Outlook for class F was
revised to Negative from Stable. The Rating Outlooks on the
remaining 12 classes remain Stable.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Citigroup Commercial
Mortgage Trust 2017-B1
A-3 17326CAY0 LT AAAsf Affirmed AAAsf
A-4 17326CAZ7 LT AAAsf Affirmed AAAsf
A-AB 17326CBA1 LT AAAsf Affirmed AAAsf
A-S 17326CBB9 LT AAAsf Affirmed AAAsf
B 17326CBC7 LT AA-sf Affirmed AA-sf
C 17326CBD5 LT A-sf Affirmed A-sf
D 17326CAA2 LT BBB-sf Affirmed BBB-sf
E 17326CAC8 LT BB-sf Affirmed BB-sf
F 17326CAE4 LT B-sf Affirmed B-sf
X-A 17326CBE3 LT AAAsf Affirmed AAAsf
X-B 17326CBF0 LT AA-sf Affirmed AA-sf
X-D 17326CAJ3 LT BBB-sf Affirmed BBB-sf
X-E 17326CAL8 LT BB-sf Affirmed BB-sf
KEY RATING DRIVERS
Performance and 'Bsf' Loss Expectations: The affirmations reflect
the generally stable pool performance and loss expectations since
Fitch's prior rating action. The deal-level 'Bsf' rating case loss
has decreased to 3.6% from 4.2% at Fitch's prior rating action. The
second largest contributor to loss expectations at the prior
review, 6 West 48th Street (1.8% of the pool), is now defeased,
reducing the overall expected loss for the transaction. Six loans
(14.8%) are considered Fitch Loans of Concern (FLOC), including two
loans (2.1%) in special servicing: Clinton Crossings Medical Office
(1.1%) and 4901 West Irving Park (1.0%).
The Negative Outlook on Class F reflects the potential for
downgrade due to performance concerns surrounding FLOCs including
411 East Wisconsin (6.2%), TKG 4 Retail Portfolio (2.9%), Wilshire
Plaza (2.6%), Clinton Crossings Medical Office (1.1%) and 4901 West
Irving Park (1.0%). The Negative Outlook also reflects the
concentration of office loans (23.4%).
Largest Loss Contributors: The largest contributor to overall loss
expectations and largest increase in loss expectations since the
prior review is the specially serviced loan, 4901 West Irving Park,
which is secured by a 60,448 sf retail property located in the Six
Corners/Old Irving Park, Chicago, IL. The loan transferred to
special servicing in January 2020 due to delinquent payments. As of
the August 2024 reporting, the loan remains in foreclosure.
According to the servicer, a foreclosure sale was held in April
2023 and the lender was the winning bidder. However, the sale was
not confirmed by the court. Another hearing is scheduled for
September 2024.
The property's largest tenants include Gold Standard Enterprises
(dba Binny's Beverage Depot; 40.5% of NRA, leased through January
2033), Irving Park Health Club, LLC (30%; May 2027), and
Immigration Lawyers, P.C. (8.2%; June 2027). Occupancy as of YE
2023 was 70%, down from 78.5% at YE 2022, 79% at March 2021, and
82% at September 2019. The servicer-reported NOI debt service
coverage ratio (DSCR) was 0.62x as of YE 2023, 0.65x at YE 2022,
-0.39x at 2021, and 1.95x at September 2019.
Fitch's 'Bsf' rating case loss of 83.7% (prior to concentration
add-ons) considers a 20% haircut to a recent appraisal value of
$6.3 million, reflecting a stressed value of approximately $83
psf.
The second largest contributor to overall loss expectations is the
Lakeside Shopping Center (7.0%) loan secured by a 1,211,349 sf
regional mall located in Metairie, LA, approximately 7.8 miles
northwest of the New Orleans CBD. The property is viewed as the
premier retail center in its regional area.
Collateral anchors include Dillard's (25.7%; December 2029), Macy's
(18.9%; January 2029) and JC Penney (16.8%; July 2028). Per the
December 2023 rent roll, the property was 97.9% occupied compared
to 97% at YE 2022, 99% at YE 2020, and 100% at YE 2019. Upcoming
rollover includes 3.9% of the NRA scheduled to expire in 2024 and
7.9% in 2025.
Fitch's 'Bsf' rating case loss of 7.1% (prior to concentration
add-ons) reflects a 12% cap rate and a 7.5% stress to the YE 2023
NOI.
The third largest contributor to overall loss expectations is the
Wellington Commercial Condo (3.6%) loan, a 42,380 sf, three-story
commercial condo at the base of a luxury high-rise condominium
tower on the Upper East Side of Manhattan.
The property has been fully occupied since YE 2022, up from 65% at
YE 2021 and YE 2020. Dr. Cecelia McCarton (previously 36.4% of NRA)
vacated in February 2020, ahead of its February 2022 lease
expiration, which dropped occupancy at the property. The space was
later backfilled by Primrose School (82 Roses, LLC) (43.1%;
November 2037). The other two tenants are Icon (East 82nd Garage)
(40.4%; month to month since lease expiration in December 2021) and
CVS (20.7%; September 2028).
Fitch's 'Bsf' rating case loss of 7.6% (prior to concentration
add-ons) reflects a 9.25% cap rate and 7.5% stress to the
annualized T9 2023 NOI.
Increased Credit Enhancement (CE): As of the August 2024
distribution date, the pool's aggregate principal balance has been
reduced by 10.7% to $840.8 million from $941.6 million at issuance.
Seven loans (6.5%) are fully defeased and three loans have been
paid off (6.3% of original pool balance). Twenty loans,
representing 61.9% of the pool, are full-term interest-only while
the remaining 25 loans, representing 38.1% of the pool, are
amortizing. All of the loans in the pool are scheduled to mature in
2027, with the exception of the TKG 4 Retail Portfolio loan, which
matures in 2026. To date, the trust has not incurred any realized
losses.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades to 'AAAsf' rated classes are not expected due to the
position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur or
are expected to occur;
- Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs and/or more loans than expected
experience performance deterioration and/or default at or prior to
maturity;
- Downgrades to classes in the 'BBBsf', 'BBsf', and 'Bsf'
categories are possible with higher than expected losses from
continued underperformance of the FLOCs (such as the 411 East
Wisconsin, TKG 4 Retail Portfolio and Wilshire Plaza loans) and/or
lack of resolution and increased exposures on the specially
serviced loans Clinton Crossings Medical Office and 4901 West
Irving Park.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades to classes rated in the 'AAsf' and 'Asf' categories may
be possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable to improved pool-level loss
expectations and improved performance on the FLOCs such as the 411
East Wisconsin, TKG 4 Retail Portfolio, Wilshire Plaza, Clinton
Crossings Medical Office, and 4901 West Irving Park loans;
- 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.
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.
CITIGROUP 2017-P8: Fitch Lowers Rating on Two Tranches to CCC
-------------------------------------------------------------
Fitch Ratings has downgraded 14 classes and affirmed seven classes
of Citigroup Commercial Mortgage Trust 2017-P8 commercial mortgage
pass-through certificates (CGCMT 2017-P8). Following their
downgrades, Fitch has assigned Negative Rating Outlooks on 12
classes. The Rating Outlooks for three of the affirmed classes were
revised to Negative from Stable.
Fitch has also downgraded three and affirmed 11 classes of
Citigroup Commercial Mortgage Trust 2017-C4 commercial mortgage
pass-through certificates (CGCMT 2017-C4). Following their
downgrades, Fitch has assigned Negative Rating Outlooks on three
classes. The Rating Outlooks for four of the affirmed classes were
revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2017-P8
A-2 17326DAB8 LT AAAsf Affirmed AAAsf
A-3 17326DAC6 LT AAAsf Affirmed AAAsf
A-4 17326DAD4 LT AAAsf Affirmed AAAsf
A-AB 17326DAE2 LT AAAsf Affirmed AAAsf
A-S 17326DAF9 LT AAAsf Affirmed AAAsf
B 17326DAG7 LT Asf Downgrade AA-sf
C 17326DAH5 LT BBBsf Downgrade A-sf
D 17326DAM4 LT BB-sf Downgrade BBB-sf
E 17326DAP7 LT B-sf Downgrade BB-sf
F 17326DAR3 LT CCCsf Downgrade B-sf
V-2A 17326DBF8 LT AAAsf Affirmed AAAsf
V-2B 17326DBH4 LT Asf Downgrade AA-sf
V-2C 17326DBK7 LT BBBsf Downgrade A-sf
V-2D 17326DBM3 LT BB-sf Downgrade BBB-sf
V-3AC 17326DBR2 LT BBBsf Downgrade A-sf
V-3D 17326DBV3 LT BB-sf Downgrade BBB-sf
X-A 17326DAJ1 LT AAAsf Affirmed AAAsf
X-B 17326DAK8 LT Asf Downgrade AA-sf
X-D 17326DAV4 LT BB-sf Downgrade BBB-sf
X-E 17326DAX0 LT B-sf Downgrade BB-sf
X-F 17326DAZ5 LT CCCsf Downgrade B-sf
CGCMT 2017-C4
A-2 17326FAB3 LT PIFsf Paid In Full AAAsf
A-3 17326FAC1 LT AAAsf Affirmed AAAsf
A-4 17326FAD9 LT AAAsf Affirmed AAAsf
A-AB 17326FAE7 LT AAAsf Affirmed AAAsf
A-S 17326FAH0 LT AAAsf Affirmed AAAsf
B 17326FAJ6 LT AA-sf Affirmed AA-sf
C 17326FAK3 LT A-sf Affirmed A-sf
D 17326FAL1 LT BBBsf Affirmed BBBsf
E-RR 17326FAN7 LT BBsf Downgrade BBB-sf
F-RR 17326FAQ0 LT B+sf Downgrade BB+sf
G-RR 17326FAS6 LT B-sf Downgrade BB-sf
H-RR 17326FAU1 LT CCCsf Affirmed CCCsf
X-A 17326FAF4 LT AAAsf Affirmed AAAsf
X-B 17326FAG2 LT A-sf Affirmed A-sf
X-D 17326FAY3 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: The deal-level 'Bsf' rating case
loss has increased since Fitch's prior rating action to 6.6% in
CGCMT 2017-P8 and 7.8% in CGCMT 2017-C4. The CGCMT 2017-P8
transaction has 12 Fitch Loans of Concern (FLOCs; 35.7% of the
pool), including three loans (11.3%) in special servicing. The
CGCMT 2017-C4 transaction has nine FLOCs (29.5%), including one
loan (1.5%) in special servicing.
CGCMT 2017-P8: The downgrades in CGCMT 2017-P8 reflect increased
pool loss expectations driven primarily by further performance
deterioration of three office FLOCs; 225 & 233 Park Avenue South
(5.8% of the pool), Bank of America Plaza (4.2%) and Grant Building
(3.5%), two of which have transferred to special servicing since
Fitch's prior rating action. The Negative Outlooks in CGCMT 2017-P8
reflect the elevated concentration of office loans (42.9%) and
possible further downgrades should performance of the
aforementioned office FLOCs further decline and/or with prolonged
workouts.
CGCMT 2017-C4: The downgrades in CGCMT 2017-C4 reflect increased
pool loss expectations driven primarily by further performance
deterioration of FLOCs, mainly the South Station (9.5% of the pool)
and Capital Center II & III (2.4%) loans. The downgrades also
reflect the high loss expectations of FLOCs 50 Varick (4.4%) and
1704 Automation Parkway (1.5%). The Negative Outlooks in CGCMT
2017-C4 reflect the high concentration of FLOCs, representing 29.5%
of the pool, along with the office concentration in the pool of
24.6%.
Largest Contributors to Loss: The largest contributor to overall
loss expectations and the largest increase in loss since the prior
rating action in CGCMT 2017-P8 is the 225 & 233 Park Avenue South
loan, which transferred to special servicing in March 2024 for
imminent monetary default. The loan is secured by two
interconnected office buildings that operate as a single property
located in the Gramercy Park submarket of Manhattan; 225 Park
Avenue South is a 19-story, 503,104-sf office building built in
1910 and 233 Park Avenue South is a 13-story, 172,652-sf office
building built in 1909. The loan matures in June 2027 and has
remained current since issuance.
Per the October 2023 rent roll, the property was 98.6% leased.
Facebook (39.4% of NRA; 44% of base rents) exercised its
termination option in March 2024, ahead of its 2027 lease
expiration. The third largest tenant, STV (19.7% of NRA; 13% of
base rents), indicated it will not renew its lease expiring in May
2024. Accounting for the loss of these two tenants, occupancy is
estimated to have declined to approximately 40%. Fitch has
requested an updated rent roll for the properties.
Additionally, the second largest tenant, BuzzFeed (28.7% NRA),
announced in 2023 that it was shutting down its news operation and
laid off 15% of its staff. The subject property became BuzzFeed's
global headquarters in 2014. Per media reports from 2022, BuzzFeed
subleases its entire 110,000-sf office space at 225 Park Avenue
South to software company Monday.com through May 2026. Near-term
rollover consists of 29% in 2026 (two tenants, including
Buzzfeed).
Fitch's 'Bsf' rating case loss of 22.2% (prior to concentration
add-ons) reflects a 9% cap rate, 50% stress to the YE 2022 NOI, and
factors an elevated probability of default given the deteriorating
office sector outlook, tenant departures, and rollover concerns.
The second largest increase in loss since the prior rating action
in CGCMT 2017-P8 is the Bank of America Plaza loan, which is
secured by a 438,996-sf, suburban office property located in Troy,
MI. The property's occupancy declined to 53.3% as of March 2024,
from 91% at YE 2022, unchanged from YE 2021, 88% at YE 2020 and 89%
at YE 2019. Occupancy declined after the property's previous
largest tenant, Bank of America (previously, 35.2% of NRA; 39.3% of
base rental income) vacated upon lease expiry in January 2023. The
loan has an upcoming September 2024 maturity date.
The property's largest tenants include Dickinson Wright (19.1% of
NRA through August 2029), Horizon Global (5.5%; October 2027), and
BDO Seidman (4.9%; April 2028).
According to CoStar, the property lies within the Troy South Office
Submarket of the Detroit market area. As of Q2 2024, average rental
rates were $21.44 psf and $21.92 psf for the submarket and market,
respectively. Vacancy for the submarket and market was 16.9% and
12.0%, respectively. As of the March 2024 rent roll, the property
reported an average in-place rental rate of $27.60 psf which is
above the submarket rent. The loan reported $8.0 million ($18.2
psf) in total reserves as of the July 2024 loan reserve report.
Fitch's 'Bsf' case loss of 23.8% (prior to concentration add-ons)
reflects a 10.5% cap rate, a 10% stress to the YE 2023 NOI, and
factors an elevated probability of default given the upcoming
September 2024 loan maturity.
The third largest increase in loss since the prior rating action in
CGCMT 2017-P8 is the Grant Building loan, which is secured by a
461,006-sf office property located in downtown Pittsburgh, PA. The
loan transferred to special servicing in September 2023 for
imminent monetary default and a receiver was appointed March 2024.
As of the July 2024 reporting, the loan was 60 days delinquent.
Major tenants at the property include Huntington National Bank
(11.4% of NRA through April 2025), Hillman Co. (5.7%; June 2028),
and Sisterson & Company (5.7%; May 2024). Per a July 2024 online
search, the tenant appears to still be operating at the subject
property. Upcoming rollover consists of 10.8% in 2024 and 18.7% in
2025. As of the March 2024 rent roll, the property was 81.9%
occupied, compared to 85% at YE 2023, 88% at YE 2022, unchanged
from YE 2021, and 89% at YE 2020.
Fitch's 'Bsf' case loss of 29.2% (prior to concentration add-ons)
reflects a 9.0% cap rate, a 10% stress to the YE 2023 NOI.
The largest contributor to overall loss expectations and largest
increase in loss since the prior rating action in CGCMT 2017-C4 is
the South Station loan, which is secured by a 200,775-sf
office/retail property located in downtown Boston, MA and
accommodates the primary Boston Amtrak hub. The largest tenants
include Amtrak (25.9% of the NRA, with 14.4% through September 2028
and the remaining 9.6% on a month-to-month lease), the Commonwealth
of Massachusetts (19.9%; June 2033) and CVS (14.4%; July 2034).
Occupancy declined to about 76% in 2021 after Aegis Media (17%)
vacated at their January 2021 lease expiration.
Along with occupancy declines, performance has further declined due
to higher expenses. YE 2023 NOI declined by 40.7% year over year
(YOY), driven by the 23% overall increase in expenses. Repairs and
maintenance increased by 128%, G&A was up 20%, real estate taxes
increased 14%, and professional fees increased 82%. Despite the
growth in revenue YOY, the servicer-reported NOI DSCR was 0.65x at
YE 2023, compared to 1.10x at YE 2022, 1.19x at YE 2021, and 1.91x
at YE 2020.
Fitch's 'Bsf' case loss of 33.1% (prior to concentration add-ons)
reflects an 8.5% cap rate, no additional stress to the YE 2023 NOI,
and factors an elevated probability of default given the continued
increase in expenses.
The second largest increase in loss since the prior rating action
in CGCMT 2017-C4 is the Capital Centers II & III loan, 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.
Occupancy previously fell to 64.5% from 90% at issuance after Wells
Fargo (formerly 10.1% of NRA), MCI Worldcom Verizon (7.6%) and
Corelogic (5.3%) vacated upon their lease expirations between 2018
and 2019. 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 issuer's underwritten NOI from issuance. CoStar
reflects availability of 32.5% across all 10 buildings.
The largest tenants at the property include Prime Therapeutics
(10.4%; May 2026) and Blue Cross of California (10.2%; March 2029).
Three new tenants, totaling 3% of the NRA, signed leases in 2023.
Fitch's 'Bsf' rating loss of 24.2% (prior to concentration add-ons)
reflects a 10% cap rate), 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 since the prior rating action in
CGCMT 2017-C4 1704 is the Automation Parkway loan, which is secured
by an 84,208 SF office property located in San Jose, CA, built in
1997, and renovated in 2015.
The sole tenant, Quantenna Communications, Inc had previously
renewed their lease from December 2022 through February 2024. The
tenant has since vacated their space upon its lease expiration. The
loan transferred to special servicing in December 2023 for imminent
default, however, remains current as of the July 2024 remittance.
According to CoStar, the property lies within the
San-Jose-Berryessa Submarket of the San Jose market area. As of Q2
2024, average rental rates were $39.32 psf and $57.27 psf for the
submarket and market, respectively. Vacancy for the submarket and
market was 5.0% and 15.6%, respectively. Per servicer updates, the
property is actively being marketed for lease by Colliers. Per a
July 2024 LoopNet search, the space is available for lease,
available at $23.50 psf.
Fitch's 'Bsf' rating loss of 31.4% (prior to concentration add-ons)
reflects a 10% cap, 40% stress to the YE 2023 NOI, and factors a
higher probability of default to account for the property remaining
full vacant.
Increased Credit Enhancement (CE): For CGCMT 2017-P8, as of the
August 2024 distribution date, the pool's aggregate principal
balance has been reduced by 5.6% to $1.03 billion from $1.09
billion at issuance. Seven loans (9.2%) are fully defeased.
Nineteen loans, representing 45.6% of the pool, are full-term
interest-only and the remaining 33 loans (54.4%), are amortizing.
For CGCMT 2017-C4, as of the August 2024 distribution date, the
pool's aggregate balance has been reduced by 19.1% to $790.7
million from $977.1 million. Seven loans (10.4% of the pool) have
fully defeased. There are 17 loans (48.4% of the NRA) that are
full-term, IO and the remaining 30 loans (51.6%) are amortizing.
Interest shortfalls of $246,788 are currently impacting the
non-rated class J-RR.
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 office FLOCs 225 & 233 Park Avenue South (5.8%
of the pool), Bank of America Plaza (4.2%) and Grant Building
(3.5%) in CGCMT 2017-P8, and South Station (9.5% of the pool),
Capital Center II & III (2.4%), 50 Varick (4.4%) and 1704
Automation Parkway (1.5%) in CGCMT 2017-C4, 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, which include
office FLOCs 225 & 233 Park Avenue South (5.8% of the pool), Bank
of America Plaza (4.2%) and Grant Building (3.5%) in CGCMT 2017-P8,
and South Station (9.5% of the pool), Capital Center II & III
(2.4%), 50 Varick (4.4%) and 1704 Automation Parkway (1.5%) in
CGCMT 2017-C4.
- 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.
CITIGROUP COMMERCIAL 2015-GC27: DBRS Confirms C Rating on G Certs
-----------------------------------------------------------------
DBRS, Inc. downgraded its credit ratings on three classes of
Commercial Mortgage Pass-Through Certificates, Series 2015-GC27
issued by Citigroup Commercial Mortgage Trust 2015-GC27 as
follows:
-- Class E to CCC (sf) from B (sf)
-- Class X-E to CCC (sf) from B (high) (sf)
-- Class F to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class G at C (sf)
Morningstar DBRS also discontinued the credit rating on Class
A-AB.
Morningstar DBRS changed the trend on Class D to Negative from
Stable. All other trends are Stable, with the exception of Classes
E, X-E, F, and G, which have credit ratings that generally do not
carry trends in commercial mortgaged-backed securities (CMBS)
credit ratings.
The credit rating downgrades reflect Morningstar DBRS' increased
loss expectations for the pool, primarily attributed to the largest
loan in special servicing, 393-401 Fifth Avenue, a nearly dark
office property in New York City, which is further discussed below.
The loan was not specially serviced at last review. Morningstar
DBRS' total loss projections as a result have increased to
approximately $37.3 million, suggesting significant credit erosion
for multiple junior bonds, including the unrated Class H
certificate as well as the Morningstar DBRS-rated Class F and G
certificates.
As of the July 2024 remittance, 88 of the original 100 loans
remained in the pool with an aggregate balance of $904.2 million,
representing a collateral reduction of 24.28% since issuance. Two
loans, representing 11.3% of the pool, are in special servicing,
and Morningstar DBRS' analysis for both of these loans included
liquidation scenarios. Forty loans, representing 42.3% of the
current pool balance, have been fully defeased. All but four loans,
representing 1.5% of the pool balance, are scheduled to mature
within the next six months. Although Morningstar DBRS expects the
majority of these will repay from the trust, Morningstar DBRS has
identified six non-specially serviced loans, representing 7.7% of
the pool, to be at increased risk of maturity default for
performance concerns including declining occupancy, debt service
coverage ratio (DSCR), and/or concentrated upcoming tenant
rollover. Where applicable, Morningstar DBRS increased the
probability of default penalties, and, in certain cases, applied
stressed loan-to-value ratios for loans exhibiting performance
concerns. The resulting weighted-average expected loss for the
loans exhibiting signs of elevated refinance risk is nearly 60%
higher than the pool average. Morningstar DBRS changed the trend on
Class D to Negative from Stable to reflect concerns about adverse
selection in a wind-down scenario where only defaulted or
underperforming assets are left in the pool. Should additional
defaults occur or individual loan performance continue to decline,
classes may be subject to further downgrades.
The largest loan in special servicing and the largest contributor
to Morningstar DBRS' increased loss projections is 393-401 Fifth
Avenue (Prospectus ID#2, 10.5% of the pool). The loan is secured by
an eight-story office building with ground-floor retail totaling
218,162 square feet (sf) in the Grand Central submarket of
Manhattan, New York. The loan transferred to special servicing in
April 2024 following news that the largest tenant, American Eagle
Outfitters (AEO) (88.2% of the net rentable area), intends to
vacate the property prior to its lease expiry in May 2026. As a
result, a cash flow sweep was initiated, which should generate
funds that can be used to re-lease the space, given the current
DSCR and the expectation that AEO will continue to pay rent
according to its lease terms. Morningstar DBRS requested an update
from the servicer regarding the balance of the cash sweep account
but has not received a response as of this press release; however,
according to the loan terms, the cash sweep amount is capped at $50
per sf.
The re-leasing efforts may be challenging given the current office
market environment and large upcoming availability at the subject.
While the loan remains current and an updated appraisal has not yet
been ordered, Morningstar DBRS believes the property value has
deteriorated given the vacancy of one of the only tenants at the
property and softened submarket fundamentals. Although the interim
rental income paid by AEO and the cash sweep help to offset some of
these concerns, Morningstar DBRS does not expect the loan will
repay at its January 2025 maturity and believes it unlikely that
the borrower will be able to secure traditional takeout financing
unless the dark space is subleased and/or a replacement tenant is
found. To reflect these concerns, Morningstar DBRS' analysis of
this loan included a liquidation scenario based on a conservative
haircut to the issuance appraised value, resulting in an implied
loss severity approaching 40.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
CLOVER CREDIT III: Moody's Cuts Rating on $19MM Cl. E Notes to B2
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Clover Credit Partners CLO III, Ltd.:
US$17,000,000 Class C-1 Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class C-1 Notes"), Upgraded to Aaa (sf);
previously on December 12, 2023 Upgraded to Aa1 (sf)
US$8,000,000 Class C-2 Mezzanine Secured Deferrable Fixed Rate
Notes due 2029 (the "Class C-2 Notes"), Upgraded to Aaa (sf);
previously on December 12, 2023 Upgraded to Aa1 (sf)
US$23,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class D Notes"), Upgraded to A2 (sf);
previously on December 12, 2023 Upgraded to Baa2 (sf)
Moody's have also downgraded the rating on the following notes:
US$19,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2029 (the "Class E Notes"), Downgraded to B2 (sf); previously
on July 27, 2020 Downgraded to B1 (sf)
Clover Credit Partners CLO III, Ltd., originally issued in
September 2017, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in October 2021.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating actions are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since December 2023. The Class
A-R notes were paid in full by approximately $73.5 million, and
Class B notes have been paid down by approximately 23.4% or $10.3
million since then. Based on Moody's calculation, the OC ratios for
the Class C and Class D notes are currently 184.54% and 131.78%,
respectively, versus December 2023 levels of 137.57% and 118.09%,
respectively.
The downgrade rating action on the Class E notes reflects the
specific risks to the junior notes posed by credit deterioration
observed in the underlying CLO portfolio. Based on Moody's
calculation, the weighted average rating factor (WARF) is currently
3133 compared to 2909 in December 2023.
No actions were taken on the Class B and Class F notes because
their expected losses remain commensurate with their current
ratings, after taking into account the CLO's latest portfolio
information, its relevant structural features and its actual
over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on Moody's
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $108,315,038
Diversity Score: 29
Weighted Average Rating Factor (WARF): 3133
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 2.9%
Weighted Average Recovery Rate (WARR): 47.83%
Weighted Average Life (WAL): 3.0 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, 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 Rating:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
COMM 2014-CCRE19: Fitch Affirms 'BBsf' Rating on Cl. E Certificates
-------------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed four classes of
Deutsche Bank Securities, Inc.'s COMM 2014-CCRE16 Mortgage Trust
commercial mortgage pass-through certificates. The Rating Outlook
for Classes B and X-B have been revised to Negative from Stable.
The Rating Outlooks for classes C and PEZ remain Negative. Class D
has been assigned a Negative Rating Outlook following the
downgrade.
Fitch has downgraded four and affirmed four classes of COMM
2014-CCRE17 Mortgage Trust commercial mortgage pass-through
certificates. The Rating Outlooks for Classes B, C, X-B and PEZ
remain Negative, and Class D has been assigned a Negative Rating
Outlook following the downgrade.
Fitch has affirmed two classes of Deutsche Bank Securities, Inc.'s
commercial mortgage pass-through certificates, series 2014-CCRE18
(COMM 2014-CCRE18). Following its affirmation, The Rating Outlook
for class E was revised to Negative from Stable.
Fitch has affirmed two classes of COMM 2014-CCRE19 Mortgage Trust.
The Rating Outlooks for classes D and E have been revised to
Negative from Stable.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
COMM 2014-CCRE19
B 12592GBG7 LT PIFsf Paid In Full AAAsf
C 12592GBJ1 LT PIFsf Paid In Full AAsf
D 12592GAG8 LT BBB-sf Affirmed BBB-sf
E 12592GAJ2 LT BBsf Affirmed BBsf
PEZ 12592GBH5 LT PIFsf Paid In Full AAsf
X-B 12592GAA1 LT PIFsf Paid In Full AAAsf
COMM 2014-CCRE16
Mortgage Trust
B 12591VAH4 LT AA-sf Affirmed AA-sf
C 12591VAK7 LT A-sf Affirmed A-sf
D 12591VAQ4 LT B-sf Downgrade Bsf
E 12591VAS0 LT CCsf Downgrade CCCsf
F 12591VAU5 LT Csf Downgrade CCsf
PEZ 12591VAJ0 LT A-sf Affirmed A-sf
X-A 12591VAF8 LT PIFsf Paid In Full AAAsf
X-B 12591VAL5 LT AA-sf Affirmed AA-sf
X-C 12591VAN1 LT CCsf Downgrade CCCsf
COMM 2014-CCRE17
A-5 12631DBB8 LT PIFsf Paid In Full AAAsf
A-M 12631DBD4 LT PIFsf Paid In Full AAAsf
B 12631DBE2 LT AA-sf Affirmed AA-sf
C 12631DBG7 LT BBBsf Affirmed BBBsf
D 12631DAG8 LT B-sf Downgrade B+sf
E 12631DAJ2 LT CCCsf Downgrade B-sf
F 12631DAL7 LT CCsf Downgrade CCCsf
PEZ 12631DBF9 LT BBBsf Affirmed BBBsf
X-A 12631DBC6 LT PIFsf Paid In Full AAAsf
X-B 12631DAA1 LT BBBsf Affirmed BBBsf
X-C 12631DAC7 LT CCsf Downgrade CCCsf
COMM 2014-CCRE18
B 12632QBA0 LT PIFsf Paid In Full AAAsf
C 12632QBC6 LT PIFsf Paid In Full Asf
D 12632QAE3 LT BBsf Affirmed BBsf
E 12632QAG8 LT B-sf Affirmed B-sf
PEZ 12632QBB8 LT PIFsf Paid In Full Asf
X-B 12632QAA1 LT WDsf Withdrawn AAAsf
Due to class B paying in full, and no guarantee of cash flow from
classes C and D, the Rating for class X-B in the COMM 2014-CCRE18
transaction has revised to Withdrawn from 'AAAsf'.
KEY RATING DRIVERS
Performance and 'Bsf' Loss Expectations: Deal-level 'Bsf' ratings
case losses range from 1.2% to 19.8%. In order of deals with the
highest losses, they are as follows:
- COMM 2014-CCRE19 (19.0%);
- COMM 2014-CCRE16 (19.8%);
- COMM 2014-CCRE17 (14.6%);
- COMM 2014-CCRE18 (1.2%).
Fitch Loans of Concerns (FLOCs) comprise six loans (100.0% of the
pool) in COMM 2014-CCRE16 including five specially serviced loans
(97.2%), six loans (65.2%) in COMM 2014-CCRE17 all of which are in
special servicing, four loans (100.0%) in COMM 2014-CCRE18
including two specially serviced loans (29.5%), and 10 loans
(76.7%) in COMM 2014-CCRE19 including five specially serviced loans
(46.4%).
Due to the concentrated nature of the pools and imminent maturities
of remaining loans in 2024, Fitch performed a sensitivity and
liquidation analysis that grouped the remaining loans based on
their current status and collateral quality, and ranked them by
their perceived likelihood of repayment and/or loss expectation.
COMM 2014-CCRE16: The downgrades reflect higher pool loss
expectations since Fitch's prior rating action driven by
performance deterioration of the FLOCs, primarily 25 Broadway
(60.3% of the pool) and 555 West 59th Street (8.7%). The Negative
Outlook for classes B, C, D, PEZ and X-B reflect the elevated
concentration of FLOCs in the pool and possible downgrades should
performance of the FLOCs continue to deteriorate and expected
recoveries of loans in special servicing worsen.
COMM 2014-CCRE17 and COMM 2014-CCRE18: Negative Outlooks reflect
the elevated concentration of FLOCS and loans in special servicing
within the pool along with the reliance on recoveries from loans in
special servicing to repay classes. The Negative Outlooks reflect
the potential for downgrades should performance of the FLOCs, in
particular 25 Broadway (32.3%) and Cottonwood Mall (21.2%) in COMM
2014-CCRE17 and Southfield Town Center (25.9%) in COMM 2014-CCRE18,
continue to deteriorate and prospect for recoveries of loans in
special servicing worsen.
COMM 2014-CCRE19: The Negative Outlook reflects the elevated
concentration of FLOCs and loans in special servicing within the
pool, most notably 866 Third Avenue Retail (17.4% of the pool),
Clinton Square (11.5%), and 140 Second Street (8.6%), with the
potential for downgrades should performance of the FLOCs continue
to deteriorate and fail to refinance.
Largest Contributors to Loss: The largest increase in loss
expectations since the prior rating action and the largest overall
contributor to loss in the COMM 2014-CCRE16 and COMM 2014-CCRE17
transactions is the 25 Broadway loan, which transferred to special
servicing in March 2024 due to maturity default. The loan is
secured by a 23-story, 951,998 sf office building located in the
Financial District in Manhattan, NY. Overall property occupancy has
remained relatively stable; however, cash flow has declined from
issuance.
YE 2023 NOI is down 3.5% year over year, 23.0% lower than YE 2021,
and remains 12.9% below the originator's underwritten NOI from
issuance. YE 2023 occupancy and NOI DSCR was 91.5% and 1.76x,
respectively, in line with prepandemic levels of 95% and 1.71x,
respectively, as of YE 2019, but lower than the originator's
underwritten levels of 96% and 2.02x, respectively. According to
the March 2024 rent roll, there is minimal near-term rollover
including 4.9% in 2024 and 4.4% in 2025.
Per updates from the servicer, the borrower and lender entered into
a forbearance period effective July 2024 to allow the borrower time
to stabilize the asset and secure financing.
Fitch's 'Bsf' ratings case loss of 13.9% includes a 9.0% cap rate
on the YE 2023 NOI and factors an increased probability of default
to account for refinance risk.
The second largest contributor to loss expectations in the COMM
2014-CCRE16 transaction is the 555 West 57th Street loan which is
secured by a mixed-use property located in New York, NY and
includes 12,520 sf of multilevel retail/commercial space and 28,000
sf of parking garage space.
Centerpark Management LLC manages the parking garage space and
occupies 6.2% of the retail space, while other retail tenants
include EVF Performance Inc. (12.8% of the NRA) and Book Nook
(4.6%). Per the YE 2023 rent roll, occupancy remains at 92.5%, in
line with historical performance, but cash flow has declined with
NOI DSCR down to 0.21x for the YTD June 2023 reporting period.
The loan transferred to special servicing in July 2020 due to
maturity default. According to the servicer, RIPCO has been
appointed as property manager and leasing agent to backfill the
remaining vacant retail space.
Fitch's 'Bsf' rating case loss of 80% reflects a stress to a recent
appraisal value.
The second largest contributor to loss expectations in the COMM
2014-CCRE17 transaction is the Cottonwood Mall loan, secured by
410,452 sf of a 1.05 million sf super regional mall located in
Albuquerque, NM. Non-collateral anchors include Dillard's, JCPenney
and Conn's HomePlus, as well as a vacant box previously occupied by
Sears, which vacated in 2018. Major collateral tenants include
Regal Cinemas (7.0% of mall NRA), Old Navy (1.4%) and Forever 21
(1.3%).
Collateral occupancy was approximately 90% per the July 2024 rent
roll, which compares to 97% as of September 2022, 93% at YE 2021
and pre-pandemic levels of 88.6% as of September 2019. Despite the
stable collateral occupancy, the servicer reported a DSCR of 1.00x
and 1.29x for the YE 2023 and YE 2022 reporting periods,
respectively.
The loan transferred to special servicing in June 2021 due to the
borrower filing for bankruptcy. A receiver was appointed in
February 2022 and has stabilized occupancy by signing new tenants
and converting temporary leases to permanent leases.
Fitch's 'Bsf' rating case loss of 19.2% reflects a stress to a
recent appraisal value which equates to a stressed value of $195
psf.
The largest contributor to loss expectations in the COMM
2014-CCRE19 transaction is the 866 Third Avenue Retail loan,
secured by a mixed-use (office, retail and hotel) building located
in Manhattan, NY. The retail tenants include Duane Reade (53.1% of
the NRA), Wells Fargo (23.6%), and 16s 52nd Group (9.4%). The loan
transferred to special servicing in May 2024 due to imminent
maturity default. The borrower stated they were unable to secure
financing and have requested a modification. The loan has
maintained an NOI DSCR of 1.26x as of YE 2023, in line with YE
2022.
Fitch's 'Bsf' rating case loss expectations of 30.0% (prior to
concentration adjustments) reflects a 9.0% cap rate on the YE 2023
NOI and factors an increased probability of default due to the
maturity default of the loan.
The second largest contributor to loss expectations in the COMM
2014-CCRE19 transaction is the 140 Second Street loan, secured by a
34,029 sf office property located in the Financial District in San
Francisco, CA. The subject experienced an occupancy decline to 66%
as of YE 2023 after Percolete Industries (33.4% of the NRA) vacated
at their March 2023 lease expiration. As a result, NOI DSCR
declined to 0.68x for the YE 2023 reporting period and the loan
transferred to special servicing in November 2023 due to payment
default.
Fitch's 'Bsf' rating case loss of 60% reflects a stress to a recent
appraisal value which equates to a stressed value of $247 psf.
The third largest contributor to loss expectations in the COMM
2014-CCRE19 transaction is the Clinton Square loan, secured by a
14-story, 305,371 sf office property located in Rochester, NY.
According to the servicer, the largest tenant, Nixon Peabody (58.2%
of the NRA), has indicated its intentions to vacate the space in
August 2024, ahead of its July 2025 lease expiration. Due to this
departure, occupancy will decline to approximately 20%. The loan
maintained a YE 2023 NOI DSCR of 1.21x.
The loan transferred to special servicing in February 2024 due to
imminent default. A receiver was appointed in March 2024.
Fitch's 'Bsf' rating case loss of 35.5% reflects a 10% cap rate and
a 20% stress to the YE 2023 NOI and factors an increased
probability of default due to the expected departure of the largest
tenant.
Increased Credit Enhancement (CE), Concentrated Loan Maturities: As
of the July 2024 remittance report, the pool's aggregate balances
have been reduced by 81.3% in COMM 2014-CCRE16, 66.2% in COMM
2014-CCRE17, 78.9% in COMM 2014-CCRE18, and 80.7% in the COMM
2014-CCRE19 transaction. There is one loan (8.0% of the pool) that
is fully defeased in the COMM 2014-CCRE19.
Each of the transactions have incurred realized losses to date
which include $41,954,474 in COMM 2014-CCRE16, $14,682,878 in COMM
2014-CCRE17, $26,285,589 in COMM 2014-CCRE18, and $3,263,150 in
COMM 2014-CCRE19. Cumulative interest shortfalls of $2.02 million
are currently affecting class D in the COMM 2014-CCRE16
transaction, $4.2 million are affecting Class F in COMM
2014-CCRE17, $1.7 million are affecting Class E in COMM
2014-CCRE18, and $536,319 is affecting Class H in COMM
2014-CCRE19.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect the possibility for future downgrades
due to potential further declines in performance that could result
in higher expected losses on FLOCs and loans in special servicing.
These FLOCs include 25 Broadway and 555 West 59th Street in COMM
2014-CCRE16, 25 Broadway and Cottonwood Mall in COMM 2014-CCRE17,
Southfield Town Center in COMM 2014-CCRE18, and 866 Third Avenue
Retail, Clinton Square, 140 Second Street and Chestnut Ridge in
COMM 2014-CCRE19. If expected losses do increase, downgrades to
these classes are anticipated.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category classes are possible with
higher expected losses from continued performance declines of the
FLOCs and higher certainty of losses on the loan's in special
servicing.
Downgrades to distressed classes 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 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 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' through 'Csf' are not
expected, but are 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 2015-LC23: Fitch Lowers Rating on Two Tranches to 'B-sf'
-------------------------------------------------------------
Fitch Ratings has downgraded five and affirmed 10 classes of COMM
2015-LC23 Mortgage Trust commercial mortgage pass-through
certificates, series 2015-LC23. Following their downgrades,
classes E, F, X-C and X-D were assigned Negative Rating Outlooks.
The Rating Outlooks for classes B, C, D and X-B were revised to
Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2015-LC23
A-3 12636FBH5 LT AAAsf Affirmed AAAsf
A-4 12636FBJ1 LT AAAsf Affirmed AAAsf
A-M 12636FBM4 LT AAAsf Affirmed AAAsf
A-SB 12636FBG7 LT AAAsf Affirmed AAAsf
B 12636FBN2 LT AA+sf Affirmed AA+sf
C 12636FBP7 LT Asf Affirmed Asf
D 12636FAL7 LT BBBsf Affirmed BBBsf
E 12636FAN3 LT BBsf Downgrade BBB-sf
F 12636FAQ6 LT B-sf Downgrade BB-sf
G 12636FAS2 LT CCsf Downgrade CCCsf
X-B 12636FAA1 LT AA+sf Affirmed AA+sf
X-C 12636FAC7 LT BBsf Downgrade BBB-sf
X-D 12636FAE3 LT B-sf Downgrade BB-sf
XP-A 12636FBK8 LT AAAsf Affirmed AAAsf
XS-A 12636FBL6 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Increased Pool Loss Expectations: The downgrades reflect increased
pool loss expectations since Fitch's last rating action, primarily
due to further performance deterioration of the office Fitch Loans
of Concern (FLOCs), including 32 Avenue of the Americas (10.5% of
the pool) and Wedgewood Building (2.4%), as well as a lower updated
appraisal on the specially serviced 1209 Dekalb loan (6.9%). Fitch
identified 17 loans (39.8% of the pool) as FLOCs, including three
loans (9.0%) in special servicing. Fitch's current ratings reflects
a deal-level 'Bsf' rating case loss of 8.4%.
Due to a majority of loan maturities scheduled in 2025 and the
increasing concentrated nature of the pool, Fitch performed a
sensitivity and liquidation analysis, which grouped the remaining
loans based on their current status and collateral quality, and
ranked them by their perceived likelihood of repayment and/or loss
expectation. A higher probability of default was assigned to office
and retail FLOCs due to anticipated maturity default risk,
including 32 Avenue of the Americas (10.5% of the pool), Wedgewood
Building (2.4%), Brentwood Retail (1.8%), Brown Street Center
(1.5%) and 75 Executive Drive (1.0%), which contributed to the
Negative Outlooks.
Largest Contributors to Loss Expectations. The largest increase in
loss expectations since the prior rating action and the largest
contributor to overall loss is the 32 Avenue of the Americas loan
(10.5% of the pool), which is secured by a 1,163,051-sf CBD office
property and data center located in New York, NY. The property was
identified as a FLOC due to sustained performance declines.
Occupancy has declined further to 57.3% as of Q1 2024 from 60.5% at
YE 2023, and remains lower than 70% at YE 2022 and 89% at YE 2020.
Due to the occupancy declines, NOI DSCR remains slightly above a
1.00x coverage for the Q1 2024 and YE 2023 reporting periods.
Per updates from the servicer, Dentsu (5.9% of the NRA), has been
gradually vacating their space ahead of their August 2025 lease
expiration. Additionally, Cedar Cares (5.7% of the NRA) and
Industrious (4.9%), which have previously shown interest in
expanding at the subject property, have since retracted their
plans.
In addition to the decline in occupancy, operating expenses have
increased at the subject. Compared to issuance levels, real estate
taxes have risen 41.8% and general and administrative expenses have
increased 170%, contributing to a 28.3% increase in total operating
expenses. Overall, YE 2023 NOI has declined 39.7% YoY, and remains
42.7% below the originator's underwritten NOI at issuance.
Fitch's 'Bsf' rating case loss of 13.2% (prior to concentration
adjustments) reflects a 9% cap rate to the YE 2023 NOI and factors
an increased probability of default due to the loan's heightened
default concerns. The loan matures in November 2025.
The second largest increase in loss expectations since the prior
rating action and the second largest contributor to overall loss is
the specially serviced 1209 Dekalb loan (6.9%), which is secured by
a 127-unit apartment building located in Brooklyn, NY. The loan
defaulted at maturity in October 2020 and subsequently transferred
to special servicing. Performance has deteriorated from issuance,
primarily driven by a significant increase in expenses.
The TTM June 2023 and YE 2022 operating expenses have increased
approximately 142% and 137%, respectively above issuance levels,
with the most notable increase in real estate taxes (539%) and
other expenses (159%). The TTM June 2023 NOI remains 38.7% below
the originator's underwritten NOI from issuance.
According to the servicer, a judgement of foreclosure and sale was
issued in August 2023. The lender is evaluating additional issues
related to litigation brought by prior tenants. Once the litigation
matters are resolved, a foreclosure sale will be scheduled.
Fitch's 'Bsf' rating case loss of 40.9% (prior to concentration
adjustments) reflects a stress to the most recent appraisal value.
The third largest increase in loss expectations since the prior
rating action is the Wedgwood Building (2.4%), which is secured by
a 83,005-sf urban office property located in Redondo Beach, CA. The
loan was identified as a FLOC due to occupancy declines and
concentrated upcoming rollover. Occupancy declined to approximately
83% following the departure of T-Mobile (16% of the NRA; 17% of
base rents) in June 2023, ahead of their October 2023 lease
expiration. The loan's DSCR has declined to 1.64x and 1.99x for the
Q1 2024 and YE 2023 reporting periods, respectively. Additionally,
the second largest tenant, Civic Finance Advisors (28% of the NRA),
has a lease expiration in April 2025, ahead of the loan's October
2025 maturity.
Fitch's 'Bsf' rating case loss of 9.0% (prior to concentration
adjustments) reflects a 9.25% cap rate and 25% stress to the YE
2023 NOI as well as an increased probability of default to account
for the loan's heightened maturity default concerns
The next largest contributor to overall loss expectations is the
Springfield Mall loan (4.1% of the pool), which is secured by a
223,180-sf portion of a 611,079-sf regional mall located in
Springfield Township, PA. The loan is jointly sponsored by Simon
Properties and Pennsylvania Real Estate Investment Trust (PREIT).
Non-collateral anchors include Macys and Target and the largest
collateral tenants include Shoe Department Encore (4.6% of the
NRA), Ulta (4.6%), American Eagle Outfitters (3.7%), The Express
(3.4%), and Gap (3.6%). The mall reported occupancy of 91.8% as of
March 2024 with NOI DSCR of 1.24x, down from occupancy of 97% and
NOI DSCR of 1.32x at YE 2023. YE 2023 NOI has fallen 8.9% YoY, and
remains 27.8% below the originator's underwritten NOI from
issuance. In line sales as of YE 2022 have declined to $397 psf
from $486 psf at YE 2021.
Fitch's 'Bsf' rating case loss of 33.2% (prior to concentration
adjustments) incorporates a cap rate of 20% on the YE 2023 NOI and
includes an increased probability of default to account for the
loan's heightened term and maturity default concerns. The loan
matures in October 2025.
The next largest contributor to overall loss expectations is the
Colerain Center (1.5%), secured by a 78,169-sf grocery-anchored
retail property located in Colerain Township, OH. The loan
transferred to special servicing in December 2017 due to imminent
default after the largest tenant LA Fitness (38.4% of the NRA)
vacated ahead of their January 2019 lease expiration.
As of YE 2023, occupancy was approximately 49%, in line with YE
2022, and lower than 57% as of YE 2020 and YE 2019. According to
the servicer, a new 10-year lease with Morris Furniture was
executed for the former LA Fitness space in Q1 2024, improving
occupancy to 89.4%. The tenant is expected to complete their build
out by July 2024.
Fitch's 'Bsf' rating case loss of 62.1% (prior to concentration
adjustments) reflects a stress to a recent appraisal value which
equates to a stressed value of $59 psf.
Increased Credit Enhancement: As of the July 2024 distribution
date, the pool's aggregate balance has been reduced by 30.9% to
$664.0 million from $960.9 million at issuance. Loan maturities are
concentrated between July and November 2025 (51 loans for 93.1% of
the pool) and July 2024 (one loan for 6.9%). Eight loans (14.9% of
the pool) have fully defeased. There are 12 loans (40.8% of the
pool) that are full-term, interest-only and 40 loans (59.2%) that
are currently amortizing.
Realized losses of $2.69 million are impacting the non-rated class
J. Interest shortfalls of $41,017 and $3.75 million are currently
impacting classes H and J, respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' rated classes are unlikely due to their
position in the capital structure and expected continued
amortization and defeasance, but may occur should interest
shortfalls impact theses classes and/or deal-level losses increase
significantly.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories may
occur should the FLOCs, namely the, 32 Avenue of the Americas,
Wedgewood Building, Brentwood Retail Center, Brown Street Centre
and 75 Executive Drive, experience further performance declines
and/or transfer to special servicing prior to or at maturity.
Downgrades to classes rated in the 'BBBsf', 'BBsf' and 'Bsf'
categories may occur with higher than expected losses as well as
sustained performance declines on FLOCs including 32 Avenue of the
Americas, Springfield Mall and 40 Wall Street and/or the
aforementioned FLOCs.
Further downgrades to distressed ratings would occur should
additional loans transfer to special servicing or as losses on
FLOCs and specially serviced loans are realized and/or become more
certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance on the FLOCs.
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
were 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.
COREVEST AMERICAN 2022-P2: Fitch Lowers Rating on Cl. G Debt to CCC
-------------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed seven classes of
CoreVest American Finance 2022-P2 Trust (CAF 2022-P2). The Rating
Outlooks for classes D and E have been revised to Negative from
Stable. Class F has been assigned a Negative Outlook following its
downgrades.
Fitch has also affirmed nine classes of CoreVest American Finance
2023-P1 Trust (CAF 2023-P1). The Rating Outlooks for classes D, E,
F and G have been revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
CAF 2022-P2
A-1 21872DAA0 LT AAAsf Affirmed AAAsf
A-2 21872DAB8 LT AAAsf Affirmed AAAsf
B 21872DAC6 LT A+sf Affirmed A+sf
C 21872DAD4 LT A-sf Affirmed A-sf
D 21872DAE2 LT BBBsf Affirmed BBBsf
E 21872DAF9 LT BBB-sf Affirmed BBB-sf
F 21872DAG7 LT B-sf Downgrade BB-sf
G 21872DAJ1 LT CCCsf Downgrade B-sf
X 21872DAM4 LT A-sf Affirmed A-sf
CAF 2023-P1
A-1 21872YAA4 LT AAAsf Affirmed AAAsf
A-2 21872YAB2 LT AAAsf Affirmed AAAsf
B 21872YAC0 LT Asf Affirmed Asf
C 21872YAD8 LT A-sf Affirmed A-sf
D 21872YAE6 LT BBBsf Affirmed BBBsf
E 21872YAF3 LT BBB-sf Affirmed BBB-sf
F 21872YAG1 LT BB-sf Affirmed BB-sf
G 21872YAH9 LT B-sf Affirmed B-sf
X 21872YAM8 LT A-sf Affirmed A-sf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Deal-level 'Bsf' rating case
losses for CAF 2022-P2 and CAF 2023-P1 are 12.78% and 11.47%,
respectively. The downgrades of classes F and G in CAF 2022-P2
reflect the increased pool loss expectations driven primarily by
the performance deterioration and an updated lower appraisal
valuation on the Florio Cushman 22-2 loan, as well as the higher
concentration of delinquent and specially serviced loans in the
pool since Fitch's last rating action.
The affirmations in CAF 2023-P1 reflect sufficient credit
enhancement (CE) relative to overall loss expectations.
The Negative Outlooks in CAF 2022-P2 and CAF 2023-P1 reflect these
transactions' elevated concentration of delinquent and specially
serviced loans, and possible downgrades should losses exceed
Fitch's expectations and/or performance or valuations decline
further.
Delinquent and Specially Serviced Loans: As of the July 2024
remittance, CAF 2022-P2 has a delinquency rate of 15.8% and CAF
2023-P1 has a delinquency rate of 6.6%. Specially serviced loans
comprise of 14.2% and 5.3% of these transactions, respectively.
The largest specially serviced loan and largest increase in loss
since the last rating action in CAF 2022-P2 is Florio Cushman 22-2
(8.0% of pool), which is secured by an 11-building, 168-unit
apartment complex located in Atlanta, GA. The loan was transferred
to special servicing in December 2023 for monetary default.
Per the special servicer, the property was 65% physically occupied,
but only approximately 55%-60% economically occupied due to
non-paying tenants. The eviction process has been taking nine to 10
months due to an extensive backlog in Fulton County. Crime and
economic changes in the submarket have also contributed to the
performance declines at the property.
The property was marketed for sale with multiple purchase offers
received. The special servicer is in the process finalizing the
selected purchase offer approval. The updated appraisal value is
53% lower than the appraisal value at issuance.
Fitch's 'Bsf' rating case loss of 38% (prior to concentration
adjustments) reflects a stress to the most recent appraisal value,
equating to a value of $84,821 per unit.
There are four sponsor-affiliated loans securitized in CAF 2022-P2
and CAF 2023-P1 that have transferred to special servicing due to
payment default. These loans, which are all 60 days or more
delinquent, include three loans securitized in CAF 2022-P2
(Razjooyan DC IV [1644 West Street], Razjooyan DC III [5058 Astor
Place SE] and Razjooyan DC II [4647 Hillside Road SE]),
representing a combined 4.2% of the pool, and the largest specially
serviced loan in CAF 2023-P1 (Razjooyan DC 10 [2912-2920 Langston
Place SE]), comprising 2.4% of the pool. These four loans are
secured by multifamily properties located in Washington, D.C.
Per the special servicer, the borrower has failed to comply with
initial attempts to resolve via a reinstatement or forbearance
agreement and has not remitted any rents or financial statements.
The special servicer is preparing to file motions for the
appointment of a receiver to gain access and control of these
properties.
The second largest specially serviced loan in CAF 2023-P1 is The
American Village Apartments (1.4% of the pool), which is secured by
a 98-unit multifamily complex located in Vidor, TX. The loan was
transferred to special servicing for monetary default. Per the
special servicer, the borrower fell behind on monthly payments
resulting largely from a substantial increase in annual insurance
premiums. The borrower submitted funds to partially cure past due
arrears but remains short of bringing the loan current. An updated
appraisal valuation of the property is 49% below the appraisal
value at issuance.
Fitch's 'Bsf' rating case loss of 29% (prior to concentration
adjustments) reflects a stress to the most recent appraisal value,
equating to a stressed value of $29,566 per unit.
Minimal Changes to CE: CAF 2022-P2 and CAF 2023-P1 transactions
have paid down 3.1% and 0.8%, respectively, since issuance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A significant and sustained decline in portfolio performance and/or
cash flow, including increases in 60+ day delinquencies and higher
than expected losses on the delinquent and specially serviced
loans, particularly Florio Cushman 22-2 in CAF 2022-P2, The
American Village Apartments in CAF 2023-P1 and the
Razjooyan-sponsored loan in both CAF 2022-P2 and CAF 2023-P1.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- For classes rated 'AAAsf' upgrades are not possible.
- For non-'AAAsf' rated classes, upgrades would be possible with
lower delinquency rates and material increases in CE from
additional loan repayments. However, upgrades may be limited by
increasing pool concentration and limited financial reporting
received for the loans.
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
CAF 2022-P2 has an ESG Relevance Score of '4' for Data Transparency
& Privacy due to limited financial reporting, which has a negative
impact on the credit profile, and is relevant to the rating[s] in
conjunction with other factors.
CAF 2023-P1 has an ESG Relevance Score of '4' for Data Transparency
& Privacy due to limited financial reporting, which has a negative
impact on the credit profile, and is relevant to the rating[s] in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CSMC TRUST 2014-USA: S&P Affirms CCC(sf) Rating on Class X-2 Certs
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on seven classes of
commercial mortgage pass-through certificates from CSMC Trust
2014-USA, a U.S. CMBS transaction. At the same time, S&P affirmed
its 'CCC (sf)' ratings on two classes from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by an 11-year, fixed-rate, interest-only (IO) mortgage loan secured
by the borrower's fee simple and leasehold interests in a portion
(2.6 million sq. ft.) of Mall of America, a 2.8 million-sq.-ft.
super regional destination mall in Bloomington, Minn.
Rating Actions
The downgrades on classes A-1, A-2, B, C, D, and E and the
affirmation on class F reflect that:
-- While the servicer reported relatively stable occupancy and net
operating income (NOI) in the past three years, both metrics are
still below pre-pandemic and the assumed levels that S&P derived in
its last review in August 2023.
-- S&P said, "The advances and interest thereon as of the August
2024 payment date, totaling $66.7 million, is much higher than what
we anticipated in our last review. Due to higher other expense
advances and accumulated interest on advances, as well as
lower-than-expected available excess cash flow, the servicer
advances only paid down by $6.6 million since our last review.
Based on the borrower's budgeted 2024 net cash flow (NCF) and
repayments to date, S&P believes that this larger amount will not
decline substantially by the loan's maturity in September 2025."
-- Due to the higher loan exposure of $1.45 billion, the updated
February 2024 appraised value of $1.95 billion (down 15.6% from the
issuance appraised value of $2.31 billion), and the lack of
meaningful improvement in the property's NCF, the borrower may face
difficulty refinancing the loan by its September 2025 maturity
date. The master servicer, Wells Fargo Bank N.A., reported a NCF
debt service coverage (DSC) of 1.06x in 2023 and 1.30x in 2022,
based on the in-place fixed mortgage interest rate of 4.38%, which
is well below prevailing rates for retail mall properties.
S&P said, "Given these factors, we further revised our
expected-case (net expected recovery) value for the property, which
is now 4.4% lower than the value we derived in our August 2023
review, 15.9% below our issuance value, and a 37.9% decline from
the February 2024 appraised value."
Despite lower model-indicated ratings, S&P tempered its downgrades
on classes A-1, A-2, and B because S&P qualitatively considered the
following:
-- The potential that the property's operating performance could
improve above our expectations. S&P considered the possibility that
the reimbursement income percentage reaches historical levels
and/or operating expenses normalize.
-- The potential that the repayment of the outstanding advances
occurs at a rate that exceeds what S&P anticipates by the loan's
maturity date.
-- The significant market value decline from the February 2024
appraisal value of $1.95 billion that would need to occur before
these classes experience principal losses.
The relative position of these classes in the payment waterfall.
The downgrade of class E and the affirmation on class F at 'CCC
(sf)' also reflect our view that these classes are/or remain at
heightened risk of default and losses and are susceptible to
liquidity interruption, based on S&P's analysis, current market
conditions, and their positions in the payment waterfall.
The downgrade of the class X-1 and the affirmation on the class X-2
IO certificates reflect our criteria for rating IO securities, in
which the ratings on the IO securities would not be higher than
that of the lowest-rated reference class. The notional amount of
class X-1 references classes A-1 and A-2, and the notional amount
of class X-2 references classes B, C, D, E, and F.
In our August 2023 review, the outstanding advances and accruals
totaling $73.3 million comprised the following:
-- $20.5 million in debt service advances;
-- $34.3 million in real estate taxes and insurance advances;
-- $9.5 million in other expense advances; and
-- $9.0 million in accrued unpaid advance interest.
While the servicer has applied the property's excess cash flow, as
available, to repay the advances, it is at a much lower rate than
we anticipated, which resulted in other expense advances and
interest on advances growing exponentially.
As of the Aug. 15, 2024, trustee remittance report, the outstanding
advances and accruals only decreased by $6.6 million to $66.7
million and consisted of the following:
-- $5.2 million in debt service advances;
-- $34.3 million in real estate taxes and insurance advances;
-- $13.1 million in other expense advances; and
-- $14.1 million in accrued unpaid advance interest.
S&P said, "We will continue to monitor the performance of the
property and loan, the repayment of advances, and the ability of
the borrower to refinance the loan by its September 2025 maturity
date. If we receive information that differs materially from our
expectations, we may revisit our analysis and take additional
rating actions as we determine necessary."
Property-Level Analysis
Mall of America is an enclosed, four-story, 2.8-million-sq.-ft.
super-regional destination mall, of which 2.6-million-sq.-ft serves
as the loan's collateral. The property was built between 1988 and
1992 and is located in Bloomington. Beginning in 2014, the mall
underwent a major expansion project at a cost of over $300.0
million, which included the construction of a JW Marriot Hotel,
150,000 sq. ft. of new retail space, an office building, a food
hall, and a new underground parking ramp. In 2018, the sponsor,
Triple Five Worldwide, proposed another major expansion to build a
325,000-sq.-ft. indoor waterpark at the property. Although the
expansion project was put on hold during the COVID-19 pandemic and
the timing of the project is currently uncertain, the plan was
approved by the Bloomington City Council in March 2022. According
to several news outlets in early 2024, the mall's management
appears to still be interested in moving forward with the project
but at a reduced scale.
In March 2021, several news outlets reported that 49.0% of the
equity stake in Mall of America was seized by the lenders of the
American Dream Mall loan and a group of real estate investors.
Triple Five Worldwide had pledged 49.0% of its equity stake in Mall
of America, as well as 49.0% of its equity stake in the West
Edmonton Mall, to secure a $1.2 billion construction loan in 2017
for the American Dream Mall project in New Jersey. Triple Five
Worldwide had defaulted on the American Dream Mall loan, resulting
in the lenders and other real estate investors taking over 49.0% of
the equity in the two other mall properties. Currently, we don't
expect these developments to impact property operations.
Collateral anchors at the property include Nickelodeon Universe
(302,966 sq. ft.), Macy's (276,581 sq. ft.), and Nordstrom (210,664
sq. ft.). There is one anchor box (177,904 sq. ft., ground leased)
that was formerly occupied by Sears, which had closed its store at
this location in 2019 following the company's bankruptcy in 2018.
Currently, the borrower is challenging the lease to Sears in court.
To S&P's knowledge, the Sears space remains dark.
S&P said, "In our August 2023 review, we noted that while the
collateral property's reported performance had improved in 2022, it
was still below pre-pandemic levels. At that time, we arrived at
our long-term sustainable NCF of $82.4 million by utilizing an
89.8% occupancy rate, a $59.32-per-sq.-ft. S&P Global Ratings'
gross rent, and a 57.5% operating expense ratio. Using a 6.50% S&P
Global Ratings' capitalization rate, we arrived at an expected-case
valuation of $1.27 billion ($588 per sq. ft.)."
The servicer reported a NCF of $64.9 million in 2023, down from
$80.2 million in 2022. According to the March 31, 2024, rent roll
and after excluding known tenant movements, the collateral property
was 89.1% leased. The five largest tenants comprising 34.7% of the
net rentable area (NRA) are:
-- Nickelodeon Universe (11.5% of NRA;1.3% of S&P Global Ratings'
in-place gross rent; August 2037 lease expiration). The tenant also
pays rent derived from the amusement park's NOI, which was
approximately $17.4 million as of year-end 2023 according to the
borrower's financials.
-- Macy's (10.5%; 0.9%; July 2028).
-- Nordstrom (8.0%; 1.4%; August 2032).
-- B&B Theatres (2.4%; 0.2%; May 2031). The tenant also pays
percentage rent.
-- Crayola Experience (2.3%; 1.0%; May 2026).
The property faces minimal (less than 10.0% of NRA) tenant rollover
in 2024, 2025, and 2027. Tenant rollover is about 11.5% of NRA in
2026 and 18.6% of NRA in 2028.
According to the servicer-provided April 2024 leasing report, the
borrower has signed leases for new and renewing in-line tenants
totaling 70,470 sq. ft. (2.7% of NRA) in 2024 thus far and has
leases out for signature representing 58,255 sq. ft. (2.2%).
S&P said, "In our current analysis, using an 89.1% occupancy rate,
a $60.65-per-sq.-ft. S&P Global Ratings' gross rent, and a 59.2%
operating expense ratio, we arrived at an S&P Global Ratings' NCF
of $82.4 million, unchanged from our last review. Utilizing an S&P
Global Ratings' capitalization rate of 6.50% (unchanged from our
last review), and deducting $55.4 million for the net advances that
we believe will remain outstanding by the loan's maturity date, we
arrived at an S&P Global Ratings' expected-case (net recovery)
value of $1.21 billion, or $461 per sq. ft., down 4.4% from our
last review value of $1.27 billion and 37.9% lower than the
February 2024 appraisal value of $1.95 billion. This yielded an S&P
Global Ratings' loan-to-value (LTV) ratio of 114.3% on the current
loan balance."
Table 1
Servicer-reported collateral performance(ii)
2023(I) 2022(I) 2021(I)
Occupancy rate (%) 89.5 90.7 89.3
Net Operating Income (mil $) 81.6 92.7 80.3
Net cash flow (mil. $) 64.9 80.2 71.6
Debt service coverage (x) 1.06 1.30 1.14
Appraisal value (mil. $) 2,040.0 (ii) 2,100.0 1,990.0
(i)Reporting period.
(ii)Appraisal date as of June 12, 2023. A revised appraisal value
totaling $1.95 billion dated as of Feb. 13, 2024, was released in
the August 2024 payment period.
Table 2
S&P Global Ratings' key assumptions
CURRENT LAST REVIEW ISSUANCE
(AUGUST 2024) (AUGUST 2023) (AUGUST 2014)
(I) (I) (I)
Outstanding trust
balance (mil. $) 1,385.6 1,385.6 1,400.0
Occupancy rate (%) 89.1 89.8 89.7
Net cash flow (mil. $) 82.4 82.4 85.2
Capitalization rate (%) 6.50 6.50 6.00
Add/(deduct)
to/from value (55.4)(ii) 0 20.0(ii)
Value (mil. $) 1,211.7 1,267.1 1,441.2
Value per sq. ft. ($) 461 482 548
Loan-to-value
ratio (%)(iii) 114.3 109.4 97.1
(i)Review period.
(ii)Issuance add-to-value for Suite E400 space holdback. 2024
deduct from value for projected net advances outstanding by loan's
maturity date in 2025.
(iii)Based on the outstanding trust balance at the time of our
review.
Transaction Summary
The 11-year, fixed-rate mortgage loan had a current balance of
$1.39 billion (as of the Aug. 15, 2024, trustee remittance report),
unchanged from our August 2023 review and down from $1.40 billion
at issuance. The loan was originally IO for the first 66 months and
then amortizes on a 30-year schedule starting with the April 2020
payment period, pays an annual fixed interest rate of 4.38%, and
matures on Sept. 11, 2025. The loan was modified in December 2020
and converted to IO through its maturity date. According to the
transaction documents, the borrower is permitted to incur mezzanine
debt if, among other factors, the aggregate LTV ratio is equal to
or less than 65.0% and the combined DSC is equal to or greater than
1.20x. It is our understanding that no mezzanine debt has been
incurred to date.
While the borrower is currently making its debt service payments,
the loan, according to the August 2024 trustee remittance report,
had a July 2024 paid through date because there is approximately
$5.2 million in outstanding debt service advances (representing
about one month of debt service payment). To date, the trust has
not experienced any principal losses.
In addition, according to the August 2024 trustee remittance
report, class F had accumulated interest shortfalls outstanding
totaling $573, which we deemed de minimis.
Ratings Lowered
CSMC Trust 2014-USA
Class A-1: to 'AA- (sf)' from 'AAA (sf)'
Class A-2: to 'AA- (sf)' from 'AAA (sf)'
Class B: to 'BBB (sf)' from 'A- (sf)'
Class C: to 'BB+ (sf)' from 'BBB- (sf)'
Class D: to 'B+ (sf)' from 'BB- (sf)'
Class E: to 'CCC (sf)' from 'B- (sf)'
Class X-1: to 'AA- (sf)' from 'AAA (sf)'
Ratings Affirmed
CSMC Trust 2014-USA
Class F: CCC (sf)
Class X-2: CCC (sf)
CXP TRUST 2022-CXP1: Moody's Lowers Rating on Cl. F Certs to Csf
----------------------------------------------------------------
Moody's Ratings has downgraded two classes of CXP Trust 2022-CXP1,
Commercial Mortgage Pass-Through Certificates, Series 2022-CXP1 as
follows:
Cl. E, Downgraded to Caa3 (sf); previously on Sep 12, 2023
Downgraded to B2 (sf)
Cl. F, Downgraded to C (sf); previously on Sep 12, 2023 Downgraded
to Caa2 (sf)
RATINGS RATIONALE
The ratings on the two P&I classes were downgraded due to higher
expected losses from the continued deterioration in collateral
property performance, weaker office fundamentals and increase in
advances since the last review. The downgrades also reflect the
current and expected future accumulation of interest shortfalls on
the trust portion of the loan resulting from a recent loan
modification. The loan failed to pay off at its initial maturity
(December 2023) date and has been in special servicing since
January 2023.
A loan modification in April 2024 allowed the current maturity date
to be extended to July 2025 with one extension option to January
2026 subject to certain conditions. As part of the modification
the trust loan's interest rate has been reduced to fixed interest
rate of 0.19% per annum effective May 2024 from an original rate of
Term SOFR plus approximately 5.0778%. The trust loan represents
middle of the capital stack between the Senior Companion Loan
(approximately $1.0731 Billion) and the Subordinate Companion Loan
($160 million) and the interest rate of the Senior Companion Loan
(held outside the trust) remains unchanged from origination whereas
the interest rate on the Subordinate Companion Loan (held outside
the trust) has been reduced to zero.
As of the August 2024 distribution date, there is approximately
$78.5 million of P&I advances, other expense, T&I advances plus
cumulative accrued unpaid advance interest outstanding
(approximately 5% of the whole mortgage balance), plus $19.8
million of interest shortfalls which compares to $10.2 million of
P&I advances and $2.4 million of interest shortfalls at Moody's
last review.
The portfolio's lack of material excess cash flow after payment of
the modified debt service amount will likely cause the accrued
unpaid advance interest on the trust portion to accumulate and the
other advances to remain outstanding for the foreseeable future.
Servicing advances are senior in the transaction waterfall and are
paid back prior to the payment of interest and principal which may
result in lower recovery to the trust balance.
In this credit rating action Moody's considered qualitative and
quantitative factors in relation to the senior-sequential structure
and the quality of the assets, 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 what Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns, a significant improvement in
the collateral property's performance, or a significant improvement
in the collateral 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
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 August 15, 2024 distribution date, the transaction's
certificate balance was $460.5 million, the same as at
securitization. The transaction is backed by a subordinate portion
of a 5-year (two-year initial term (December 2025) plus three,
one-year extension options), floating rate, IO whole mortgage loan
collateralized by the borrower's fee simple or leasehold interests
in a portfolio of seven office properties located in New York City,
San Francisco, Jersey City, and Boston.
The trust loan of $484,742,628 represents a portion of a
$1,717,842,628 whole mortgage loan further split between A-Notes
totaling $1,557,842,628 (Senior Companion Loan and trust loan) and
B-Notes totaling $160,000,000 (Subordinate Companion Loan). There
is an additional $125,000,000 mezzanine loan held outside the
trust. The trust loan represents the junior portion of the A-Notes,
which is senior in right of payment to the B-Notes and mezzanine
loan.
After being in special servicing in since January 2023 and passing
its initial December 2023 maturity date, the loan was modified in
April 2024. The modification included reducing the trust's interest
rate to a fixed rate of 0.19% per annum and the loan now matures in
July 2025 with one extension option till January 2026 subject to
certain conditions.
Collateral for the whole mortgage loan is the borrower's fee simple
or leasehold interests in seven cross-collateralized office
properties totaling 2,749,316 SF across four markets in New York,
NY (three properties, 1,094,567 SF), San Francisco, CA (two
properties, 729,493SF), Jersey City, NJ (one property, 652,329 SF)
and Boston, MA (one property, 272,876 SF). Construction dates range
between 1902 and 1991, with a weighted average year built of 1952.
Property sizes range between 258,000 SF to 652,329 SF, with an
average size of 392,752 SF. Based on June 2024 rent roll, the
portfolio was approximately 76% leased, compared 82% in December
2022 and 85% leased at the time of securitization. The portfolio's
net operating income (NOI) continues to trend downward since
securitization having achieved approximately $99 million in 2023.
Furthermore, the 2024 NOI is estimated to be lower given the recent
occupancy declines.
Moody's net cash flow (NCF) remains the same as the last review at
$81.3 million. However, this rating action also reflects the
expectation of further accumulation of interest shortfalls and the
outstanding advances which increases the aggregate loan exposure
and the potential for principal losses. Moody's LTV ratio for the
A-Notes balance (Senior Companion Loan and trust loan) and whole
mortgage balance (including Subordinate Companion Loan) are 167%
and 184%, respectively. Adjusted Moody's LTV ratio for the A-Notes
balance and whole mortgage balance are 151% and 167%, respectively
using a cap rate adjusted for the current interest rate
environment. Moody's total debt LTV (including mezzanine debt)
would be 197% and the adjusted Moody's total debt LTV would be
179%.
DBGS 2018-C1: Fitch Lowers Rating on Two Tranches to 'B+sf'
-----------------------------------------------------------
Fitch Ratings has downgraded five and affirmed nine classes of DBGS
2018-C1 Mortgage Trust commercial mortgage pass-through
certificates. The Rating Outlooks for classes A-M, B, C and X-A
were revised to Negative from Stable. Classes D, E and X-D were
assigned a Negative Outlook following their downgrades.
Fitch has also affirmed 16 classes of CSAIL 2019-C17 Commercial
Mortgage Trust. The Rating Outlooks for class C, D, E-RR, F-RR, X-B
and X-D were revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
CSAIL 2019-C17
A-1 12597BAQ2 LT AAAsf Affirmed AAAsf
A-2 12597BAR0 LT AAAsf Affirmed AAAsf
A-3 12597BAS8 LT AAAsf Affirmed AAAsf
A-4 12597BAT6 LT AAAsf Affirmed AAAsf
A-5 12597BAU3 LT AAAsf Affirmed AAAsf
A-S 12597BAY5 LT AAAsf Affirmed AAAsf
A-SB 12597BAV1 LT AAAsf Affirmed AAAsf
B 12597BAZ2 LT AA-sf Affirmed AA-sf
C 12597BBA6 LT A-sf Affirmed A-sf
D 12597BAC3 LT BBB-sf Affirmed BBB-sf
E-RR 12597BAE9 LT BBsf Affirmed BBsf
F-RR 12597BAG4 LT B-sf Affirmed B-sf
G-RR 12597BAJ8 LT CCCsf Affirmed CCCsf
X-A 12597BAW9 LT AAAsf Affirmed AAAsf
X-B 12597BAX7 LT A-sf Affirmed A-sf
X-D 12597BAA7 LT BBB-sf Affirmed BBB-sf
DBGS 2018-C1
A-2 23307DAX1 LT AAAsf Affirmed AAAsf
A-3 23307DAZ6 LT AAAsf Affirmed AAAsf
A-4 23307DBA0 LT AAAsf Affirmed AAAsf
A-M 23307DBC6 LT AAAsf Affirmed AAAsf
A-SB 23307DAY9 LT AAAsf Affirmed AAAsf
B 23307DBD4 LT AA-sf Affirmed AA-sf
C 23307DBE2 LT A-sf Affirmed A-sf
D 23307DAG8 LT BB+sf Downgrade BBBsf
E 23307DAJ2 LT B+sf Downgrade BBsf
F 23307DAL7 LT CCCsf Downgrade B-sf
G-RR 23307DAN3 LT CCCsf Affirmed CCCsf
X-A 23307DBB8 LT AAAsf Affirmed AAAsf
X-D 23307DAC7 LT B+sf Downgrade BBsf
X-F 23307DAE3 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Transaction-level 'Bsf'
ratings case losses are 5.3% in DBGS 2018-C1 and 7.4% in CSAIL
2019-C17. The DBGS 2018-C1 transaction has 12 loans (31.8% of the
pool) that have been identified as Fitch Loans of Concern (FLOCs),
including five loans (11.6%) in special servicing. The CSAIL
2019-C17 transaction also has eight FLOCs (25.4%), including one
loan (5.3%) in special servicing.
Downgrades of classes D, E, F, X-D and X-F in the DBGS 2018-C1
transaction reflect increased pool loss expectations since the
prior rating action, driven primarily by the July 2024 transfer of
Time Square Office Renton (5.4% of the pool) to the special
servicer and continued concerns with the performance of TripAdvisor
HQ (7.5%). The Negative Outlooks on classes A-M, X-A, B, C, D, E
and X-D reflect the high exposure to office loans (41.6% of the
pool) and increasing concentration of specially serviced loans
(11.6%)
The Negative Outlooks for classes C, D, E-RR, F-RR, X-B and X-D in
the CSAIL 2019-C17 transaction reflect concerns with
underperforming office loans in the top 15 including the Selig
Office Portfolio (10%) and the specially serviced APX Morristown
(5.3%), along with the high concentration of office loans (32.5%)
and FLOCs (25.4%).
Largest Contributors to Loss: The largest contributor to overall
loss expectations in DBGS 2018-C1 is the specially serviced Time
Square Office Renton, which is secured by a suburban office complex
consisting of five two-story buildings, totaling 319,767 sf
suburban office property located in Renton, WA, approximately 11
miles southeast of downtown Seattle. As of June 2024, occupancy
declined to 77.8% from 95% at YE 2020. There is significant tenant
rollover in the next 12 months of approximately 34%, including
Microscan Systems (12.7%) which has already vacated. The NOI debt
service coverage ratio (DSCR) for YE 2023 was reported at 1.11x
compared to 1.17x at YE 2022 and 1.73x at YE 2021.
Fitch's 'Bsf' rating case loss of 30% (prior to concentration
add-on) is based on a 10% cap rate and 10% stress to YE 2023 NOI.
Fitch also applied an increased probability of default due to the
recent transfer to the special servicer.
The second largest contributor to overall loss expectations in DBGS
2018-C1 is Trip Advisor HQ, which is secured by a 280,892 sf
suburban office property located in Needham, MA. TripAdvisor leases
100% of the building through 2030; however, the tenant is marketing
approximately 50% of its space for sublease. As of YE 2023, the NOI
DSCR was reported to be 1.67x. Fitch's 'Bsf' rating case loss of
10.7% (prior to concentration add-on) is based on a 10% cap rate
and 20% stress to YE 2023 NOI.
The largest contributor to overall loss expectations in CSAIL
2019-C17 is the specially serviced APX Morristown loan, which is
secured by a 486,742 sf suburban office property located in
Morristown, NJ. The loan transferred to special servicing in July
2023 due to imminent monetary default. Occupancy has declined at
the property to 60.6% as of June 2024 due to the departure and
downsizing of several tenants. The largest tenant, Louis Berger
(NRA 22.3%), which was acquired by WSP in late 2018, vacated in
2022 ahead of its lease expiration in 2026. The mezzanine lender
was the winning bidder at the June 2024 UCC Foreclosure sale and is
finalizing a loan modification with the special servicer.
Fitch's 'Bsf' rating case loss of 35% (prior to concentration
add-on) reflects a stressed cap rate of 10% to account for the
office property quality and suburban location and no additional
stress to the YE 2023 NOI. It also factors in a higher probability
of default to account for the transfer to special servicing,
deteriorated occupancy and high submarket vacancy.
The second largest contributor to expected losses in CSAIL 2019-C17
is the Selig Office Portfolio (10%), which is securitized by an
urban office portfolio consisting of three properties all located
in downtown Seattle, WA. The April 2024 rent roll reflects an
occupancy of 66.5% compared to 70% at YE 2023, 65% at YE 2022, and
99% at YE 2019. Near term tenant rollover includes 0.7% in 2024,
4.1% in 2025, and 0.2% in 2026 with the next largest concentration
of leases (20.6%) expiring in 2028. The servicer-reported NOI DSCR
has declined to 1.25x as of YE 2023, compared with 1.32x at YE 2022
and 1.76x at YE 2020.
Fitch's 'Bsf' rating case loss of 17.6% (prior to concentration
add-on) is based on a 9.75% cap rate and no additional stress to YE
2022 NOI.
Changes in Credit Enhancement (CE): As of the July 2024
distribution date, the aggregate balances of the DBGS 2018-C1 and
CSAIL 2019-C17 transactions have been paid down by 6.5% and 6.4%,
respectively, since issuance. The DBGS 2018-C1 transaction includes
two loans (4.3% of the pool) that have fully defeased. There are
three loans (5.9% of the pool) that are defeased within the CSAIL
2019-C17 transaction.
Cumulative interest shortfalls of approximately $2 million are
affecting the non-rated class HRR in DBGS 2018-C1 and approximately
$185,000 are affecting the non-rated class NR-RR in CSAIL
2019-C17.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades to 'AAAsf' and 'AAsf' category rated classes could
occur if deal-level expected losses increase significantly;
downgrades to 'AAAsf' rated classes if interest shortfalls occur;
- Downgrades to classes rated in the 'Asf' and 'BBBsf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs and/or more loans than expected
experience performance deterioration and/or default at or prior to
maturity. Of particular concern in the DBGS 2018-C1 transaction are
the Times Square Office Renton and TripAdvisor HQ FLOCs. Of
particular concern in the CSAIL 2019-C17 transaction are the APX
Morristown and Selig Office Portfolio FLOCs;
- Downgrades to in the 'BBsf' and 'Bsf' categories are possible
with higher than expected losses from continued underperformance of
the FLOCs and/or lack of resolution and increased exposures on the
specially serviced loans;
- Downgrades to 'CCCsf' and rated classes would occur should
additional loans transfer to special servicing and/or default, or
as losses become realized or more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades to classes rated in the 'AAsf' and 'Asf' categories may
be possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance on the FLOCs such as Times
Square Office Renton and TripAdvisor HQ in DBGS 2018-C1 and APX
Morristown and Selig Office Portfolio in CSAIL 2019-C17;
- Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'AA+sf' if there
is likelihood for interest shortfalls;
- Upgrades to the 'BBsf' and 'Bsf' category rated classes are not
likely until the later years in a transaction and only if the
performance of the remaining pool is stable, recoveries on the
FLOCs are better than expected and there is sufficient CE to the
classes;
- Upgrades to distressed ratings are not expected but would be
possible with better than expected recoveries on specially serviced
loans or significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
DBJPM 2016-C1: Fitch Lowers Rating on Class X-D Certs to CCCsf
--------------------------------------------------------------
Fitch Ratings has downgraded five and affirmed nine classes of
DBJPM 2016-C1 Mortgage Trust commercial pass-through certificates,
series 2016-C1 (DBJPM 2016-C1). The Rating Outlooks on affirmed
classes A-M and X-A have been revised to Negative from Stable.
Classes B, C, D, X-B and X-C were assigned a Negative Outlook
following their downgrades.
Entity/Debt Rating Prior
----------- ------ -----
DBJPM 2016-C1
A-3A 23312LAR9 LT AAAsf Affirmed AAAsf
A-3B 23312LAA6 LT AAAsf Affirmed AAAsf
A-4 23312LAS7 LT AAAsf Affirmed AAAsf
A-M 23312LAT5 LT AAAsf Affirmed AAAsf
A-SB 23312LAQ1 LT AAAsf Affirmed AAAsf
B 23312LAU2 LT A-sf Downgrade AA-sf
C 23312LAV0 LT BBB-sf Downgrade A-sf
D 23312LAG3 LT B-sf Downgrade Bsf
E 23312LAH1 LT CCCsf Affirmed CCCsf
F 23312LAJ7 LT CCsf Affirmed CCsf
X-A 23312LAW8 LT AAAsf Affirmed AAAsf
X-B 23312LAB4 LT BBB-sf Downgrade A-sf
X-C 23312LAC2 LT B-sf Downgrade Bsf
X-D 23312LAD0 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades of classes B, C, D,
X-B, and X-C reflect increased loss expectations since Fitch's
prior rating action driven by continued underperformance and
refinance concerns for Fitch Loans of Concern (FLOCs), in
particular the Hagerstown Premium Outlets, Hall Office Park
A1/G1/G3 and Sheraton North Houston. In addition, the pool is
exposed to a high office concentration (36.9% of the pool is
secured by office properties).
Fitch's current ratings incorporate a 'Bsf' rating case loss of
7.9%, an increase from 6.3% at the prior rating action. Fitch
identified nine loans (39.8% of the pool) as FLOCs, including the
specially serviced Sheraton North Houston (5.0%) and Hagerstown
Premium Outlets (3.8%).
The Negative Outlooks reflects the potential for downgrades of up
to one category should performance of the FLOCs experience further
performance declines and/or additional loans transfer to special
servicing.
Largest Contributors to Loss Expectations: The largest increase in
loss expectations since the prior rating action and largest
contributor to loss is the specially serviced Hagerstown Premium
Outlets (3.8%), secured by a 484,994-sf outlet center located in
Hagerstown, MD. The loan transferred to special servicing in
September 2023 for payment default and the servicer is
dual-tracking workout discussions with foreclosure/receivership.
According to the servicer, the sponsor, Simon Property Group, has
submitted a loan modification request to convert to an
interest-only structure.
While collateral occupancy improved to 53.5% in 2023 after Tim's
Furniture Mart (13.1% of the NRA) backfilled the former vacant Wolf
Furniture and Outlet space, it still remains below pre-pandemic
occupancy levels of 78% at YE 2019. As of September 2023, NOI DSCR
was 0.97x, remaining generally in line with reported DSCR metrics
since 2021. Inline sales for tenants less than 10,000 sf have
declined to $227 psf as TTM August 2023.
Fitch's 'Bsf' rating loss of 63% (prior to concentration add-ons)
reflects a discount to a recent appraisal value, which equates to a
recovery of $52 psf.
The second largest contributor to loss expectations is the
specially serviced Sheraton North Houston (5.0%), which is secured
by a 419-key full-service hotel located in Houston, TX. The loan
transferred to special servicing in November 2020 for payment
default as a result of the pandemic. After the borrower indicated
that they were unwilling to fund cash flow shortfalls, GF Hotels
was appointed as the receiver in April 2021.
According to the most recent STR report, the hotel reported
occupancy, ADR and RevPAR of 64.7%, $98, $63 as of the TTM ending
in May 2024 which compares with 59.6%, $92, and $55 as of the TTM
ending June 2023 and 78.2%, $126, and $99, respectively as of the
TTM ending October 2015 at issuance. The hotel was ranked fifth out
of eight hotels in its competitive set with respect to RevPAR. The
servicer- reported YE 2023 and YE 2022 NOI DSCR of 0.14x and
-0.45x, respectively. The loan was identified as a FLOC prior to
the pandemic after United Airlines relocated their pilot training
program to Denver, resulting in lost contract revenue.
Fitch's 'Bsf' rating loss of 42% (prior to concentration add-ons)
is based on a stress to a recent appraisal value, which equates to
an 11.0% cap rate on YE 2019 NOI.
The third largest contributor to loss expectations is the Hall
Office Park A1/G1/G3 loan (3.6%), 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 and an additional 11% 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 date in January 2026.
Fitch's 'Bsf' rating loss of 21% (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 fourth largest contributor to overall loss expectations is the
Columbus Park Crossing loan (3.9%), 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 loss of 15% (prior to concentration add-ons)
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 largest FLOC is the Williamsburg Premium Outlets loan (10.1%),
which 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.
Fitch's 'Bsf' rating loss of 6% (prior to concentration add-ons)
reflects a 11% cap rate and a 15% stress to the YE 2023 NOI.
Pool Concentration: The top 10 loans comprise 61.5% of the pool.
All of the loans in the pool mature from December 2025 through
April 2026. The largest property type concentrations are office at
36.9%, retail at 33.6% and hotel at 17.4%.
Changes in Credit Enhancement: As of the August 2024 distribution
date, the pool's aggregate balance has been reduced by 15.5% to
$691.6 million from $818.0 million at issuance. There are six loans
(13.4%) of the pool that have fully defeased. There are five loans
(34.9% of the pool) that are full-term, interest-only and 26 loans
(65.1%) that are currently amortizing. Realized losses of about
$5.3 million are currently impacting the non-rated class H and
interest shortfalls of $1.8 million are currently impacting classes
E, F, G, and H.
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 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. The Negative Outlook on the 'AAAsf' rated
class A-M and X-A reflects the potential for downgrades if
performance of the FLOCs deteriorates further and expected losses
increase.
Downgrades to classes rated in the 'Asf' category could occur if
deal-level losses increase significantly from outsized losses on
larger FLOCs or more loans than expected experience performance
deterioration or default at or before maturity.
Downgrades to the 'BBBsf' and 'Bsf' categories are possible with
higher than expected losses from continued underperformance of the
FLOCs, in particular retail mall and office loans with
deteriorating performance or with greater certainty of losses on
FLOCs. Loans of particular concern include Hagerstown Premium
Outlets and Hall Office Park A1/G1/G3.
Downgrades to classes with distressed ratings would occur if
additional loans transfer to special servicing or default, as
losses are realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'Asf' category may be possible
with significantly increased credit enhancement (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
were likelihood for interest shortfalls.
Upgrades to the 'Bsf' category rated classes are not likely until
the later years in a transaction and only if the performance of the
remaining pool is stable, recoveries on the FLOCs are better than
expected and there is sufficient CE to the classes.
Upgrades to distressed ratings are not expected but would be
possible with better than expected recoveries on specially serviced
loans or significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
DRYDEN 76 CLO: S&P Assigns BB- (sf) Rating on Class E-R2 Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R2,
A-2-R2, B-R2, C-R2, D-1-R2, D-2-R2 and E-R2 replacement debt from
Dryden 76 CLO Ltd./Dryden 76 CLO LLC, a CLO first refinanced in
November 2021 and originally issued in October 2019. The
transaction is managed by PGIM Inc. At the same time, S&P withdrew
its ratings on the existing class X, A-1R, B-R, C-R, D-R, and E-R
debt following payment in full on the Aug. 28, 2024, refinancing
date.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The replacement class A-1-R2, A-2-R2, B-R2, C-R2, D-1-R2,
D-2-R2, and E-R2 notes were issued at floating spreads, replacing
the current floating spreads.
-- The debt's stated maturity was extended to October 2037, and
the subordinated notes' stated maturity was extended to October
2054.
-- The reinvestment period was extended to October 2029.
-- The non-call period was extended to August 2026.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Dryden 76 CLO Ltd./Dryden 76 CLO LLC
Class A-1-R2, $256.0 million: AAA (sf)
Class A-2-R2, $4.0 million: AAA (sf)
Class B-R2, $44.0 million: AA (sf)
Class C-R2 (deferrable), $24.0 million: A (sf)
Class D-1-R2 (deferrable), $20.0 million: BBB (sf)
Class D-2-R2 (deferrable), $8.0 million: BBB- (sf)
Class E-R2 (deferrable), $12.0: BB- (sf)
Subordinated notes, $64.8 million: Not rated
Ratings Withdrawn
Dryden 76 CLO Ltd./Dryden 76 CLO LLC
Class X to not rated from 'AAA (sf)'
Class A-1R to not rated from 'AAA (sf)'
Class B-R to not rated from 'AA (sf)'
Class C-R to not rated from 'A (sf)'
Class D-R to not rated from 'BBB- (sf)'
Class E-R to not rated from 'BB- (sf)'
DRYDEN 94: S&P Assigns Prelim BB- (sf) Rating on Class E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-RR loans and class A-1-RR, A-2-RR, B-RR, C-RR, and D-RR
replacement debt from Dryden 94 CLO Ltd./Dryden 94 CLO LLC, a CLO
managed by PGIM Inc. and its affiliates. This is a proposed
refinancing of its June 2022 transaction.
The preliminary ratings are based on information as of Aug. 29,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Sept. 5, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the existing debt. At that
time, S&P expects to withdraw our ratings on the existing debt and
assign ratings to the replacement debt. However, if the refinancing
doesn't occur, S&P may affirm its ratings on the existing debt and
withdraw its preliminary ratings on the replacement debt.
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-1-R, D-2-R, and E-R
notes are expected to be issued at floating spreads, replacing the
current floating spread.
-- The stated maturity will be extended to October 2037.
-- The reinvestment period will be extended to October 2029.
-- The non-call period will be extended to September 2026.
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."
Preliminary Ratings Assigned
Dryden 94 CLO Ltd./Dryden 94 CLO LLC
Class A-R, $320.00 million: AAA (sf)
Class B-R, $60.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-1-R (deferrable), $23.75 million: BBB (sf)
Class D-2-R (deferrable), $11.25 million: BBB- (sf)
Class E-R (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $72.90 million: Not rated
ELMWOOD CLO 31: S&P Assigns BB- (sf) Rating on Class E-2 Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Elmwood CLO 31
Ltd./Elmwood CLO 31 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Elmwood CLO 31 Ltd./Elmwood CLO 31 LLC
Class A-1, $256.00 million: AAA (sf)
Class A-2, $8.00 million: AAA (sf)
Class B, $40.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D-1 (deferrable), $24.00 million: BBB- (sf)
Class D-2 (deferrable), $4.00 million: BBB- (sf)
Class E-1 (deferrable), $12.00 million: BB- (sf)
Class E-2 (deferrable), $1.60 million: BB- (sf)
Subordinated notes, $32.00 million: Not rated
ELMWOOD CLO 32: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
32 Ltd./Elmwood CLO 32 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The preliminary ratings are based on information as of Aug. 26,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO 32 Ltd./Elmwood CLO 32 LLC
Class A-1, $320.0 million: AAA (sf)
Class A-2, $10.0 million: AAA (sf)
Class B, $50.0 million: AA (sf)
Class C (deferrable), $30.0 million: A (sf)
Class D-1 (deferrable), $30.0 million: BBB- (sf)
Class D-2 (deferrable), $5.0 million: BBB- (sf)
Class E (deferrable), $15.0 million: BB- (sf)
Subordinated notes, $47.5 million: Not rated
FLATIRON CLO 18: Moody's Ups Rating on $22.5MM Cl. E Notes to Ba2
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Flatiron CLO 18 Ltd.:
US$26,500,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2031 (the "Class C Notes"), Upgraded to Aaa (sf); previously on
November 3, 2023 Upgraded to Aa3 (sf)
US$31,000,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2031 (the "Class D Notes"), Upgraded to A3 (sf); previously on
November 3, 2023 Upgraded to Baa2 (sf)
US$22,500,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2031 (the "Class E Notes"), Upgraded to Ba2 (sf); previously on
April 4, 2018 Assigned Ba3 (sf)
Flatiron CLO 18 Ltd., originally issued in April 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 November 2023. The Class A
notes have been paid down by approximately 47.1% or $128.6 million
since then. Based on Moody's calculation, the OC ratios for the
Class C, Class D and Class E notes are currently 136.67%, 120.50%
and 110.96%, respectively, versus November 2023 levels of 123.95%,
114.11% and 107.89%, respectively.
Nevertheless, the credit quality of the portfolio has deteriorated
since November 2023. Based on Moody's calculation, the weighted
average rating factor (WARF) is currently 2948 compared to 2697 in
November 2023.
No actions were taken on the Class A and Class B notes because
their expected losses remain commensurate with their current
ratings, after taking into account the CLO's latest portfolio
information, its relevant structural features and its actual
over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on Moody's
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $314,234,443
Defaulted par: $5,331,354
Diversity Score: 68
Weighted Average Rating Factor (WARF): 2948
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.14%
Weighted Average Recovery Rate (WARR): 47.77%
Weighted Average Life (WAL): 3.7 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio 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.
FS TRUST 2024-HULA: DBRS Finalizes BB Rating on 2 Classes
---------------------------------------------------------
DBRS, Inc. finalized provisional credit ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2024-HULA (the Certificates) issued by FS Trust 2024-HULA (the
Trust):
-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class D at AA (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (low) (sf)
-- Class G at BB (high) (sf)
-- Class JRR at BB (sf)
-- Class KRR at BB (sf)
All trends are Stable.
The Trust is secured by the borrower's fee-simple and leasehold
interest in a 249-key full-service resort private, members-only
Hualalai Club, Parcel A (16.3 acres approved for buildout of 20
residential lots) and Parcel 21 (4.8 acres and approved for the
buildout of four residential lots), all of which are located on the
Big Island of Hawaii. Surrounded by the blue waters of the Pacific,
white-sand beaches, and black-lava landscapes, the luxury resort is
well situated in the northwest coastline of the Kona Island of
Hawaii, epitomizing the allure of a premier Big Island resort. The
Four Seasons Resort Hualalai has long been viewed as one of the
most luxurious vacation destinations for aspirational travelers and
high-net-worth individuals. Morningstar DBRS expects its
competitive position to persist given the transformative capital
improvements at the property.
The resort features 249 total keys, approximately 37,000 sf of
meeting space, including approximately 10,400 sf of indoor meeting
space and 26,600 sf of outdoor group space, and an extensive
amenity package including six food and beverage (F&B) restaurants,
eight pools, Sports Club & Spa, four retail shops, and two 18-hole
golf courses. Other revenue-generating property operations include
the Hualalai Club, Realty Company (brokers' the majority of the
Hualalai residential sales), and Utility Companies (Kaupulehu Water
Company, Kaupulehu Irrigation Company, and Kaupulehu Wastewater
Company). The resort was built and opened in 1996, renovated in
2009 and again from 2019 to 2021, aiming to provide the most
luxurious hospitality experience in one of the most renowned travel
destinations, the big island of Hawaii. The sponsor's unwavering
commitment to conceptualizing the luxurious Hawaiian resort
experience has earned the resort the only AAA Five Diamond and
Forbes Five Star resort on the Big Island.
The subject mortgage loan of $400.0 million along with
approximately $18.4 million of sponsor equity will be used to
retire $409.7 million of existing debt, fund an upfront ground
lease reserve of approximately $770,000, and cover closing costs of
approximately $8.0 million. The loan is a two-year floating-rate IO
mortgage loan, with three one-year extension options. The floating
rate will be based on the one-month Secured Overnight Financing
Rate (SOFR) plus the initial WA component spread, which is
approximately 2.749%. The borrower will be required to enter into
an interest rate cap agreement, with a one-month Term SOFR strike
price of 2.050% during the initial term, and the strike price equal
to the greater of 4.50% and a strike rate that, when added to the
spread of each component, results in a minimum DSCR of 1.10x on the
Mortgage Loan.
MSD Sponsor, an affiliate of BDT & MSD, and Walton Sponsor, which
is controlled by certain members of the Walton Family, are the Loan
Sponsors and the Borrower Sponsor, respectively, for this
transaction. Backed by Dell Technologies founder Michael Dell, BDT
& MSD is currently invested in and managing more than $16 billion
of real estate. The property is flagged as a Four Seasons hotel, a
privately-owned hotel management company that has been managing the
resort since its inception in 1996. The management agreement
expires in 2035 and has two renewal options of 15-years each
remaining for a fully extended maturity date of 2065.
Morningstar DBRS' credit rating on the Certificates addresses the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations are the related Principle Distribution
Amounts and Interest Distribution Amounts for the rated classes.
Morningstar DBRS' credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. For example, Spread Maintenance Premiums.
Notes: All figures are in US dollars unless otherwise noted.
GCAT TRUST 2022-INV2: Moody's Hikes Rating on Cl. B-5 Certs to Ba2
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of nine bonds issued by
GCAT 2022-INV2 Trust, backed by agency eligible investment mortgage
loans.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
Issuer: GCAT 2022-INV2 Trust
Cl. B-1, Upgraded to Aa2 (sf); previously on Apr 28, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Upgraded to Aa2 (sf); previously on Apr 28, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Apr 28, 2022
Definitive Rating Assigned A2 (sf)
Cl. B-2A, Upgraded to Aa3 (sf); previously on Apr 28, 2022
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Apr 28, 2022 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Apr 28, 2022
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Apr 28, 2022
Definitive Rating Assigned B2 (sf)
Cl. B-X-1*, Upgraded to Aa2 (sf); previously on Apr 28, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-X-2*, Upgraded to Aa3 (sf); previously on Apr 28, 2022
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 pool. The
transaction continues to display strong collateral performance,
with no cumulative losses to date and a small number of loans in
delinquency. In addition, enhancement levels for the tranches have
grown since close, with the enhancement for the tranches Moody's
upgraded each growing by 8.29%.
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 this deal
because the expected losses on the bonds remain commensurate with
the 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.
GENERATE CLO 2: S&P Assigns BB- (sf) Rating on Class ER2 Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Generate CLO 2
Ltd./Generate CLO 2 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 Generate Advisors LLC, which serves
as the CLO management division of Kennedy Lewis Investment
Management LLC. This is a proposed refinancing of its December 2017
transaction, which wasn't rated by S&P Global Ratings.
The ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Generate CLO 2 Ltd./Generate CLO 2 LLC
Class X, $3.50 million: AAA (sf)
Class AR2, $305.00 million: Not rated
Class BR2, $75.00 million: AA (sf)
Class CR2 (deferrable), $30.00 million: A (sf)
Class D1R2 (deferrable), $25.00 million: BBB (sf)
Class D2R2 (deferrable), $7.50 million: BBB- (sf)
Class ER2 (deferrable), $17.50 million: BB- (sf)
Subordinated notes, $63.65 million: Not rated
GOLDENTREE LOAN 12: Fitch Assigns 'B-sf' Rating on Class F-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to
GoldenTree Loan Management US CLO 12, Ltd. Reset Transaction.
Entity/Debt Rating Prior
----------- ------ -----
GoldenTree Loan
Management US
CLO 12, Ltd.
X-R LT NRsf New Rating NR(EXP)sf
A 38138FAC5 LT PIFsf Paid In Full AAAsf
A-J-R LT AAAsf New Rating AAA(EXP)sf
A-R LT AAAsf New Rating AAA(EXP)sf
B 38138FAG6 LT PIFsf Paid In Full AAsf
B-1-R LT AAsf New Rating
B-2-R LT AAsf New Rating
B-R LT WDsf Withdrawn AA+(EXP)sf
C 38138FAJ0 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating A+(EXP)sf
D 38138FAL5 LT PIFsf Paid In Full BBB-sf
D-R LT BBB-sf New Rating BBB+(EXP)sf
E 38138YAA8 LT PIFsf Paid In Full BB+sf
E-R LT BB-sf New Rating BB+(EXP)sf
F-R LT B-sf New Rating NR(EXP)sf
Transaction Summary
GoldenTree Loan Management US CLO 12, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) managed by
GLM II, LP that originally closed in May 2022 and is being reset on
Aug. 21, 2024. Net proceeds from the issuance of the secured notes
will provide financing on a portfolio of approximately $600 million
of primarily first lien senior secured leveraged loans.
Fitch has withdrawn the 'AA+(EXP)sf' rating for the class B-R
notes. These notes were not issued, instead, a new class B-1-R
notes rated 'AAsf' and class B-2-R notes rated 'AAsf' were issued.
The class F-R notes were originally rated 'NR(EXP)sf' but Fitch is
now rating these notes 'B-sf' with a Stable Rating Outlook.
Changes since Fitch assigned expected ratings include higher Fitch
specific industry concentration limitations, a higher minimum
weighted average coupon value, and the inclusion of a fixed rate
tranche. Additionally, the transaction will now be managed to Fitch
collateral quality tests, which have been sized for lower ratings
than the expected ratings assigned previously. When performing the
stressed portfolio analysis for all rated notes considering all
collateral quality test permutations, the resulting ratings for the
class C-R, D-R and E-R notes are one to two notches below their
expected ratings.
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 24.09, versus a maximum covenant, in accordance with
the initial expected matrix point of 25. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.31% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.88% versus a
minimum covenant, in accordance with the initial expected matrix
point of 66%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 44.5% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'A-sf' and 'AA+sf' for class A-R, between
'BBB+sf' and 'AA+sf' for class A-J-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-R, between less than
'B-sf' and 'BB-sf' for class E-R, and between less than 'B-sf' and
'B-sf' for class F-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-R and class
A-J-R notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, 'Asf'
for class D-R, 'BBB+sf' for class E-R, and 'BB+sf' for class F-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for GoldenTree Loan
Management US CLO 12, 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.
GS MORTGAGE 2014-GC24: Moody's Lowers Rating on Cl. C Certs to 'B2'
-------------------------------------------------------------------
Moody's Ratings has affirmed the rating on one class and downgraded
the ratings on six classes in GS Mortgage Securities Trust
2014-GC24, Commercial Mortgage Pass-Through Certificates, Series
2014-GC24 as follows:
Cl. A-5, Affirmed Aaa (sf); previously on Jan 24, 2023 Affirmed Aaa
(sf)
Cl. A-S, Downgraded to Aa2 (sf); previously on Jan 24, 2023
Affirmed Aaa (sf)
Cl. B, Downgraded to Baa3 (sf); previously on Jan 24, 2023
Downgraded to A3 (sf)
Cl. C, Downgraded to B2 (sf); previously on Jan 24, 2023 Downgraded
to Ba2 (sf)
Cl. PEZ, Downgraded to Ba2 (sf); previously on Jan 24, 2023
Downgraded to Baa2 (sf)
Cl. X-A*, Downgraded to Aa1 (sf); previously on Jan 24, 2023
Affirmed Aaa (sf)
Cl. X-B*, Downgraded to Baa3 (sf); previously on Jan 24, 2023
Downgraded to A3 (sf)
Reflects Interest-Only Classes
RATINGS RATIONALE
The rating on one P&I class, Cl. A-5, was affirmed because of its
credit support and the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the transaction's Herfindahl Index (Herf), are
within acceptable ranges. Class Cl. A-5 has already paid down 45%
from its original balance and is now the most senior outstanding
class and will benefit from payment priority from any principal
paydowns.
The rating on three P&I classes, Cl. A-S, Cl. B and Cl. C, were
downgraded due to the potential for higher expected losses and the
risk of increased interest shortfalls driven by the significant
exposure to specially serviced loans and large loans that have
either passed their maturity dates or have heightened refinance
risk ahead of their imminent maturity dates. Approximately 70% of
the remaining loans have now passed their original maturity dates,
including the Stamford Plaza loan (27.6% of the pool) which is
secured by an office building with declining occupancy and cash
flow and Costal Grand Mall (21.4%) which is secured by a regional
mall whose performance has remained below levels at securitization.
One loan, the Beverly Connection (19% of the pool), is in special
servicing that has had a decline in performance in recent years and
has passed its original maturity date. Given the exposure to loans
that have passed their maturity dates and given the higher interest
rate environment and loan performance, certain loans may be unable
to pay off at their maturity date, which may increase interest
shortfall risk for the outstanding classes.
The rating on the interest-only (IO) classes, Cl. X-A and Cl. X-B,
were downgraded due to the decline in the credit quality of its
referenced classes.
The rating on the exchangeable class (PEZ) class, Cl. PEZ, was
downgraded due to the decline in the credit quality of its
referenced classes resulting from principal paydowns of higher
quality referenced classes.
Moody's rating action reflects a base expected loss of 20.9% of the
current pooled balance, compared to 12.3% at Moody's last review.
Moody's base expected loss plus realized losses is now 10.3% of the
original pooled balance, compared to 11.0% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. 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, loan concentration, 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 August 12, 2024 distribution date, the transaction's
aggregate certificate balance has decreased by 57% to $464 million
from $1.07 billion at securitization. The certificates are
collateralized by 23 mortgage loans ranging in size from less than
1% to 27.6% of the pool, with the top ten loans (excluding
defeasance) constituting 80.5% of the pool. Seven loans,
constituting 15.4% of the pool, have defeased and are secured by US
government securities.
Moody's use a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 4, compared to 10 at Moody's last review.
As of the August 2024 remittance report, loans representing 100%
were current or within their grace period on their debt service
payments.
Fifteen loans, constituting 65.8% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Two loans have been liquidated from the pool, contributing to an
aggregate realized loss of $13.5 million. One loan, constituting
18.8% of the pool, is currently in special servicing. The specially
serviced loan is the Beverly Connection Loan ($87.5 million –
18.8% of the pool), which represents a pari-passu portion of a
$175.0 million senior mortgage loan. The property is also
encumbered by a $35.0 million B-note and $21.0 million mezzanine
financing. The loan is secured by an approximately 334,600 square
feet (SF), two-level, power center located on the border of Beverly
Hills and West Hollywood in Los Angeles, California. The collateral
is comprised of a fee simple interest in approximately 270,700 SF
of retail space and a leasehold interest in the remaining portion
with a ground lease expiration in December 2085. The largest
tenant, Target, accounts for 30% of net rentable area (NRA) with a
lease expiration in 2029. Other national tenants at the property
include Marshalls (10% of NRA), Ross Dress for Less (9% of NRA),
Nordstrom Rack (9% of NRA), and Saks Fifth Avenue Off Fifth (8% of
NRA). This loan transferred to special servicing in August 2020,
due to the impact of the pandemic and has remained in special
servicing since. The loan was in the process of reinstatement after
an agreement was executed in September 2022, and in the process of
being returned to the master. The borrower has requested an
extension of the maturity date and discussions are still ongoing.
The loan is cash managed with all property cash flow being
controlled by the lender. An updated appraisal in December 2023
indicated a value of $214 million, which is slightly above the
outstanding loan balance. The fourth largest tenant Nordstrom Rack
(9% of NRA) had a lease expiration in September 2024, and has
extended the lease by five years to September 2029. Marshalls and
Ross Dress for Less had extended their leases in 2021. As of the
August 2024 remittance, this loan was last paid through July 2024.
Moody's have also assumed a high default probability for two poorly
performing loans, constituting 30.6% of the pool, and have
estimated an aggregate loss of $88.4 million (a 50% expected loss
on average) from these troubled and specially serviced loans. The
largest troubled loan is the Stamford Plaza Portfolio Loan ($128.3
million – 27.6% of the pool), which represents a pari-passu
portion of a $247.6 million senior mortgage loan. The property is
also encumbered by $227.2 million of mezzanine financing. The loan
is secured by a four-building office complex representing
approximately 982,500 SF and located in Stamford, Connecticut. The
loan has been on the watchlist since October 2018 due to several
tenants vacating and exercising their early termination options
resulting in a decline in the portfolio occupancy. As of December
2023, the portfolio was 69% leased, compared to 66% in September
2022, 62% as of December 2021, 65% in June 2020 and 88% at
securitization. As a result of lower occupancy, the year-end 2023
NOI had declined over 50% since securitization and the loan's
actual reported NOI DSCR has been below 1.00X since 2019.
Furthermore, according to CBRE, the Stamford office market vacancy
rate as of Q2 2024 was 17.6%. Indeed (5% of NRA) announced
intentions to vacate their space at the property at the end of
their term in July 2024. This loan has passed its maturity date in
August 2024. After an initial 60-month interest-only period, the
loan has amortized by 8.4% since securitization.
The second largest troubled loan is the Arbutus Shopping Center
Loan ($14.0 million -- 3.0% of the pool), which is secured by the
borrower's fee simple interest in a 91,434 SF grocery anchored
shopping center located in Arbutus, Maryland. The loan has a
maturity date in September 2024, and most recent 2023 NOI continues
to underperform. As of the August 2024 remittance, this loan is
current on P&I payments and has amortized by 17.7% since
securitization.
The top three loans represent 26% of the pool balance. The largest
loan is the Coastal Grand Mall Loan ($99.5 million – 21.4% of the
pool), which is secured by an approximately 631,200 SF component of
a 1.1 million SF enclosed super-regional mall located in Myrtle
Beach, South Carolina. The non-collateral anchors include Dillard's
and Belk and the collateral anchor, J.C. Penney is a ground lease
tenant. The collateral is 50% owned by CBL & Associates Properties,
Inc. (NYSE: CBL) and 50% owned by Burroughs & Chapin Company, Inc.
The collateral is occupied by several national tenants including
Dick's Sporting Goods (8% of NRA), and Cinemark (8% of NRA). The
loan previously transferred to special servicing in March 2020 due
to the coronavirus outbreak but returned to the master servicer in
May 2020 after temporary payment relief was granted. Occupancy was
95% in March 2024, compared to 83% in December 2022, 87% in
December 2020, 97% at securitization. While the year-end 2023 NOI
was 10% higher than in 2021, it is still 11% below securitization.
The loan has amortized almost 21% since securitization, however,
the loan may face increased refinance risk as it has passed the
August 2024 maturity date. Moody's LTV and stressed DSCR are 138%
and 0.96X, compared to 113% and 1.08X at the last review.
The second largest loan is the 5th and K Street Loan ($10.2 million
– 2.2% of the pool), which is secured by the borrower's fee
simple interest in a retail condo of a mixed-use building located
in San Diego, California. The collateral includes a combination of
ground floor retail space, along with a subgrade parking garage.
The non collateral component includes residential condos along with
a Residence Inn Marriott. Gaslamp's Backstreet Grill (5,604 SF; 20%
NRA) and Gaslamp Garage (4,897 SF; 17% NRA) renewed their lease in
2021 at lower rents with current lease expiration in December 2028
and January 2029, respectively. As of June 2024, the property was
100% leased which it has maintained since securitization. The loan
is currently on the watchlist due to the upcoming maturity date in
September 2024. As of August 2024 remittance, this loan was current
on P&I payments and has amortized by 14% since securitization.
Moody's LTV and stressed DSCR are 118% and 0.87X, respectively,
compared to 123% and 0.84X at the last review.
The third largest loan is The Grove Loan ($10.2 million – 2.2% of
the pool), which is secured by the borrower's fee simple interest
in an open-air neighborhood center located in North Las Vegas,
Nevada. The property was built in 2006 and is anchored by a Smart
and Final Store (30% of NRA). Occupancy was 90% in September 2023,
compared to 96% in December 2022, 94% in December 2020, and 91% at
securitization. In 2022, both Smart and Final (30% of NRA) and US
Army (11%) extended their lease terms at the property. The
operating expenses have increased at a higher rate than revenues
resulting in lower cash flow since securitization. As of August
2024 remittance, this loan was current on P&I payments and has
amortized by 12.6% since securitization. Moody's LTV and stressed
DSCR are 147% and 0.77X, respectively, compared to 130% and 0.83X
at the last review.
GS MORTGAGE 2024-RVR: Moody's Assigns Ba2 Rating to Cl. HRR Certs
-----------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to seven classes of
CMBS securities, issued by GS Mortgage Securities Corporation Trust
2024-RVR, Commercial Mortgage Pass-Through Certificates, Series
2024-RVR:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. X*, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa2 (sf)
Cl. E, Definitive Rating Assigned Ba1 (sf)
Cl. HRR, Definitive Rating Assigned Ba2 (sf)
* Reflects Interest-Only classes
RATINGS RATIONALE
The certificates are collateralized by a single fixed rate loan
backed by the borrower's fee simple interest in a 40-story
residential tower comprised of 921 residential units, and 38,748 SF
of ground floor commercial space located in New York, New York.
Moody's ratings are based on the credit quality of the loans and
the strength of the securitization structure.
The property is a 40-story residential tower with 921 residential
units and 38,748 SF of ground floor commercial space located at 650
W 42nd St, New York, NY. The site lies within Manhattan's Midtown
West, approximately two blocks west of Hell's Kitchen. The property
was developed by the Sponsor and completed in 2000, and has been
well-maintained since its opening, with interior finishes of a high
quality. The property offers extensive amenities for residents
including a 34,000+ SF fitness studio, 75-foot swimming pool,
outdoor tennis courts, 24-hour doorman and concierge service,
private driveway, basketball court, a sundeck overlooking the
Hudson River, and a parking garage with 24-hour valet service.
These amenity offerings are generally superior to those of
competing properties in the area. The property benefits from a
15-year tax abatement under the 421(a) Tax Exemption program,
providing a 50% tax abatement through 2037. Current commercial
tenants include a drycleaning service and a steakhouse restaurant.
A grocer currently has an LOI in place to occupy a large commercial
space at the property. However, a lease for the space has not been
executed by the prospective tenant. The property is in overall good
condition, and is of Class A quality.
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 and
Moody's IO Rating methodology. The rating approach for securities
backed by a single loan compares the credit risk inherent in the
underlying collateral with the credit protection offered by the
structure. The structure's credit enhancement is quantified by the
maximum deterioration in property value that the securities are
able to withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In
assigning single borrower ratings, Moody's also consider a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, Moody's make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile.
The Moody's first mortgage actual DSCR is 1.18x, compared to 1.14x
at Moody's provisional ratings due to an interest rate increase,
which is higher than Moody's first mortgage actual stressed DSCR
(at a 9.25% constant) of 0.74x. Moody's DSCR is based on Moody's
stabilized net cash flow.
The loan first mortgage balance of $245,000,000 represents a
Moody's LTV ratio of 106.2% based on Moody's Value. Adjusted
Moody's LTV ratio for the first mortgage balance is 96.5%, compared
to 96.2% issued at Moody's provisional ratings, based on Moody's
Value using a cap rate adjusted for the current interest rate
environment.
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 property quality
grade is 0.75.
Notable strengths of the transaction include: property's asset
quality, strong location, submarket performance and experienced
sponsorship.
Notable concerns of the transaction include: lack of asset
diversification, temporary decline in occupancy, interest-only loan
profile and certain credit negative legal features.
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.
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.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan 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.
HALSEYPOINT CLO 3: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-R, C-R, D-1R, D-2R, and E-R replacement debt from
HalseyPoint CLO 3 Ltd./HalseyPoint CLO 3 LLC, a CLO that was
originally issued in November 2020 (the class A-2R replacement debt
is not rated by S&P Global Ratings). The transaction is managed by
HalseyPoint Asset Management LLC.
The preliminary ratings are based on information as of Aug. 23,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Aug. 30, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the existing debt. S&P
said, "At that time, we expect to withdraw our ratings on the
existing debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
existing debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a supplemental indenture,
which outlines the terms of the replacement debt. According to the
proposed supplemental indenture:
-- The replacement class A-R, A-2R, B-R, C-R, D-1R, D-2R, and E-R
debt is expected to be issued at a lower spread over three-month
SOFR than the original debt.
-- The reinvestment period will be extended to July 30, 2029.
-- A non-call period will be implemented and will be in effect
through Aug. 30, 2026.
-- The stated maturity of the secured notes will be extended to
July 30, 2037.
Replacement And Existing Debt Issuances
Replacement debt
-- Class A-R, $300.00 million: Three-month CME term SOFR + 1.48%
-- Class A-2R, $20.00 million: Three-month CME term SOFR + 1.68%
-- Class B-R, $60.00 million: Three-month CME term SOFR + 1.95%
-- Class C-R (deferrable), $30.00 million: Three-month CME term
SOFR + 2.35%
-- Class D-1R (deferrable), $25.00 million: Three-month CME term
SOFR + 4.30%
-- Class D-2R (deferrable), $8.75 million: Three-month CME term
SOFR + 5.25%
-- Class E-R (deferrable), $15.00 million: Three-month CME term
SOFR + 8.11%
-- Subordinated notes, $48.12 million: Not applicable
Existing debt
-- Class A-1A, $280.00 million: Three-month CME term SOFR +
1.71161%
-- Class A-1B, $25.00 million: 1.938%
-- Class A-2, $10.00 million: Three-month CME term SOFR +
2.01161%
-- Class B-1, $55.00 million: Three-month CME term SOFR +
2.41161%
-- Class B-2, $10.00 million: 2.729%
-- Class C (deferrable), $25.00 million: Three-month CME term SOFR
+ 3.01161%
-- Class D-1 (deferrable), $15.00 million: Three-month CME term
SOFR + 4.51161%
-- Class D-2 (deferrable), $15.00 million: Three-month CME term
SOFR + 5.41161%
-- Class E (deferrable), $15.00 million: Three-month CME term SOFR
+ 8.60161%
-- Subordinated notes, $48.12 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
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
HalseyPoint CLO 3 Ltd./HalseyPoint CLO 3 LLC
Class A-R, $300.00 million: AAA (sf)
Class A-2R, $20.00 million: N ot rated
Class B-R, $60.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-1R (deferrable), $25.00 million: BBB (sf)
Class D-2R (deferrable), $8.75 million: BBB- (sf)
Class E-R (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $48.12 million: Not rated
HARVEST US 2024-2: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Harvest US CLO 2024-2 Ltd.
Entity/Debt Rating
----------- ------
Harvest US
CLO 2024-2 Ltd.
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D-1 LT BBB-(EXP)sf Expected Rating
D-2 LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
Transaction Summary
Harvest US CLO 2024-2 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Investcorp Credit Management US 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 23.69 versus a maximum covenant, in accordance with
the initial expected matrix point of 25.27. Issuers rated in the
'B' rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.5% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.56% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% of the portfolio balance in aggregate while the
top five obligors can represent up to 11.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'BBB+sf' and 'AA+sf' for class A-2, between 'BB+sf' and 'A+sf' for
class B, between 'B+sf' and 'BBB+sf' for class C, between less than
'B-sf' and 'BB+sf' for class D-1, between less than 'B-sf' and
'BB+sf' for class D-2, and between less than 'B-sf' and 'B+sf' for
class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1 and class A-2
notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AA+sf' for class C, 'A+sf' for
class D-1, 'A-sf' for class D-2, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Harvest US CLO
2024-2 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.
HOMEWARD OPPORTUNITIES 2024-RRTL2: DBRS Gives P B(low) on M2 Notes
------------------------------------------------------------------
On August 6, 2024, DBRS, Inc. assigned provisional credit ratings
to the Mortgage-Backed Notes, Series 2024-RRTL2 (the Notes) to be
issued by Homeward Opportunities Fund Trust 2024-RRTL2 as follows:
-- $206.6 million Class A1 at A (low) (sf)
-- $175.5 million Class A1A at A (low) (sf)
-- $31.1 million Class A1B at A (low) (sf)
-- $17.6 million Class A2 at BBB (low) (sf)
-- $18.2 million Class M1 at BB (low) (sf)
-- $14.2 million Class M2 at B (low) (sf)
The A (low) (sf) credit rating reflects 23.50% of credit
enhancement provided by the subordinated notes and
overcollateralization. The BBB (low) (sf), BB (low) (sf), and B
(low) (sf) credit ratings reflect 17.00%, 10.25%, and 5.00% of
credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
Morningstar DBRS originally published a presale report for this
transaction on August 6, 2024, which has been replaced to reflect
the following: Subsequent to publication, the Sponsor, Homeward
Opportunities Fund LP, updated the eligibility criteria to change
the maximum concentration of multifamily 5+ loans to 0.0% from
5.0%, which resulted in lower expected losses on the collateral, as
described in the related report. Because of this update, the
multifamily 5+ loans were removed from the initial mortgage loan
population. In addition, the Initial Cut-Off Date moved to July 31,
2024, the initial mortgage loan balances were consequently updated,
and more funds were added to the Accumulation Account to maintain
the same amount of total collateral. The Note balances and the
transaction's capital structure remain the same as what was
described in the prior publication.
Notes: All figures are in U.S. dollars unless otherwise noted.
JEFFERIES CREDIT 2024-I: S&P Assigns BB-(sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Jefferies Credit
Partners Direct Lending CLO 2024-I Ltd./Jefferies Credit Partners
Direct Lending CLO 2024-I LLC's floating- and fixed-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by Jefferies Credit Partners LLC.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Jefferies Credit Partners Direct Lending CLO 2024-I Ltd./
Jefferies Credit Partners Direct Lending CLO 2024-I LLC
Class A loans, $50.00 million: AAA (sf)
Class A-1, $176.00 million: AAA (sf)
Class A-JF, $8.42 million: AAA (sf)
Class A-JN, $5.58 million: AAA (sf)
Class B, $38.00 million: AA (sf)
Class C (deferrable), $26.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $24.00 million: BB- (sf)
Subordinated notes, $55.20 million: Not rated
KIND COMMERCIAL 2024-1: DBRS Finalizes BB(high) Rating on E Certs
-----------------------------------------------------------------
DBRS, Inc. finalized provisional credit ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2024-1 (the Certificates) issued by KIND Commercial Mortgage Trust
2024-1 (the Trust):
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
All trends are Stable.
The Trust is collateralized by the borrower's fee-simple interests
in a portfolio of 42 industrial properties and one office property
totaling 6.7 million square feet. The portfolio is spread across 17
states and two Canadian provinces, with 29 unique markets. The
properties themselves are a mix of manufacturing, distribution, and
office properties. The properties that comprise the portfolio are
generally located near major population centers and strong
infrastructure, with convenient access to local and regional
highways, railways, and airports. Overall, the subject markets have
solid fundamentals with positive annual growth in rents while
absorbing new supply. Morningstar DBRS continues to take a
favorable view on the long-term growth and stability of the
warehouse and logistics sector.
The sponsor for this transaction is KKR Real Estate Partners
Americas III AIV I L.P., an affiliate of KKR & Co. Inc. (KKR), a
global investment firm with more than $251 billion in assets under
management (AUM) as of December 2023. KKR acquired the Portfolio
through its Strategic Lease Partners (SLP) platform, which was
created in 2021. SLP engages the capabilities and resources of
KKR's real estate, credit, and capital markets teams to acquire
triple-net properties and deliver sale leaseback solutions to
corporate tenants. The sponsor contributed $43.5 million of cash
equity to this refinance transaction, which represents 7.8% of the
sources for the transaction. Based on the portfolio appraised value
of $844.4 million, the sponsor had $327.4 million of implied equity
in the transaction.
The portfolio is 100.0% occupied by 10 unique tenants; the top
three tenants by net rental area (NRA) are BlueTriton (59.4% of NRA
and 54.4% of Morningstar DBRS base rent), which master-leases 20
properties across seven states; Dessert Holdings (8.3% of NRA and
7.8% of Morningstar DBRS base rent), which master-leases four
properties across two states and two Canadian provinces; and Cadrex
Manufacturing (7.8% of NRA and 12.0% of Morningstar DBRS base
rent), which master-leases nine properties across five states. The
portfolio has a weighted-average remaining lease term of 14.4
years.
Over half of the Morningstar DBRS gross rent is derived from a
single tenant, BlueTriton, a bottled water distributor. While the
tenant has invested over $600.0 million into the properties within
the subject portfolio and has a lease expiration date in December
2036, the loan would likely default if BlueTriton were to go
bankrupt or fail to make its lease payments during the loan term.
BlueTriton formerly operated as the North American business unit of
Nestle Waters (a subsidiary of Nestle S.A.). In 2021, One Rock
Capital Partners and Metropoulos & Co. acquired Nestle Waters North
America for $4.3 billion and rebranded it as BlueTriton. Since the
acquisition, BlueTriton's net revenue grew to $4.7 billion during
the T-12 period ended March 31, 2024, from $3.9 billion in 2021. On
June 17, 2024, BlueTriton announced its entry into a definitive
agreement to merge with Primo Water Corporation in an all-stock
transaction. The merger is expected to close in the first half of
2025. The merged company would have combined net revenue of $6.5
billion and adjusted EBITDA of $1.5 billion, inclusive of $200
million in estimated cost synergies, for the T-12 period ended
March 31, 2024.
The Morningstar DBRS loan-to-value ratio (LTV) on the full debt
load of $517.0 million is high at 96.5%. To account for the high
leverage, Morningstar DBRS programmatically reduced its LTV
benchmark targets for the transaction by 1.5% across the capital
structure. The high leverage point, combined with a lack of
scheduled amortization, could result in elevated refinance risk at
loan maturity. Furthermore, the Morningstar DBRS net cash flow of
$38.4 million results in a debt service coverage ratio of 0.93x,
indicating that the overall portfolio is at risk of not being able
to service its debt payments as they come due. Morningstar DBRS
took a conservative approach in its cash flow analysis, which
includes no rental rate appreciation over the course of the loan
term, elevated economic vacancy conclusions, and elevated operating
expenses when compared against the Issuer's cash flow figure.
Morningstar DBRS' credit rating on the Certificates addresses the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations are the related Principal Amounts and
Interest Distribution Amounts for the rated classes.
Notes: All figures are in US dollars unless otherwise noted.
KRR STATIC I: Fitch Affirms 'BB+sf' Rating on Class E Notes
-----------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class A-R, B-R, C-R,
D-R, and E notes of KKR Static CLO I Ltd. (KKR Static I). The
Rating Outlook on the class B-R notes was revised to Positive from
Stable, while the Outlooks on the other rated notes remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
KKR Static CLO I Ltd.
A-R 48255QAL7 LT AAAsf Affirmed AAAsf
B-R 48255QAM5 LT AA+sf Affirmed AA+sf
C-R 48255QAN3 LT A+sf Affirmed A+sf
D-R 48255QAP8 LT BBB+sf Affirmed BBB+sf
E 48255RAA9 LT BB+sf Affirmed BB+sf
Transaction Summary
KKR Static I is a static arbitrage cash flow collateralized loan
obligation (CLO) managed by KKR Financial Advisors II, LLC, that
originally closed in July 2022. The CLO's secured notes were
partially refinanced on Jan. 3, 2024 from the proceeds of new
secured notes. The transaction is secured primarily by first lien,
senior secured leveraged loans.
KEY RATING DRIVERS
Increased Credit Enhancement from Note Amortization
The Positive Outlook on the class B-R notes is driven by note
amortization of the class A-R notes. As of July 2024 reporting,
approximately 23% of the original class A-R note balance has
amortized since the refinancing, which has increased credit
enhancement (CE) levels on all classes of notes. While class B-R's
model implied rating (MIR) is one notch higher than the notes
current rating, the cushion at the MIR was limited in the context
of the portfolio's current metrics.
Exposure to issuers with a Negative Outlook increased to 18.8% from
10.1% in January 2024; Fitch's watchlist increased to 16.4% from
12.3%. The Fitch weighted average rating factor of the portfolio
increased to 27.3 ('B/B-') from 26.9 (B/B-) at the refinancing,
excluding one defaulted asset at 0.4% of the portfolio. The
portfolio consists of 178 obligors, and the largest 10 obligors
represent 10.3% of the portfolio. All coverage tests are in
compliance.
The Positive Outlook for class B-R indicates a potential upgrade if
the amortization continues and outweighs potential decline in the
credit quality of the pool.
Cash Flow Analysis
Fitch conducted an updated cash flow analysis based on a stressed
portfolio that assumed a one-notch downgrade on the Fitch Issuer
Default Rating Equivalency Rating for assets with a Negative
Outlook on the driving rating of the obligor and extended the
weighted average life to 4.0 years.
Fitch affirmed all the notes' ratings in line with their MIRs as
defined in Fitch's CLOs and Corporate CDOs Rating Criteria, with
the exception of the class B-R notes as noted above.
The Stable Outlooks on the class A-R, C-R, D-R, and E notes reflect
Fitch's expectation that the notes have sufficient level of credit
protection to withstand potential deterioration in the credit
quality of the portfolios in stress scenarios commensurate with
each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and if the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed.
A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to downgrades of up to three
notches, based on MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Except for tranches already at the highest 'AAAsf' rating, upgrades
may occur in the event of better-than-expected portfolio credit
quality and transaction performance.
A 25% reduction of the mean default rate across all ratings, along
with a 25% increase of the recovery rate at all rating levels for
the current portfolio, would lead to upgrades of up to four
notches, based on MIRs.
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
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
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 or information on the risk-presenting entities.
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.
LUNAR AIRCRAFT 2020-1: Fitch Hikes Rating on Cl. C Notes to 'BBsf'
------------------------------------------------------------------
Fitch Ratings has upgraded the ratings of Lunar Aircraft 2020-1
Limited's A, B and C notes to 'Asf', 'BBB+sf' and 'BBsf', from
'A-sf', 'BBB-sf' and 'BB-sf', respectively. The ratings have been
assigned a Stable Outlook.
Entity/Debt Rating Prior
----------- ------ -----
Lunar Aircraft 2020-1 Limited
A 55037LAA2 LT Asf Upgrade A-sf
B 55037LAB0 LT BBB+sf Upgrade BBB-sf
C 55037LAC8 LT BBsf Upgrade BB-sf
Transaction Summary
These ratings reflect current transaction performance, Fitch's cash
flow projections and its expectation for the structure to withstand
stress scenarios commensurate with their respective ratings within
the framework of Fitch criteria and the related asset model. The
rating actions also consider lease terms, lessee credit quality and
performance, updated aircraft values, and Fitch's assumptions and
stresses, which inform its modeled cash flows and coverage levels.
Fitch's updated rating assumptions for airlines are based on a
variety of performance metrics and airline characteristics.
Portfolio performance has broadly improved over the past 12 months.
Fitch Value for the pool increased to $200MM from $192M as of
August 2023, largely caused by relatively strong market values of
the assets in the pool and Fitch increasing the number of aircraft
it values using market values. As aircraft reach the last three
years of their leasable life, Fitch typically uses market values as
its Fitch Value. In addition, cash flow available to service debt
over the past 12 months outpaced last year's model projections by
$12.4MM, as utilization rents and net maintenance cash flows to
debt service surpassed expectations.
The Series A Notes and Series B Notes continued to receive timely
interest and have caught up and surpassed their scheduled principal
balances. The Series C Notes continue to defer interest and
principal, but its LTV has improved as the transaction has
de-levered overall and aircraft values have increased.
Overall Market Recovery: Demand for air travel remains robust.
Total passenger traffic is above 2019 levels with June revenue
passenger kilometers (RPKs) up 9.1% compared to June 2023, per the
International Air Transport Association (IATA). International
traffic led the way with 12.3% yoy RPK growth while domestic
traffic grew 4.3% yoy. Asia-Pacific led overall growth in traffic.
Aircraft Values: Aircraft ABS transaction servicers are reporting
strong demand and increased lease rates for aircraft. Demand for
A320-200s and 737-800s, particularly those in good maintenance
condition, has materially strengthened. A320-200s (four aircraft)
and 737-800s (four aircraft) make up approximately 37% and 34% of
the pool by Fitch Value, respectively. The remainder of the pool
consists of three 737-700s (17% of value) and one 737-900ER (11% of
value).
Fitch is also seeing meaningful improvement in sales proceeds for
aircraft approaching the end of their leasable lives. Appraiser
market values are currently higher than base values for many
aircraft types, which previously had not occurred for several
years.
Macro Risks: While the commercial aviation market has recovered
significantly over the past 12 months, it will continue to face
risks including workforce shortages, supply chain issues,
geopolitical risks and recessionary concerns that would impact
passenger demand. In addition, uncertainty regarding inflationary
pressures despite some improvements remain. Most of these events
would lead to greater credit risk due to increased lessee
delinquencies, lease restructurings, defaults, and reductions in
lease rates and asset values, particularly for older aircraft. All
of these factors would cause downward pressure on future cash flows
needed to meet debt service.
KEY RATING DRIVERS
Asset Values: The Fitch value for the pool is $200MM. Fitch used
the most recent appraisal as of February 2024 and applied
depreciation. Fitch employs a methodology whereby Fitch varies the
type of value per aircraft based on the remaining leasable life:
3 years of leasable life, but >15 years old:
Maintenance-adjusted base value;
MAGNETITE XXIX: Fitch Assigns 'BBsf' Rating on Class E-R Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Magnetite
XXIX, Limited reset transaction.
Entity/Debt Rating
----------- ------
Magnetite XXIX,
Limited
X LT NRsf New Rating
A-R LT NRsf New Rating
B-R LT AAsf New Rating
C-R LT A+sf New Rating
D-R LT BBB-sf New Rating
E-R LT BBsf New Rating
F LT NRsf New Rating
Subordinated LT NRsf New Rating
Transaction Summary
Magnetite XXIX, Limited (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by BlackRock Financial
Management, Inc. that originally closed in March 2021 and is being
reset on Aug. 22, 2024. Net proceeds from the refinancing of the
secured 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. Issuers rated in the 'B' rating category have 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
96.9% first-lien senior secured loans and has a weighted average
recovery assumption of 75.42%. 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 that of other
recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to those of
other CLOs. Fitch's analysis was based on a stressed portfolio
created by adjusting the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B-R, between 'B+sf'
and 'BBB+sf' for class C-R, between less than 'B-sf' and 'BB+sf'
for class D-R, and between less than 'B-sf' and 'B+sf' for class
E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AA+sf' for class C-R, 'Asf'
for class D-R, and 'BBB+sf' for class E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Magnetite XXIX,
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 XXIX: Moody's Assigns B3 Rating to $750,000 Cl. F Notes
-----------------------------------------------------------------
Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes (the Refinancing Notes) issued by Magnetite XXIX,
Limited (the Issuer):
US$5,000,000 Class X Senior Secured Floating Rate Notes due 2037,
Assigned Aaa (sf)
US$320,000,000 Class A-R Senior Secured Floating Rate Notes due
2037, Assigned Aaa (sf)
US$750,000 Class F Deferrable Mezzanine Floating Rate Notes due
2037, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 90%
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 five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, the other
four 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; and changes to the
overcollateralization test levels and changes to the base matrix
and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2024.
The key model inputs Moody's used in 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: $495,986,202
Defaulted par: $4,013,797
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2985
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 46.00%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
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.
MELLO MORTGAGE 2021-INV1: Moody's Ups Rating on Cl. B-5 Certs to B2
-------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 25 bonds from two US
residential mortgage-backed transactions (RMBS), backed by 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: Mello Mortgage Capital Acceptance 2021-INV1
Cl. A-14, Upgraded to Aaa (sf); previously on Jun 17, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Jun 17, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Jun 17, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Upgraded to Aaa (sf); previously on Jun 17, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-4*, Upgraded to Aaa (sf); previously on Jun 17, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Jun 17, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jun 17, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Jun 17, 2021
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba2 (sf); previously on Jun 17, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to B2 (sf); previously on Jun 17, 2021 Definitive
Rating Assigned B3 (sf)
Issuer: Mello Mortgage Capital Acceptance 2021-MTG3
Cl. A26, Upgraded to Aaa (sf); previously on Jul 2, 2021 Definitive
Rating Assigned Aa1 (sf)
Cl. A27, Upgraded to Aaa (sf); previously on Jul 2, 2021 Definitive
Rating Assigned Aa1 (sf)
Cl. A28, Upgraded to Aaa (sf); previously on Jul 2, 2021 Definitive
Rating Assigned Aa1 (sf)
Cl. AX26*, Upgraded to Aaa (sf); previously on Jul 2, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. AX27*, Upgraded to Aaa (sf); previously on Jul 2, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. AX28*, Upgraded to Aaa (sf); previously on Jul 2, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B1, Upgraded to Aa2 (sf); previously on Jul 2, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. B1A, Upgraded to Aa2 (sf); previously on Jul 2, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. B2, Upgraded to A1 (sf); previously on Jul 2, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B2A, Upgraded to A1 (sf); previously on Jul 2, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B3, Upgraded to A3 (sf); previously on Jul 2, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B4, Upgraded to Baa3 (sf); previously on Jul 2, 2021 Definitive
Rating Assigned Ba2 (sf)
Cl. B5, Upgraded to Ba3 (sf); previously on Jul 2, 2021 Definitive
Rating Assigned B2 (sf)
Cl. BX1*, Upgraded to Aa2 (sf); previously on Jul 2, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. BX2*, Upgraded to A1 (sf); previously on Jul 2, 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. The
transactions continues to display strong collateral performance,
with cumulative losses below 0.01% for each and a small number of
loans in delinquencies. In addition, enhancement levels for the
tranches have grown significantly, with the credit enhancement for
the tranches upgraded growing by an average of 26.87% 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.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds and/or pools.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
MORGAN STANLEY 2016-C29: DBRS Cuts Class G Certs Rating to C
------------------------------------------------------------
DBRS Limited downgraded its credit ratings on seven classes of
Commercial Mortgage Pass-Through Certificates, Series 2016-C29
issued by Morgan Stanley Bank of America Merrill Lynch Trust
2016-C29 as follows:
-- Class D to BB (low) (sf) from BBB (sf)
-- Class X-D to BB (sf) from BBB (high) (sf)
-- Class E to B (low) (sf) from BB (sf)
-- Class X-E to B (sf) from BB (high) (sf)
-- Class F to CCC (sf) from B (high) (sf)
-- Class X-F to CCC (sf) from BB (low) (sf)
-- Class G to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AAA (sf)
-- Class C at A (high) (sf)
Morningstar DBRS changed the trends on Classes B, C, D, E, X-B,
X-D, and X-E to Negative from Stable. Classes A-3, A-4, A-SB, A-S,
and X-A continue to carry Stable trends. There are no trends for
Classes F, G, and X-F, which have credit ratings that do not
typically carry trends in commercial mortgage-backed securities
(CMBS).
The credit rating downgrades on Classes D, E, F, G, X-D, X-E, and
X-F reflect Morningstar DBRS' increased loss projections for the
loans in special servicing. Since the last credit rating action,
Princeton Pike Corporate Center (Prospectus ID#16, 2.2% of the
current pool balance) and 696 Centre (Prospectus ID#13, 2.1% of the
current pool balance) transferred to special servicing, and there
are currently three specially serviced loans, representing 5.6% of
the pool balance. Morningstar DBRS' analysis included a liquidation
scenario for all three specially serviced loans, resulting in
implied losses of approximately $23.5 million, an increase from
Morningstar DBRS' projected losses of $7.0 million at the time of
the last credit rating action. The current implied losses are
projected to fully erode the unrated Class H certificate and
approximately 65.0% of the Class G certificate, further reducing
credit enhancement to the junior bonds. The primary contributor to
the increase in Morningstar DBRS' projected loss is the liquidation
scenario for the recently transferred 696 Centre loan. The Negative
trends on Classes D and E are tied to the potential for further
value deterioration for the loans in special servicing.
The Negative trends on Classes B, C, and X-B reflect Morningstar
DBRS' concerns regarding loans not yet in special servicing. With
this review, Morningstar DBRS' weighted-average (WA) expected loss
(EL) for the pool increased by approximately 100 basis points over
the WA EL at the last review, primarily attributable to the two
largest loans in the pool: Grove City Premium Outlets (Prospectus
ID#1, 8.35% of the current pool balance) and 300 Four Walls
(Prospectus ID#2, 7.4% of the pool balance). Both loans have been
exhibiting year-over-year declines in occupancy rates, though net
cash flow (NCF) and debt service coverage ratios (DSCR) remain
relatively in line with issuance expectations. Given that both
loans are approaching their respective maturity dates in December
2025 and February 2026, the increasing vacancy could prove
challenging as the borrower seeks refinancing. To account for the
increased risk, Morningstar DBRS' analysis included stressed
loan-to-value ratios and/or elevated probabilities of default for
these loans. Should these loans' performance deteriorate further or
additional defaults occur, those classes with Negative trends may
be subject to further credit rating downgrades.
The credit ratings for the remaining Classes A-3, A-4, A-SB, A-S,
and X-A were confirmed at AAA (sf), reflective of the otherwise
overall stable performance of the remaining loans in the pool and
Morningstar DBRS' expectation that these classes are sufficiently
insulated from losses and will be recovered from loans expected to
pay at maturity, based on their most recent year-end WA DSCR above
2.10 times (x) and WA debt yield of approximately 13.5%.
As of the July 2024 remittance, 61 of the original 69 loans
remained in the trust, with an aggregate balance of $677.6 million,
representing a collateral reduction of 16.3% since issuance. There
are 21 fully defeased loans, representing 24.4% of the current pool
balance. One previously specially serviced loan, Wabash Landing
Retail (Prospectus ID#22), was liquidated from the trust in
December 2023, resulting in a realized loss of $2.8 million to the
trust, slightly above Morningstar DBRS' loss projections of $2.2
million at its last review in August 2023, thereby eroding
approximately 15% of the nonrated Class H. Interest shortfalls have
also increased to $1.4 million with this review from $1.0 million
in August 2023.
Excluding the defeased loans, the pool is most concentrated by
retail and office properties, which represent 36.7% and 15.3% of
the pool balance, respectively. Morningstar DBRS has a cautious
outlook on the office sector given the anticipated upward pressure
on vacancy rates in the broader office market, challenging
landlords' efforts to backfill vacant space, and, in certain
instances, contributing to value declines, particularly for assets
in noncore markets and/or with disadvantages in location, building
quality, or amenities offered. Outside of the loans in special
servicing, Morningstar DBRS' analysis includes an additional stress
for two office loans exhibiting weakened performance, which
resulted in loan-level WA ELs that are more than double the pool's
average EL.
The primary contributor to the implied liquidation losses is 696
Centre, which is secured by a 204,552-square-foot (sf) suburban
office building in Farmington Hills, Michigan, approximately 20
miles outside of Detroit. The loan transferred to the special
servicer in February 2024 for imminent monetary default after the
borrower failed to pay its January 2024 scheduled debt payment. As
per the July 2024 remittance, the loan remains 90+ days delinquent.
As per the special servicer's commentary, the borrower requested an
extension and discussions remain ongoing. The loan was previously
on the servicer's watchlist because of the departure of its largest
tenant, Google (which formerly occupied 41.4% of the net rentable
area (NRA)), at its lease expiry in November 2022. Another tenant,
Botsford General Hospital (which formerly occupied 24.9% of the
NRA), also vacated in March 2022, prior to its December 2024 lease
expiry. As a result, occupancy at the subject plummeted to 32.9% as
of YE2023. As per the servicer site inspection performed in April
2024, occupancy at the subject has declined further to 26.9%, with
an additional 7.0% of the NRA scheduled to roll over prior to loan
maturity in January 2026. The departure of the property's largest
tenants triggered cash management, and the loan reported a total
balance of $1.8 million across all reserve accounts in July 2024.
The borrower is reportedly funding operating shortfalls as the
property is not generating enough revenue to cover expenses.
The property was reappraised in March 2024 at $6.1 million, which
represents a 74.6% decline from the issuance appraised value of
$24.0 million. As per Reis, similar-vintage office properties
within the Farmington Hills submarket reported an average vacancy
rate of 20.5%, with an average asking rent of $18.47 per sf (psf),
which is in line with the subject's average rental rate of $18.57
psf as per the April 2024 rent roll. Despite ongoing discussions
surrounding a plausible extension, given the softening submarket
metrics, significant drop in occupancy, and value deterioration
with the latest appraisal, it is likely this asset will ultimately
incur a loss upon resolution. Morningstar DBRS analyzed this loan
with a liquidation scenario based on a conservative haircut to the
most recent value, suggesting a loss severity of approximately
80%.
Another loan in special servicing is Princeton Pike Corporate
Center, which is secured by an eight-building suburban office
complex in the Trenton suburb of Lawrenceville, New Jersey. The
loan is pari passu with the MSBAM 2016-C28 transaction, which is
also rated by Morningstar DBRS. The loan transferred to special
servicing in February 2024 for imminent monetary default after the
borrower indicated its inability to cover debt service and
operating expenses. However, as of the July 2024 reporting, the
loan was reported current. Occupancy at the collateral has fallen
significantly, reported at only 59.5% as per the February 2024 rent
roll, a further decline from the already-low YE2022 occupancy
figure of 73.6%. Moreover, leases totaling approximately 23.0% of
the NRA are scheduled to roll over in the next 12 months. According
to Reis, office properties within the Trenton submarket reported an
average vacancy rate of 17.4% and an average asking rental rate of
$26.60 psf as of Q1 2024. However, Morningstar DBRS expects that
the availability rate within the submarket could be much higher
than the reported vacancy rate given the shift in demand for office
space, particularly within suburban markets.
The annualized September 2023 NCF was $7.1 million (reflecting a
DSCR of 1.16x), compared with the YE2022 figure of $9.2 million (a
DSCR of 1.50x) and the Morningstar DBRS NCF of $10.8 million. The
drop in cash flow was attributed to a drop in occupancy, although
Morningstar DBRS notes that multiple tenants vacated their space
throughout 2023, suggesting the full-year 2023 and 2024 cash flows
could show even further declines. Given the current payment status,
an updated appraisal has not been ordered. Morningstar DBRS'
liquidation scenario was based on a haircut to the issuance
appraised value to reflect the declines in occupancy and cash flow,
resulting in a projected loss severity approaching 40%.
The Penn Square Mall (Prospectus ID#3, 6.9% of the pool) loan was
shadow-rated investment grade at issuance. With this review,
Morningstar DBRS notes that the loan continues to exhibit
investment-grade loan characteristics as demonstrated by the stable
cash flow and occupancy rate.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2016-C32: DBRS Confirms BB(low) Rating on F Certs
----------------------------------------------------------------
DBRS Limited confirmed its credit ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2016-C32 issued by
Morgan Stanley Bank of America Merrill Lynch Trust as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class C at AA (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
Morningstar DBRS changed the trends on Classes E and F to Negative
from Stable. All remaining trends are Stable.
The credit rating confirmations reflect the stable performance of
the transaction, which remains in line with Morningstar DBRS'
expectations. Overall, the pool continues to exhibit healthy credit
metrics, as evidenced by the weighted-average debt service coverage
ratio (DSCR) of 2.32 times (x), based on the most recent financial
reporting available. In addition, the transaction continues to
benefit from increased credit support to the bonds as a result of
scheduled amortization, loan repayments, and defeasance, further
supporting the credit rating confirmations and Stable trends
assigned with this review. In addition, two top-five loans, Hilton
Hawaiian Village Waikiki Beach Resort (Prospectus ID#1; 7.6% of the
pool) and Potomac Mills (Prospectus ID#5; 6.3% of the pool) are
shadow-rated as investment grade by Morningstar DBRS. The Negative
trends assigned to the Class E and F certificates reflect loan
specific concerns tied to the second and third largest loans in the
pool, Wolfchase Galleria (Prospectus ID#3; 6.3% of the pool) and
191 Peachtree (Prospectus ID#2; 6.7% of the pool), details of which
are outlined below.
According to the July 2024 remittance, 52 of the original 56 loans
remain within the transaction with a trust balance of $825.2
million, reflecting a collateral reduction of 9.0% since issuance.
In addition, five loans, representing approximately 4.5% of the
pool, have fully defeased. There are no loans in special servicing;
however, four loans, representing 8.3% of the pool, are on the
servicer's watchlist. The transaction is concentrated by property
type, with loans representing 40.8%, 17.0%, and 10.2% of the pool
collateralized by retail, office, and lodging properties,
respectively.
The largest loan on the servicer's watchlist, Wolfchase Galleria,
is secured by an approximately 392,000-square-foot (sf) portion of
a 1.3 million-sf, super-regional mall in Memphis. The loan sponsor
is an affiliate of Simon Property Group, which contributed
approximately $62.0 million of equity at closing. The trust debt of
$51.7 million is a pari passu portion of a $155.2 million whole
loan. The property is anchored by noncollateral Macy's, Dillard's,
and JC Penney. The noncollateral Sears closed in 2018 and the space
remains dark. The loan transferred to special servicing in June
2020 for imminent monetary default because of the bankruptcies and
store closures of several tenants. A forbearance agreement was
executed in January 2021 and the loan subsequently transferred back
to the master servicer a few months later. Operating performance at
the property was stressed prior to the coronavirus pandemic, with
net cash flows (NCFs) consistently reported well below the
Morningstar DBRS figure at issuance. According to the YE2023
financial reporting, the property generated $9.8 million of NCF (a
DSCR of 1.5x), below the YE2022 and Morningstar DBRS figures of
$10.3 million (a DSCR of 1.07x) and $14.1 million (a DSCR of
1.46x), respectively.
Per the March 2024 rent roll, the collateral's occupancy rate was
75.2%, a marginal decline from the April 2023 figure 80.4%, but
well below the issuance rate of 89.3%. The mall had exposure to Bed
Bath & Beyond, which filed for bankruptcy in 2023 and has since
closed its doors at the subject property. The largest collateral
tenant, Malco Theatres (7.9% of collateral net rentable area (NRA))
has a lease expiration in December 2027, approximately one-year
post-loan maturity in November 2026. The third-largest collateral
tenant, The Finish Line (5.6% of collateral NRA) recently extended
its lease for seven years through to February 2029; however, tenant
rollover risk remains elevated as leases representing approximately
21.0% of the collateral's NRA have expired or are scheduled to
expire within the next 12 months. Given the sustained decline in
performance, Morningstar DBRS analyzed the loan with an elevated
probability of default (POD) penalty and stressed loan-to-value
ratio (LTV), resulting in an expected loss that was approximately
three times the pool average.
The 191 Peachtree loan is secured by a 1.2 million sf office
property in Atlanta's central business district. The largest
tenant, Deloitte & Touche USA LLP (Deloitte; 19.3% of NRA) had a
lease expiration date in May 2024. Although Deloitte remains at the
property, the tenant has reduced its footprint by 199,145 sf (16.3%
of NRA), signing a short-term 18 month lease for 35,932 sf.
Deloitte is reportedly moving to the Promenade Tower and will be
reducing its overall footprint in Atlanta's business district by
approximately 50.0%. With this downsizing, the property's physical
occupancy will likely decline from 84.2% at YE2023 to slightly less
than 70.0%. The loan is structured with a cash flow sweep that was
designed to trigger two years prior to Deloitte's lease expiration
until the balance reaches approximately $11.8 million (or $50.0 per
sf on Deloitte's intended vacant space). According to the July 2024
reporting, reserve balances total $11.5 million, the majority of
which is held in a tenant reserve account.
While Deloitte's recent downsizing is noteworthy, the loan benefits
from structural mitigants, namely, the moderate going-in LTV ratio
of 64.9% (based on the whole-loan balance of $175.5 million and the
issuance appraised value of $270.5 million) and the cash sweep
provisions. Moreover, the loan's maturity date in November 2026
will provide some time to backfill vacant space and work toward
stabilization. Historically, operating performance at the property
has been strong with the YE2023 DSCR reported at 2.92x, compared
with the YE2022 and Morningstar DBRS DSCR of 2.95x and 2.33x,
respectively. According to Reis, office properties in the Downtown
submarket reported a Q2 2024 vacancy rate of 18.4%, compared with
the Q2 2023 vacancy rate of 13.8%. Given the property's increased
vacancy rate, coupled with soft submarket conditions, the
collateral's as-is value has likely declined from issuance.
Morningstar DBRS analyzed the loan with an elevated POD penalty and
stressed LTV, resulting in an expected loss that was more than
triple the pool average.
At issuance, Morningstar DBRS shadow-rated the Hilton Hawaiian
Village loan and the Potomac Mills loan as investment grade. This
assessment was supported by the loans' strong credit metrics,
strong sponsorship strength, and historically stable performance.
With this review, Morningstar DBRS confirms that the
characteristics of these loans remain consistent with the
investment-grade shadow rating.
Notes: All figures are in U.S dollars unless otherwise noted.
MOUNTAIN VIEW 2017-2: Moody's Cuts Rating on $17.5MM E Notes to B1
------------------------------------------------------------------
Moody's Ratings has upgraded the rating on the following note
issued by Mountain View CLO 2017-2 Ltd.:
US$21,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C Notes"), Upgraded to Aa1 (sf);
previously on February 29, 2024 Upgraded to Aa2 (sf)
Moody's have also downgraded the ratings on the following notes:
US$17,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class E Notes"), Downgraded to B1 (sf); previously
on September 21, 2020 Confirmed at Ba3 (sf)
US$7,400,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class F Notes"), Downgraded to Caa3 (sf); previously
on February 29, 2024 Downgraded to Caa1 (sf)
Mountain View CLO 2017-2 Ltd., originally issued in January 2018
and partially refinanced in August 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 January 2023.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating action is primarily a result of deleveraging of
the senior notes since February 2024. The Class A-R notes have been
paid down by approximately 37.7% or $80.1 million since then. Based
on Moody's calculation, the OC ratio for the Class C notes is
currently 127.62% versus February 2024 level of 122.12%.
The downgrade rating actions on the Class E and Class F notes
reflect the specific risks to those notes posed by par loss and
credit deterioration observed in the underlying CLO portfolio.
Based on Moody's calculation, the OC ratios for the Class E notes
and Class F notes are at 105.14% and 102.05%, respectively, versus
February 2024 level of 105.93% and 103.56%, respectively.
Furthermore, the portfolio WARF has been deteriorating based on
Moody's calculation and is currently at 2800 compared to 2559 in
February 2024.
No actions were taken on the Class A-R, Class B, and Class D notes
because their expected losses remain commensurate with their
current ratings, after taking into account the CLO's latest
portfolio information, its relevant structural features and its
actual over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in 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: $256,600,376
Defaulted par: $3,935,180
Diversity Score: 52
Weighted Average Rating Factor (WARF): 2800
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.44%
Weighted Average Coupon (WAC): 8.00%
Weighted Average Recovery Rate (WARR): 46.41%
Weighted Average Life (WAL): 3.18 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 Actions:
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.
MP CLO III: Moody's Cuts Rating on $21.3MM E-R Class Notes to B2
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by MP CLO III, Ltd.:
US$21,100,000 Class C-R Secured Deferrable Floating Rate Notes due
2030 (the "Class C-R Notes"), Upgraded to Aa1 (sf); previously on
February 13, 2024 Upgraded to Aa3 (sf)
US$25,600,000 Class D-R Secured Deferrable Floating Rate Notes due
2030 (the "Class D-R Notes"), Upgraded to Baa3 (sf); previously on
August 31, 2020 Downgraded to Ba1 (sf)
Moody's have also downgraded the rating on the following notes:
US$21,300,000 Class E-R Secured Deferrable Floating Rate Notes due
2030 (the "Class E-R Notes"), Downgraded to B2 (sf); previously on
August 31, 2020 Downgraded to B1 (sf)
MP CLO III, Ltd., originally issued in March 2013 and refinanced in
October 2017, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in October 2022.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating actions on the Class C-R and D-R notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's over-collateralization (OC) ratios
since February 2024. The Class A-R notes have been paid down by
approximately 48.8% or $79.9 million since then. Based on Moody's
calculation, the OC ratios for the Class C-R and Class D-R notes
are currently 138.11% and 117.37%, respectively, versus February
2024 levels of 125.94% and 113.06%, respectively.
The downgrade rating action on the Class E-R notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
Moody's calculation, the deal has lost approximately $5.4 million
or 1.9% of performing par since February 2024. Furthermore, the
proportion of obligors in the portfolio with Moody's corporate
family or other equivalent ratings of Caa1 or lower (after any
adjustments for watchlist for possible downgrade) has increased
from 10.9% to 13.7% since that time.
No actions were taken on the Class A-R and Class B-R notes because
their expected losses remain commensurate with their 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 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: $198,205,785
Defaulted par: $3,875,440
Diversity Score: 42
Weighted Average Rating Factor (WARF): 3027
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.33%
Weighted Average Recovery Rate (WARR): 46.65%
Weighted Average Life (WAL): 3.3 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.
NATIXIS COMMERCIAL 2019-FAME: Moody's Cuts 2 Tranches to Caa1
-------------------------------------------------------------
Moody's Ratings has downgraded the ratings on nine classes of
Natixis Commercial Mortgage Securities Trust 2019-FAME, Commercial
Pass-Through Certificates, Series 2019-FAME as follows:
Cl. A, Downgraded to Aa2 (sf); previously on Sep 5, 2019 Definitive
Rating Assigned Aaa (sf)
Cl. B, Downgraded to Baa1 (sf); previously on Sep 5, 2019
Definitive Rating Assigned A1 (sf)
Cl. C, Downgraded to Ba3 (sf); previously on Sep 5, 2019 Definitive
Rating Assigned Baa3 (sf)
Cl. D, Downgraded to Caa1 (sf); previously on Sep 5, 2019
Definitive Rating Assigned B1 (sf)
Cl. V-A, Downgraded to Aa2 (sf); previously on Sep 5, 2019
Definitive Rating Assigned Aaa (sf)
Cl. V-BC, Downgraded to Ba1 (sf); previously on Sep 5, 2019
Definitive Rating Assigned Baa1 (sf)
Cl. V-D, Downgraded to Caa1 (sf); previously on Sep 5, 2019
Definitive Rating Assigned B1 (sf)
Cl. X-A*, Downgraded to Aa2 (sf); previously on Sep 5, 2019
Definitive Rating Assigned Aaa (sf)
Cl. X-B*, Downgraded to Ba1 (sf); previously on Sep 5, 2019
Definitive Rating Assigned Baa1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on four P&I classes were downgraded due to the increase
in Moody's LTV ratio driven by the property's performance, cash
flow and occupancy trends since 2020 as well as uncertainty around
the timing and extent of the property's cash flow recovery given
the Los Angeles market fundamentals. Furthermore, the loan
recently transferred to special servicing in June 2024 and while it
remains current on its monthly debt service payments it has now
passed the original loan maturity date in August 2024.
The property's net cash flow (NCF) experienced a significant drop
in 2021 and the slow recovery has caused cash flow to remain below
underwritten levels at securitization. Property performance had
improved in 2022 after an additional $52.5 million A-2 note (not in
the trust) was used to fund a renovation at the property that was
originally expected to increase NCF significantly. However, the
property's operating expenses have significantly increased since
2022 causing the trailing twelve month (TTM) NCF as of March 2024
to be 14% lower than at year-end December 2022. Occupancy is 74% as
of March 2024, and has remained below 80% since 2020, down from 94%
as of May 2019. Despite the cash flow drop in recent years, the
loan has maintained a NCF DSCR of 1.20X based on the floating rate
on the non-pooled A-2 note and the fixed rate of 4.41% on the trust
notes.
The lingering effects of the pandemic has had an outsized negative
impact on the Los Angeles MSA and the city is lagging other major
cities in terms of bounce back. As part of the renovation, a small
portion of the retail space was converted to creative office,
downtown Los Angeles has faced weaker office fundammentals in
recent years. The renovation also resulted in an increase in the
total debt amount to $263.8 million from $211.3 million. While the
additional debt is held outside the trust, it is pari passu with
the $143.7 million A-1 note that is held in the trust.
The ratings on two IO classes, Cl. X-A and Cl. X-B, were downgraded
due to a decline in the credit quality of the referenced classes.
The ratings on three exchangeable classes, Cl. V-A, Cl. V-BC and
Cl. V-D, were downgraded due to a decline in the credit quality of
the referenced 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.
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, loan concentration, 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 August 15, 2024 distribution date, the transaction's
aggregate certificate balance was $211.3 million, the same as at
securitization. The loan transferred to special servicing in June
2024 for imminent default ahead of the August 2024 maturity date,
and the lender is in discussions with the borrower regarding
possible resolutions. The loan had an original five year term with
interest only payments for the entire loan term at a fixed interest
rate of 4.414% and floating interest rate of one-month LIBOR plus a
spread on the Note A-2 portion of the loan, which comprises the
future funding of approximately $52.5 million.
The loan is secured by the fee simple and leasehold interests in
Ovation Hollywood (formerly known as Hollywoods & Highlands) Loan
($143.94 million A-1 Note and $67.36 million Junior Bonds), a
462,827 square foot (SF) mixed-use retail and entertainment
shopping plaza located in West Hollywood, California. The property
includes retail space, event space, office space, two
non-collateral movie theaters, and 18 billboard and media displays.
The property is a nationally recognized entertainment center
located at the intersection of Hollywood Boulevard, home to the
famous Hollywood Walk of the Stars, and North Highland Avenue, a
major thoroughfare in West Hollywood. From 2021 through 2023, the
property underwent a $100 million renovation that was partly funded
by the $52.5 million A-2 note that is pari passu with the A-1 note.
The renovation included the addition of a dining deck to the second
level, new retail tenants at the street level, and conversion of
the retail space on the fifth floor to office space.
The property's NCF for TTM ending March 2024 was $15.6 million,
compared to $15.4 million in 2023, lower than $18.2 million in
2022, and the property never achieved the underwritten cash flow
level. Expenses have increased by 12% from 2019 to March 2024, and
occupancy was 74%, and has remained below 80% since 2020, down from
90% at securitization. Despite the lower occupancy, the NCF DSCR
has remained above 1.00X. The Los Angeles submarket fundamentals
have continued to weaken since securitization and the coronavirus
pandemic. According to CBRE, the Lifestyle & Mall trend for the
Hollywood and Wilshire submarket availability rate has increased to
8.8% in 2024 from 1.0% in 2019, and the office submarket
availability rate has increased to 23.6% in 2024 from 13.8% in
2019.
Moody's LTV ratio for the total mortgage balance is 158% based on
Moody's Value compared to 140% at securitization. Moody's stressed
debt service coverage ratio (DSCR) is 0.60X compared ot 0.65X at
securitization. There are no outstanding advances but there are
interest shortfalls of $25,260 affected Class E and Class VRR as of
the August 2024 distribution date.
NEUBERGER BERMAN 28: Fitch Assigns 'BB-(EXP)sf' Rating on E-R Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
the Neuberger Berman Loan Advisers CLO 28, Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Neuberger Berman
Loan Advisers
CLO 28, Ltd.
A-1-R LT AAA(EXP)sf Expected Rating
A-2-R LT AAA(EXP)sf Expected Rating
B-R LT AA(EXP)sf Expected Rating
C-R LT A(EXP)sf Expected Rating
D-1-R LT BBB-(EXP)sf Expected Rating
D-2-R LT BBB-(EXP)sf Expected Rating
E-R LT BB-(EXP)sf Expected Rating
Transaction Summary
Neuberger Berman Loan Advisers CLO 28, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) managed by
Neuberger Berman Loan Advisers LLC that originally closed in June
2018. On Sept. 12, 2024 (the reset date), the CLO's secured notes
will be redeemed in full with refinancing proceeds. The secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first-lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.68, versus a maximum covenant, in
accordance with the initial expected matrix point of 25.70. 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
98.33% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.88% versus a
minimum covenant, in accordance with the initial expected matrix
point of 75%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 44% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1-R, between
'BBB+sf' and 'AA+sf' for class A-2-R, between 'BB+sf' and 'A+sf'
for class B-R, between 'B+sf' and 'BBB+sf' for class C-R, between
less than 'B-sf' and 'BB+sf' for class D-1-R, between less than
'B-sf' and 'BB+sf' for class D-2-R, and between less than 'B-sf'
and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R and class
A-2-R notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, '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 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 Neuberger Berman
Loan Advisers CLO 28, 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.
NMEF FUNDING 2024-A: Moody's Assigns Ba3 Rating to Class D Notes
----------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to the notes issued
by NMEF Funding 2024-A, LLC (NMEF 2024-A). North Mill Equipment
Finance LLC (NMEF) is the sponsor of the transaction and the
servicer of the securitized loan pool. The notes are backed by a
pool of loans and leases secured by mainly new and used trucking
and transportation equipment such as vocational trucks, trailers,
heavy duty trucks, as well as medical and construction equipment.
NMEF Funding 2024-A, LLC is NMEF's eighth ABS transaction and the
third transaction rated by us.
The complete rating actions are as follows:
Issuer: NMEF Funding 2024-A, LLC
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 Baa2 (sf)
Class D Notes, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
The definitive ratings of the notes are based on the credit quality
of the securitized equipment loan and lease pool and its expected
performance, the historical performance of NMEF's managed portfolio
and that of its prior securitizations, the experience and expertise
of NMEF as the originator and servicer of the underlying pool, the
back-up servicing arrangement with GreatAmerica Portfolio Services
Group LLC, the transaction structure including the level of credit
enhancement supporting the notes, and the legal aspects of the
transaction.
Moody's cumulative net loss expectation for the NMEF 2024-A
collateral pool is 7%, 1.50% higher than the NMEF 2023-A pool at
closing, and loss at a Aaa stress is 32.0%, the same as that for
the NMEF 2023-A pool. 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 and the historical
performance of similar collateral, including NMEF's managed
portfolio and transaction performance, the track-record, ability
and expertise of NMEF to perform the servicing functions, and
current expectations for the macroeconomic environment during the
life of the transaction including the current inflationary
environment, increased fuel costs, and decreasing consumer spending
leading to weakening freight demand which is pressuring the margins
of operators in the transportation sector.
The classes of notes will be paid sequentially. The Class A, Class
B, Class C, and Class D notes benefit from approximately 35.3%,
25.4%, 15.9%, and 13.2% of hard credit enhancement, respectively.
Initial hard credit enhancement for the notes consists of (1)
subordination, (2) over-collateralization (OC) of 12.15% of the
initial adjusted discounted pool balance with the transaction
utilizing excess spread to build to an OC target of 19.00% of the
outstanding adjusted discounted pool balance subject to a 0.50% OC
floor, and (3) a fully funded, non-declining reserve account of
1.00% of the initial adjusted discounted pool balance. Excess
spread may be available as additional credit protection for the
notes. 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 Class B, Class C, and
Class D 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
Moody's 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 enhancement
are insufficient to protect investors against current expectations
of portfolio losses. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults or
deterioration in the value of the equipment that secure the
obligor's promise of payment. Portfolio losses also depend on the
health of the trucking and transportation industries. Other reasons
for worse-than-expected performance could include poor servicing,
error on the part of transaction parties, inadequate transaction
governance or fraud. Moody's could downgrade the Class A-1 short
term rating following a significant slowdown in principal
collections that could result from, among other reasons, high
delinquencies or a servicer disruption that impacts obligor's
payments.
OCP CLO 2022-24: S&P Assigns BB- (sf) Rating on Class E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1R, A-2R,
B-1R, B-2R, C-R, D-1R, D-2R, and E-R replacement debt from OCP CLO
2022-24 Ltd./OCP CLO 2022-24 LLC, a CLO originally issued in June
2022 that is managed by Onex Credit Partners LLC. At the same time,
S&P withdrew its ratings on the original class A-1, A-2, B, C, D,
and E debt following payment in full.
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. 27, 2026.
-- The reinvestment period was extended to Aug. 27, 2029.
-- The legal final maturity dates was extended to Oct. 20, 2037.
-- The target initial par amount will remain at $400.00 million.
There will be no additional effective date or ramp-up period, and
the first payment date will be Oct. 21, 2024.
-- The required minimum overcollateralization ratios will be
amended.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
OCP CLO 2022-24 Ltd./OCP CLO 2022-24 LLC
Class A-1R, $256.00 million: AAA (sf)
Class A-2R, $8.00 million: AAA (sf)
Class B-1R, $30.00 million: AA (sf)
Class B-2R, $10.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-1R (deferrable), $24.00 million: BBB (sf)
Class D-2R (deferrable), $4.00 million: BBB- (sf)
Class E-R (deferrable), $12.00 million: BB- (sf)
Ratings Withdrawn
OCP CLO 2022-24 Ltd./OCP CLO 2022-24 LLC
Class A-1 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A+ (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
Other Debt
OCP CLO 2022-24 Ltd./OCP CLO 2022-24 LLC
Subordinated notes, $42.15 million: Not rated
NR--Not rated
OCTAGON 60: Fitch Affirms 'BB-sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has affirmed all rated classes of notes for Octagon
60, Ltd. (Octagon 60) and Octagon 68, Ltd. (Octagon 68). The Rating
Outlooks on the rated notes remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Octagon 60, Ltd.
A-1 675935AA8 LT AAAsf Affirmed AAAsf
A-2 675935AC4 LT AAAsf Affirmed AAAsf
B 675935AE0 LT AAsf Affirmed AAsf
C 675935AG5 LT Asf Affirmed Asf
D-1 675935AJ9 LT BBB-sf Affirmed BBB-sf
D-2 675935AL4 LT BBB-sf Affirmed BBB-sf
E 675936AA6 LT BB-sf Affirmed BB-sf
Octagon 68, Ltd.
A-1 675949AC5 LT AAAsf Affirmed AAAsf
A-2 675949AE1 LT AAAsf Affirmed AAAsf
B 675949AG6 LT AAsf Affirmed AAsf
C 675949AJ0 LT Asf Affirmed Asf
D 675949AL5 LT BBB-sf Affirmed BBB-sf
E 675950AA7 LT BB-sf Affirmed BB-sf
Transaction Summary
Octagon 60 and Octagon 68 are broadly syndicated collateralized
loan obligations (CLOs) managed by Octagon Credit Investors, LLC.
Octagon 60 closed in October 2022 and will exit its reinvestment
period in October 2027. Octagon 68 closed in November 2023 and will
exit its reinvestment period in October 2028. Both CLOs are secured
primarily by first-lien senior secured leveraged loans.
KEY RATING DRIVERS
Stable Portfolio Performance and Sufficient Credit Enhancement
The affirmations are driven by stable portfolio performance and
sufficient credit enhancement. As of July 2024 reporting, the
credit quality of the Octagon 60 portfolio was at the 'B'/'B-'
rating level, compared with a 'B' rating level at last review. The
credit quality of the Octagon 68 portfolio was at the 'B' rating
level, compared with a 'B+'/'B' rating level at closing. The
average Fitch weighted average rating factor for both portfolios
slightly increased to 24.6 from 23.5 at last review. There are no
defaulted assets in either portfolio.
The portfolios hold 345 obligors on average, with the top 10
comprising 8.7% of the portfolio on average. The average exposure
to issuers with a Negative Outlook and Fitch's watchlist is 14.8%
and 5.9%, respectively. First-lien loans, cash and eligible
investments comprise 98.1% of the portfolios.
All collateral quality tests, concentration limitations, and
coverage tests are in compliance for both portfolios.
Cash Flow Analysis
Fitch conducted updated cash flow analyses based on the newly run
Fitch Stressed Portfolios (FSP) since both transactions are still
in their reinvestment periods. The FSP analysis stressed the
current portfolios to account for permissible concentration and CQT
limits. The FSP analyses was updated to stress weighted average
life to 6.25 and 7.30 years for Octagon 60 and Octagon 68,
respectively. The weighted average spread, weighted average
recovery rate and weighted average rating factor were stressed to
the current Fitch test matrix points for both Octagon 60 and
Octagon 68.
The ratings are in line with their respective model-implied ratings
(MIRs) as defined in Fitch's "CLOs and Corporate CDOs Rating
Criteria." The Stable Outlooks reflect Fitch's expectation that the
notes have sufficient level of credit protection to withstand
potential deterioration in the credit quality of the portfolio in
stress scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed;
- A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead downgrades of up to three notches
for Octagon 60 and Octagon 68, based on the MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance;
- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating levels
for the current portfolio, would lead to upgrades of up to five
notches for Octagon 60 and Octagon 68, based on the MIRs. Upgrade
scenarios are not applicable for 'AAAsf' rated notes as those
tranches are already at the highest rating level.
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 or information on the risk-presenting entities.
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.
OCTAGON INVESTMENT XVI: S&P Raises E-R Notes Rating to BB- (sf)
---------------------------------------------------------------
S&P Global Ratings took various rating actions on 30 classes of
debt from Octagon Investment Partners XV Ltd., Octagon Investment
Partners XVI Ltd., Octagon Investment Partners XXII Ltd., Octagon
Investment Partners 27 Ltd., and Octagon Investment Partners 35
Ltd., U.S. broadly syndicated CLO transactions managed by Octagon
Credit Investors LLC. The reviewed ratings included eight that were
placed on CreditWatch negative on May 31, 2024, due to a
combination of decreased overcollateralization (O/C) levels, an
increase in defaults and obligations rated in the 'CCC' category,
and indicative cash flow results at that point of time. Of those on
CreditWatch negative, S&P lowered three, affirmed five, and removed
all from CreditWatch negative. Additionally, of the ratings not on
CreditWatch, S&P raised 10 and affirmed 12.
S&P said, "The rating actions follow our review of each
transaction's performance using data from the July 2024 trustee
report. In our 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.
"The transactions have all exited their reinvestment period and are
paying down the debt in the order specified in their respective
documents. As a result of paydowns and support changes in the
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.
"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
each 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 incorporate other considerations into its decision
to raise, lower, affirm, or limit rating movements. These
considerations typically include:
-- Whether the CLO is still reinvesting post reinvestment period
or paying down its debt;
-- 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; 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 downgrades primarily reflect the class's indicative cash flow
results and decreased credit support as a result of principal
losses and/or negative migration in portfolio credit quality.
The affirmations reflect S&P's view that the available credit
enhancement for each respective class is still commensurate with
the assigned ratings.
Although S&P's cash flow analysis indicated a different rating for
some classes of debt, it limited the upgrade or downgrade of the
ratings after considering one or more qualitative factors listed
above.
S&P will continue to review whether, in its view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and will take rating actions as we deem
necessary.
Ratings List
RATING
ISSUER CUSIP CLASS TO FROM
Octagon
Investment 67590EBG8 A-1-RR AAA (sf) AAA (sf)
Partners
XV Ltd.
RATIONALE: Cash flow passes at the current rating level.
Octagon
Investment 67590EAS3 A-2-R NR NR
Partners
XV Ltd.
RATIONALE: Not rated.
Octagon
Investment 67590EBJ2 B-RR AA+ (sf) AA (sf)
Partners
XV Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows. Although S&P's base-case analysis indicated a higher
rating, our rating action considered the current credit enhancement
level, which is commensurate with the raised rating rather than the
higher rating.
Octagon
Investment 67590EBL7 C-RR A+ (sf) A (sf)
Partners
XV Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows. Although S&P's base-case analysis indicated a higher
rating, our rating action considered the current credit enhancement
level, which in our opinion is commensurate with the raised rating
rather than the higher rating.
Octagon
Investment 67590EBN3 D-RR BBB- (sf) BBB- (sf)
Partners
XV Ltd.
RATIONALE: Senior note paydowns and passing cash flows. Although
S&P's base-case analysis indicated a higher rating, its affirmation
considers the sensitivity test results on the elevated exposures to
assets rated in the 'CCC' rating category and assets with
distressed market prices, and also considers its current credit
enhancement level, which in our opinion is commensurate with the
affirmed rating.
Octagon
Investment 67590EBA1 E-R BB- (sf) BB- (sf)/
Partners Watch Neg
XV Ltd.
RATIONALE: Senior note paydowns and passing cash flows.
Octagon
Investment 67590FAA9 Sub notes NR NR
Partners
XV Ltd.
RATIONALE: Not rated.
Octagon
Investment 67590BAQ3 A-1-R AAA (sf) AAA (sf)
Partners
XVI Ltd.
RATIONALE: Cash flow passes at the current rating level.
Octagon
Investment 67590BAS9 A-2-R NR NR
Partners
XVI Ltd.
RATIONALE: Not rated.
Octagon
Investment 67590BAU4 B-R AA+ (sf) AA (sf)
Partners
XVI Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows.
Octagon
Investment 67590BAW0 C-R A (sf) A (sf)
Partners
XVI Ltd.
RATIONALE: Senior note paydowns and passing cash flows. Although
S&P's base-case analysis indicated a higher rating, its affirmation
considers the sensitivity test results on the elevated exposures to
assets rated in the 'CCC' rating category and assets with
distressed market prices, and also considers its current credit
enhancement level, which in our opinion is commensurate with the
affirmed rating.
Octagon
Investment 67590BAY6 D-R BBB- (sf) BBB- (sf)
Partners
XVI Ltd.
RATIONALE: Senior note paydowns and passing cash flows. Although
S&P's base-case analysis indicated a higher rating, its affirmation
considers the sensitivity test results on the elevated exposures to
assets rated in the 'CCC' rating category and assets with
distressed market prices, and also considers its current credit
enhancement level, which in our opinion is commensurate with the
affirmed rating.
Octagon
Investment 67590DAG1 E-R B+ (sf) BB- (sf)/
Partners Watch Neg
XVI Ltd.
RATIONALE: Failing base-case cash flows at the previous rating
level. Current credit enhancement level is in S&P's opinion
commensurate with the lowered rating.
Octagon
Investment 67590DAJ5 F-R B- (sf) B- (sf)/
Partners Watch Neg
XVI Ltd.
RATIONALE: Although S&P's base-case analysis indicated a lower
rating, it affirmed the 'B-' rating as it decided that this class
does not fit S&P's 'CCC' definition yet based on its low exposure
to 'CCC' and 'CCC-' rated assets and its current credit enhancement
level, which in its opinion can withstand a steady-state scenario
without being dependent on favorable conditions to meet its
financial commitments.
Octagon
Investment 67590DAL0 Sub notes NR NR
Partners
XVI Ltd.
RATIONALE: Not rated.
Octagon
Investment 67572YBN1 X-RR NR NR
Partners
XXII Ltd.
RATIONALE: Not rated. Paid in full.
Octagon
Investment 67572YBQ4 A-RR AAA (sf) AAA (sf)
Partners
XXII Ltd.
RATIONALE: Cash flow passes at the current rating level.
Octagon
Investment 67572YBS0 B-RR AAA (sf) AA (sf)
Partners
XXII Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows. Current credit enhancement level is in our opinion
commensurate with the raised rating.
Octagon
Investment 67572YBU5 C-RR A+ (sf) A (sf)
Partners
XXII Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows. Although S&P's base-case analysis indicated a higher
rating, its rating action considered the current credit enhancement
level, which in its opinion is commensurate with the raised rating
rather than the higher rating.
Octagon
Investment 67572YBW1 D-RR BBB (sf) BBB- (sf)
Partners
XXII Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows. Although S&P's base-case analysis indicated a higher
rating, its rating action considered the current credit enhancement
level, which in its opinion is commensurate with the raised rating
rather than the higher rating.
Octagon
Investment 67574QAL1 E-RR BB- (sf) BB- (sf)/
Partners Watch Neg
XXII Ltd.
RATIONALE: Although S&P's base-case analysis indicated a lower
rating, it affirmed the rating based on the margin of failure, the
passing trustee O/C test, and the current credit enhancement level,
which in its opinion is commensurate with the affirmed rating
rather than the lower rating indicated by the base-case analysis.
Octagon
Investment 67574QAN7 F-RR B- (sf) B- (sf)/
Partners Watch Neg
XXII Ltd.
RATIONALE: Although S&P's base-case analysis indicated a lower
rating, it affirmed the 'B-' rating as it decided that this class
does not fit S&P's 'CCC' definition yet based on its low exposure
to 'CCC' and 'CCC-' rated assets and its current credit enhancement
level, which in its opinion can withstand a steady-state scenario
without being dependent on favorable conditions to meet its
financial commitments.
Octagon
Investment 67574QAG2 Sub notes NR NR
Partners
XXII Ltd.
RATIONALE: Not rated.
Octagon
Investment 67590XAJ1 A-1-R AAA (sf) AAA (sf)
Partners
27 Ltd.
RATIONALE: Cash flow passes at the current rating level.
Octagon
Investment 67590XAL6 A-2-R NR NR
Partners
27 Ltd.
RATIONALE: Not rated.
Octagon
Investment 67590XAN2 B-1-R AA+ (sf) AA (sf)
Partners
27 Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows.
Octagon
Investment 67590XAU6 B-2-R AA+ (sf) AA (sf)
Partners
27 Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows.
Octagon
Investment 67590XAQ5 C-R A (sf) A (sf)
Partners
27 Ltd.
RATIONALE: Senior note paydowns and passing cash flows. Although
S&P's base-case analysis indicated a higher rating, its affirmation
considers the sensitivity test results on the elevated exposures to
assets rated in the 'CCC' rating category and assets with
distressed market prices, and also considers its current credit
enhancement level, which in S&P's opinion is commensurate with the
affirmed rating.
Octagon
Investment 67590XAS1 D-R BBB- (sf) BBB- (sf)
Partners
27 Ltd.
RATIONALE: Senior note paydowns and passing cash flows. Although
S&P's base-case analysis indicated a higher rating, its affirmation
considers the sensitivity test results on the elevated exposures to
assets rated in the 'CCC' rating category and assets with
distressed market prices, and also considers its current credit
enhancement level, which in its opinion is commensurate with the
affirmed rating.
Octagon
Investment 67591CAE7 E-R B+ (sf) BB- (sf)/
Partners Watch Neg
27 Ltd.
RATIONALE: Failing base-case cash flows at the previous rating
level. Current credit enhancement level is in S&P's opinion
commensurate with the lowered rating.
Octagon
Investment 67591CAG2 F-R B- (sf) B- (sf)/
Partners Watch Neg
27 Ltd.
RATIONALE: Although S&P's base-case analysis indicated a lower
rating, it affirmed the 'B-' rating as it decided that this class
does not fit its 'CCC' definition yet based on its low exposure to
CCC and CCC- rated assets and its current credit enhancement level,
which in its opinion can withstand a steady-state scenario without
being dependent on favorable conditions to meet its financial
commitments.
Octagon
Investment 67591CAC1 Sub notes NR NR
Partners
27 Ltd.
RATIONALE: Not rated.
Octagon
Investment 67591TAA8 A-1a AAA (sf) AAA (sf)
Partners
35 Ltd.
RATIONALE: Cash flow passes at the current rating level.
Octagon
Investment 67591TAC4 A-1b NR NR
Partners
35 Ltd.
RATIONALE: Not rated.
Octagon
Investment 67591TAE0 A-2 AA+ (sf) AA (sf)
Partners
35 Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows.
Octagon
Investment 67591TAG5 B A+ (sf) A (sf)
Partners
35 Ltd.
RATIONALE: Senior note paydowns, O/C improvement, and passing
cash flows. Although S&P's base-case analysis indicated a higher
rating, its rating action considered the current credit enhancement
level, which in its opinion is commensurate with the raised rating
rather than the higher rating.
Octagon
Investment 67591TAJ9 C BBB- (sf) BBB- (sf)
Partners
35 Ltd.
RATIONALE: Senior note paydowns and passing cash flows. Although
S&P's base-case analysis indicated a higher rating, its affirmation
considers the sensitivity test results on the elevated exposures to
assets rated in the 'CCC' rating category and assets with
distressed market prices, and also considers its current credit
enhancement level, which in its opinion is commensurate with the
affirmed rating.
Octagon
Investment 67591RAA2 D B+ (sf) BB- (sf)/
Partners Watch Neg
35 Ltd.
RATIONALE: Considered the sensitivity test results and the
current credit enhancement level, which in S&P's opinion is
commensurate with the lowered rating.
Octagon
Investment 67591RAE4 Combination A+ (sf) A+ (sf)
Partners Notes
35 Ltd.
RATIONALE: Although S&P's base-case analysis indicated a higher
rating, its affirmation considers the performance of the respective
parent CLOs, including their 'CCC' exposure; the potential
volatility of the cash flows; the dependence on subordinated notes;
and expected amortization schedule as qualitative factors.
Octagon
Investment 67591RAC8 Sub notes NR NR
Partners
35 Ltd.
RATIONALE: Not rated.
O/C--Overcollateralization.
NR--Not rated.
OFSI BSL XIV: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------
S&P Global Ratings assigned its 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 ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
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
PALMER SQUARE 2022-3: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
-------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Palmer
Square CLO 2022-3, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Palmer Square
CLO 2022-3, LTD.
A-1R LT NRsf New Rating NR(EXP)sf
A-2R LT AAAsf New Rating AAA(EXP)sf
B-1R LT AA+sf New Rating AA+(EXP)sf
B-2R LT AAsf New Rating AA(EXP)sf
C-R LT Asf New Rating A(EXP)sf
D-1R LT BBB-sf New Rating BBB-(EXP)sf
D-2R LT BBB-sf New Rating BBB-(EXP)sf
E-R LT BB-sf New Rating BB-(EXP)sf
Transaction Summary
Palmer Square CLO 2022-3, Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) managed by Palmer Square
Europe Capital Management LLC that originally closed in August
2022. The CLO's secured notes will be refinanced on Aug. 28, 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 $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+'/'B', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 23.04, versus a maximum covenant, in
accordance with the initial expected matrix point of 25. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.6% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.57% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.4%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The 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
'BB+sf' and 'AA-sf' for class B-1R, between 'BB+sf' and 'A+sf' for
class B-2R, between 'B+sf' and 'BBB+sf' for class C-R, 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-1R, 'AAAsf' for class B-2R,
'AA+sf' for class C-R, 'A+sf' for class D-1R, 'A-sf' for class
D-2R, 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 Palmer Square CLO
2022-3 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.
PALMER SQUARE 2022-3: Fitch Assigns BB-(EXP)sf Rating on E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Palmer Square CLO 2022-3, Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Palmer Square
CLO 2022-3, LTD.
A-1R LT NR(EXP)sf Expected Rating
A-2R LT AAA(EXP)sf Expected Rating
B-1R LT AA+(EXP)sf Expected Rating
B-2R LT AA(EXP)sf Expected Rating
C-R LT A(EXP)sf Expected Rating
D-1R LT BBB-(EXP)sf Expected Rating
D-2R LT BBB-(EXP)sf Expected Rating
E-R LT BB-(EXP)sf Expected Rating
Transaction Summary
Palmer Square CLO 2022-3, Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) managed by Palmer Square
Europe Capital Management LLC that originally closed in August
2022. The CLO's secured notes will be refinanced on Aug. 28, 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 $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+'/'B', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 23.04, versus a maximum covenant, in
accordance with the initial expected matrix point of 25. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.6% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.57% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.4%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The 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
'BB+sf' and 'AA-sf' for class B-1R, between 'BB+sf' and 'A+sf' for
class B-2R, between 'B+sf' and 'BBB+sf' for class C-R, 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-1R, 'AAAsf' for class B-2R,
'AA+sf' for class C-R, 'A+sf' for class D-1R, 'A-sf' for class
D-2R, 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 Palmer Square CLO
2022-3 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.
PALMER SQUARE 2024-3: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Palmer Square CLO 2024-3
Ltd./Palmer Square CLO 2024-3 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 Palmer Square Capital Management
LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Palmer Square CLO 2024-3 Ltd./Palmer Square CLO 2024-3 LLC
Class A, $320.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D-1 (deferrable), $30.00 million: BBB- (sf)
Class D-2 (deferrable), $5.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $46.30 million: Not rated
PARK AVENUE 2016-1: S&P Lowers Class D-R Notes Rating to 'B+ (sf)'
------------------------------------------------------------------
S&P Global Ratings took various rating actions on five classes of
debt from Park Avenue Institutional Advisers CLO Ltd. 2016-1, a
U.S. broadly syndicated CLO transaction managed by Park Avenue
Institutional Advisers LLC. S&P raised its ratings on the class
A-2-R and B-R debt and, at the same time, lowered its rating on the
class D-R debt and removed it from CreditWatch, where we placed it
with negative implications on May 31, 2024. S&P also affirmed its
ratings on the class A-1-R and C-R debt from the same transaction.
S&P said, "The rating actions follow our review of the
transaction's performance using data from the July 2024 trustee
report. Although the same portfolio backs all of the tranches,
there can be circumstances such as this one, where the ratings on
the tranches may move in opposite directions due to support changes
in the portfolio. This transaction is experiencing opposing rating
movements because it experienced both principal paydowns (which
increased the senior credit support) and faced an increase in
defaults and a decline in credit quality (which decreased the
junior credit support)."
The transaction has paid down $82.88 million to the class A-1-R
debt since our August 2018 rating actions. Following are the
changes in the reported overcollateralization (O/C) ratios since
the September 2018 trustee report:
-- The class A O/C ratio improved to 142.29% from 137.34%.
-- The class B O/C ratio declined to 121.51% from 122.35%.
-- The class C O/C ratio declined to 111.50% from 114.66%.
-- The class D O/C ratio declined to 105.31% from 109.74%.
While the class A O/C ratio experienced a positive movement due to
the lower balances of the senior debt, the O/C ratios for class B
and below declined largely due to par losses and haircuts following
an increase in the portfolio's exposure to defaulted assets.
Though paydowns have helped the senior classes, the collateral
portfolio's credit quality has slightly deteriorated since our last
rating actions. Collateral obligations with ratings in the 'CCC'
category have increased, with $17.68 million reported as of the
July 2024 trustee report, compared with $12.74 million reported as
of the September 2018 trustee report. Over the same period, the par
amount of defaulted collateral has increased to $4.00 million from
$0.00 million.
However, despite the slightly increased exposure in the 'CCC'
category and defaulted collateral, the transaction, especially the
senior tranches, has benefited from deleveraging and a drop in the
weighted average life due to the underlying collateral's seasoning,
with 3.62 years reported as of the July 2024 trustee report
compared with 5.41 years reported at the time of our August 2018
rating actions.
The upgraded ratings reflect the improved credit support available
to the debt at the prior rating levels.
The lowered rating reflects deteriorated credit quality of the
underlying portfolio and the decrease in credit support available
to the class D-R debt.
The affirmed ratings reflect adequate credit support at the current
rating levels, though any further deterioration in the credit
support available to the debt could results in further ratings
changes.
S&P said, "Although our cash flow analysis indicated higher ratings
for the class A-2-R, B-R, and C-R debt, our rating actions
considered their existing credit support when compared with
similarly rated CLO tranches and additional sensitivity runs that
considered the exposure to lower-quality assets and distressed
prices we noticed in the portfolio.
"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 debt remain consistent with the credit enhancement
available to support them and will take rating actions as we deem
necessary."
Ratings Raised
Park Avenue Institutional Advisers CLO Ltd. 2016-1
Class A-2-R to 'AA+ (sf)' from 'AA (sf)'
Class B-R to 'A+ (sf)' from 'A (sf)'
Rating Lowered And Removed From CreditWatch Negative
Park Avenue Institutional Advisers CLO Ltd. 2016-1
Class D-R to 'B+ (sf)' from 'BB- (sf)/Watch Neg'
Ratings Affirmed
Park Avenue Institutional Advisers CLO Ltd. 2016-1
Class A-1-R: AAA (sf)
Class C-R: BBB- (sf)
PARK AVENUE 2019-2: S&P Lowers Class D-R Notes Rating to BB- (sf)
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings on two classes of debt from
Park Avenue Institutional Advisers CLO Ltd. 2019-1 and 2019-2, and
removed them from CreditWatch, where S&P had placed them with
negative implications on May 31, 2024. At the same time, S&P
affirmed its ratings on nine classes from the transactions. The
transactions are U.S. broadly syndicated CLOs managed by Park
Avenue Institutional Advisers LLC.
The rating actions follow its review of each transaction's
performance using data from the July 2, 2024, (series 2019-2) and
July 11, 2024, (series 2019-1) trustee reports. In its review, S&P
analyzed each transaction's performance and cash flows, and applied
our global corporate CLO criteria in its rating decisions.
The class D debt from both transactions were placed on CreditWatch
negative due to an increase in defaults and/or 'CCC' rated assets,
and the indicative cash flow results. The transactions have
experienced par losses that reduced the credit subordination to the
class D debt, resulting in a decline in the overcollateralization
(O/C) test results. The series 2019-1 class D debt is failing its
O/C test, according to the July 11, 2024, 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 the rated
outstanding classes all 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 debt;
-- 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 downgrades primarily reflect the classes' indicative cash flows
results and decreased credit support due to principal losses and/or
negative migration in portfolio credit quality.
S&P said, "The affirmations reflect our view that each class's
available credit enhancement is still commensurate with the
assigned rating. Although our cash flow analysis has indicated a
different rating for some of the rated classes, we affirmed the
ratings after considering one or more of the qualitative factors
listed above."
The key driving factors for each rating action are listed in the
table below.
S&P will continue to review whether the ratings assigned to the
debt remain consistent with the credit enhancement available to
support them and will take rating actions as we deem necessary.
Ratings list
RATING
ISSUER CLASS CUSIP TO FROM
Park Avenue
Institutional A-1 70017WAA1 AAA (sf) AAA (sf)
Advisers CLO
Ltd. 2019-1
MAIN RATIONALE: Currently paying down and cash flows passing at
current rating level with additional cushion.
Park Avenue
Institutional A-2A 70017WAC7 AA (sf) AA (sf)
Advisers CLO
Ltd. 2019-1
MAIN RATIONALE: Passing cash flows at the current rating level.
Although S&P's base-case analysis indicated a higher rating, the
rating action considered the current credit enhancement level,
which is commensurate with the affirmed rating rather than the
higher rating.
Park Avenue
Institutional A-2B 70017WAE3 AA (sf) AA (sf)
Advisers CLO
Ltd. 2019-1
MAIN RATIONALE: Passing cash flows at the current rating level.
Although S&P's base-case analysis indicated a higher rating, the
rating action considered the current credit enhancement level,
which is commensurate with the affirmed rating rather than the
higher rating.
Park Avenue
Institutional B 70017WAG8 A (sf) A (sf)
Advisers CLO
Ltd. 2019-1
MAIN RATIONALE: Passing cash flows at the current rating level.
Although S&P's base-case analysis indicated a higher rating, the
rating action considered the current credit enhancement level,
which is commensurate with the affirmed rating rather than the
higher rating.
Park Avenue
Institutional C 70017WAJ2 BBB- (sf) BBB- (sf)
Advisers CLO
Ltd. 2019-1
MAIN RATIONALE: Passing cash flows at the current rating level.
Although S&P's base-case analysis indicated a higher rating, the
rating action considered the current credit enhancement level,
which is commensurate with the affirmed rating rather than the
higher rating.
Park Avenue
Institutional D 70017XAA9 B+ (sf) BB- (sf)/
Advisers CLO Watch Neg
Ltd. 2019-1
MAIN RATIONALE: Failing base-case cash flows at previous rating
level. Credit enhancement commensurate at new rating level.
Park Avenue
Institutional A-1-R 70018AAJ9 AAA (sf) AAA (sf)
Advisers CLO
Ltd. 2019-2
MAIN RATIONALE: Cash flows passing at current rating level with
additional cushion.
Park Avenue
Institutional A-2-R 70018AAL4 AA (sf) AA (sf)
Advisers CLO
Ltd. 2019-2
MAIN RATIONALE: Passing cash flows at the current rating level.
Although S&P's base-case analysis indicated a higher rating, the
rating action considered the current credit enhancement level,
which is commensurate with the affirmed rating rather than the
higher rating.
Park Avenue
Institutional B-R 70018AAN0 A (sf) A (sf)
Advisers CLO
Ltd. 2019-2
MAIN RATIONALE: Passing cash flows at the current rating level.
Although S&P's base-case analysis indicated a higher rating, the
rating action considered the current credit enhancement level,
which is commensurate with the affirmed rating rather than the
higher rating.
Park Avenue
Institutional C-R 70018AAQ3 BBB- (sf) BBB- (sf)
Advisers CLO
Ltd. 2019-2
MAIN RATIONALE: Passing cash flows at the current rating level.
Although S&P's base-case analysis indicated a higher rating, the
rating action considered the current credit enhancement level,
which is commensurate with the affirmed rating rather than the
higher rating.
Park Avenue
Institutional D-R 70018BAE8 B+ (sf) BB- (sf)/
Advisers CLO Watch Neg
Ltd. 2019-2
MAIN RATIONALE: Insufficient credit enhancement at the current
rating level, sensitivity test results, and very low cushion at
base cash flow runs.
PMT LOAN 2022-INV1: Moody's Upgrades Rating on Cl. B-5 Certs to B1
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 10 bonds from PMT Loan
Trust 2022-INV1. The collateral backing this deal consists of prime
conforming, investment property mortgage loans that were originated
by PennyMac Corp. (PennyMac).
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: PMT Loan Trust 2022-INV1
Cl. A-28, Upgraded to Aaa (sf); previously on Mar 24, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-29, Upgraded to Aaa (sf); previously on Mar 24, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-30, Upgraded to Aaa (sf); previously on Mar 24, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-X30*, Upgraded to Aaa (sf); previously on Mar 24, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. A-X31*, Upgraded to Aaa (sf); previously on Mar 24, 2022
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Mar 24, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Mar 24, 2022 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Mar 24, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Mar 24, 2022
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Mar 24, 2022 Definitive
Rating Assigned B2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool. The
transaction Moody's reviewed continues to display strong collateral
performance, with minimal amount of cumulative loss to date (less
than .01%) and a small number of loans in delinquency. In addition,
enhancement levels for all tranches have grown as the pool has
amortized. The credit enhancement since closing has relative growth
of 10.8% for the non-exchangeable tranches Moody's 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 this deal
as those classes are already at the highest achievable levels
within Moody's rating scale.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in 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.
PRET TRUST 2024-RPL2: Fitch Assigns 'Bsf' Rating on Cl. B-2 Notes
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Fitch Ratings has assigned final ratings and Rating Outlooks to the
residential mortgage-backed notes to be issued by PRET 2024-RPL2
Trust (PRET 2024-RPL2).
Entity/Debt Rating Prior
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PRET 2024-RPL2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT AAsf New Rating AA(EXP)sf
A-4 LT Asf New Rating A(EXP)sf
A-5 LT BBBsf New Rating BBB(EXP)sf
M-1 LT Asf New Rating A(EXP)sf
M-2 LT BBBsf New Rating BBB(EXP)sf
SA LT NRsf New Rating NR(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
B-4 LT NRsf New Rating NR(EXP)sf
B-5 LT NRsf New Rating NR(EXP)sf
B LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
PT LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
CERT LT NRsf New Rating NR(EXP)sf
RISKRETEN LT NRsf New Rating NR(EXP)sf
Transaction Summary
The PRET 2024-RPL2 notes are supported by 2,190 seasoned performing
and reperforming loans (RPLs) that had a balance of $409.73 million
as of the July 31, 2024 cutoff date.
The notes are secured by a pool of fixed, step-rate and
adjustable-rate mortgage (ARM) loans, some of which have an initial
interest-only (IO) period, that are primarily fully amortizing with
original terms to maturity of 30 years. The loans are secured by
first liens primarily on single-family residential properties,
townhouses, condominiums, co-ops, manufactured housing, multifamily
homes, and raw land.
In the pool, 100% of the loans are seasoned performing and
re-performing loans. Of the loans, 87.0% are exempt from the
qualified mortgage (QM) rule as they are investment properties or
were originated prior to the Ability to Repay (ATR) rule taking
effect in January 2014.
Selene Finance LP (Selene) will service 100.0% of the loans in the
pool; Fitch rates Selene 'RPS3+'.
There is London Interbank Offered Rate (LIBOR) exposure in this
transaction. The majority of the loans in the collateral pool
comprise fixed-rate mortgages, though 9.9% of the pool comprises
step-rate loans or loans with an adjustable rate. Of the pool, 5.9%
consists of ARM loans that reference the six-month or one-year
LIBOR index.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 12.1% above a long-term sustainable level (vs.
11.5% on a national level as of 1Q24, up 0.4% 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 5.9% YoY nationally as of May 2024 despite modest
regional declines but are still being supported by limited
inventory.
Seasoned and Reperforming Credit Quality (Mixed): The collateral
consists of 2,190 loans, totaling $409.73 million, which includes
deferred amounts. The loans are seasoned approximately 187 months
in aggregate, according to Fitch, as calculated from origination
date (182 months per the transaction documents). Specifically, the
pool comprises 90.1% fully amortizing fixed-rate loans, 6.9% fully
amortizing ARM loans, and 3.0% STEP loans that were treated as ARM
loans.
The borrowers have a moderate credit profile, with a 653 Fitch
model FICO score (655 FICO per the transaction documents). The
transaction has a weighted average (WA) sustainable loan-to-value
(sLTV) ratio of 56.8%, as determined by Fitch. The debt to income
ratio (DTI) was not provided for the loans in the transaction as a
result, Fitch applied a 45% DTI to all loans.
According to Fitch, the pool consists of 83.5% of loans where the
borrower maintains a primary residence, while 16.5% consists of
loans for investor properties or second homes. For loans with an
unknown occupancy, Fitch treated these loans as investor
properties. In Fitch's analysis, Fitch considered, 13.0% of the
loans to be non-QM loans and 0.03% to be safe-harbor QM loans,
while the remaining 87.0% were considered to be exempt from QM
status. In its analysis, Fitch considered loans originated after
January 2014 to be non-QM since they are no longer eligible to be
in government-sponsored enterprise (GSE) pools.
In Fitch's analysis, 82.6% of the loans are to single-family homes,
townhouses, and planned unit developments (PUDs), 7.5% are to
condos or coops, 9.9% are to manufactured housing or multifamily
homes, and less than 0.1% are for land. In the analysis, Fitch
treated manufactured properties as multifamily and the probability
of default (PD) was increased for these loans as a result.
The pool contains 22 loans over $1.0 million, with the largest loan
at $6.32 million. Based on the transaction documents 0.0% of the
loans have subordinate financing, however based on the due
diligence findings, Fitch considered 3.3% of the loans to have
subordinate financing. Specifically, Fitch treated PACE loan
amounts as subordinate financing since the borrower owes this
amount and it would need to be repaid in order to maintain the lien
status.
In addition, for loans missing original appraised values, Fitch
assumed these loans had an LTV of 80% and a combined LTV of 100%
which further explains the discrepancy in the subordinate financing
percentages per Fitch's analysis vs per the transaction documents.
Fitch viewed all the loans in the pool to be in the first lien
position based on data provided in the tape and confirmation from
the servicer on the lien position.
Of the pool, 95.2% of the loans were current as of July 31, 2024.
Overall, the pool characteristics resemble RPL collateral;
therefore, the pool was analyzed using Fitch's RPL model, and Fitch
extended liquidation timelines as it typically does for RPL pools.
Approximately 20.2% of the pool is concentrated in California. The
largest metropolitan statistical area (MSA) concentration is in the
New York MSA at 19.0%, followed by the Los Angeles MSA at 8.3% and
the Miami MSA at 4.8%. The top three MSAs account for 32.1% of the
pool. As a result, there was no penalty applied for geographic
concentration.
Sequential Deal Structure (Positive): The transaction utilizes a
sequential payment structure with no advancing of delinquent
principal and interest (P&I) payments. The transaction is
structured with subordination to protect more senior classes from
losses and has a minimal amount of excess interest, which can be
used to repay current or previously allocated realized losses and
cap carryover shortfall amounts.
The interest and principal waterfall prioritize the payment of
interest to the A-1 and A-2 classes, which is supportive of class
A-1 receiving timely interest and class A-2 receiving ultimate if
not timely interest. Fitch considers timely interest for 'AAAsf'
rated classes and to ultimate interest for 'AAsf' to 'Bsf' category
rated classes.
The class A-1 notes have a coupon based on a fixed rate that is
capped at the net weighted average coupon (WAC) and the class A-2,
M and B notes have a coupon based on the net WAC. All expenses are
coming out of the net WAC.
Losses are allocated to classes reverse sequentially starting with
class B-5. Classes will be written down if the transaction is
undercollateralized.
No Advancing (Mixed): The servicer will not be advancing delinquent
monthly payments of P&I. Because P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level loss severities
(LS) are less for this transaction than for those where the
servicer is obligated to advance P&I.
To provide liquidity and ensure timely interest will be paid to the
'AAAsf' rated classes and ultimate interest on the remaining rated
classes, principal will need to be used to pay for interest accrued
on delinquent loans. This will result in stress on the structure
and the need for additional credit enhancement (CE) compared with a
pool with limited advancing. These structural provisions and cash
flow priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' rated classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
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 42.9%, 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 ProTitle and AMC. The third-party due diligence
described in Form 15E focused on the following areas: compliance
review, data integrity, servicing review and title review. The
scope of the review was consistent with Fitch's criteria. Fitch
considered this information in its analysis. Based on the results
of the 100% due diligence performed on the pool, Fitch adjusted the
expected losses.
A large portion of the loans received 'C' and 'D' grades mainly due
to missing documentation that resulted in the ability to test for
certain compliance issues. As a result, Fitch applied negative loan
level adjustments, which increased the 'AAAsf' losses by 1.25% and
are further detailed in the Third-Party Due Diligence section of
the presale.
Fitch determined there were 21 loans with material TRID issues; a
$15,500 loss severity penalty was given to loans with material TRID
issues, though this did not have any impact on the rounded losses.
A ProTitle search found outstanding liens that pre-date the
mortgage. It was confirmed the majority of these liens are retired
and nothing is owed. There are 205 loans in the pool have a total
of approximately $2,408,018 (per the 15E) in potentially superior
post origination recorded liens/judgments.
In addition, there are 48 loans that have a clean title search but
there may be potential liens that could claim priority over the
mortgage in the pool that total $105,580 (per the 15E). The trust
will be responsible for these amounts. As a result, Fitch increased
the loss severity by these amounts since the trust would be
responsible for reimbursing the servicer these amounts. This did
not have any impact on the rounded losses.
Fitch received confirmation from the servicer on the current lien
status of the loans in the pool. The servicer regularly orders
these searches as part of its normal business practice and resolves
issues as they arise. No additional adjustment was made as a
result. The title report did show loans in the pool to not be in a
first lien position, but the servicer confirmed that they are in a
first lien status and that they will follow standard servicing
practices to maintain the lien position disclosed in the tape. As a
result of the valid title policy and the servicer monitoring the
lien status, Fitch treated 100% of the pool as first liens.
The custodian is actively tracking down missing documents. In the
event a missing document materially delays or prevents a
foreclosure, the sponsor will have 90 days to find the document or
cure the issue. If the loan seller cannot cure the issue or find
the missing documents, they will repurchase the loan at the
repurchase price. Due to this circumstance, Fitch only extended
timelines for missing documents.
A pay history review was conducted on a sample set of loans by AMC.
The review confirmed the pay strings are accurate, and the servicer
confirmed the payment history was accurate for all the loans. As a
result, 100% of the pool's payment history was confirmed.
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 ProTitle and AMC to perform the review. Loans reviewed
under this engagement were given initial and final compliance
grades. A portion of the loans in the pool received a credit or
valuation review.
An exception and waiver report was provided to Fitch, indicating
that the pool of reviewed loans has a number of exceptions and
waivers. Fitch determined that the exceptions and waivers do
materially affect the overall credit risk of the loans; refer to
the Third-Party Due Diligence section of the presale report for
more details.
Fitch also received confirmation from the servicer that the lien
status and payment history provided in the tape is accurate per its
records. Fitch took this information into consideration in its
analysis.
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 was populated by the due
diligence company, and no material discrepancies were noted.
ESG Considerations
PRET 2024-RPL2 has an ESG Relevance Score of '4' for Transaction
Parties and Operational Risk due to elevated operational risk,
which resulted in an increase in expected losses. The Tier 2
representations and warranties (R&W) framework with an unrated
counterparty resulted in an increase in expected losses. This has a
negative impact on the credit profile and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
PRPM 2024-RCF5: DBRS Finalizes BB(low) Rating on M-2 Notes
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DBRS, Inc. finalized its provisional credit ratings on the
Mortgage-Backed Notes, Series 2024-RCF5 (the Notes) to be issued by
PRPM 2024-RCF5, LLC (PRPM 2024-RCF5 or the Trust):
-- $94.1 million Class A-1 at AAA (sf)
-- $17.3 million Class A-2 at AA (sf)
-- $14.8 million Class A-3 at A (high) (sf)
-- $14.5 million Class M-1 at BBB (high) (sf)
-- $19.0 million Class M-2 at BB (low) (sf)
The AAA (sf) credit rating on the Class A-1 Notes reflects 47.75%
of credit enhancement provided by the subordinated notes. The AA
(sf), A (high) (sf), BBB (high) (sf), and BB (low) (sf) credit
ratings reflect 38.15%, 29.95%, 21.90%, and 11.35% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of newly originated
and seasoned, performing and reperforming, first-lien residential
mortgages to be funded by the issuance of the Notes. The Notes are
backed by 738 loans with a total principal balance of $180,171,348
as of the Cut-Off Date (June 30, 2024).
Morningstar DBRS calculated the portfolio to be approximately 55
months seasoned on average, though the age of the loans is quite
dispersed, ranging from seven months to 314 months. Approximately
63.8% of the loans had origination guideline or document
deficiencies, which prevented these loans from being sold to Fannie
Mae, Freddie Mac, or another purchaser, and the loans were
subsequently put back to the sellers. In its analysis, Morningstar
DBRS assessed such defects and applied certain penalties,
consequently increasing expected losses on the mortgage pool.
No originator accounted for more than 15% of loans in the pool.
In the portfolio, 13.0% of the loans are modified. The
modifications happened more than two years ago for 80.3% of the
modified loans. Within the portfolio, 124 mortgages have
non-interest-bearing deferred amounts, equating to 0.9% of the
total unpaid principal balance (UPB). Unless specified otherwise,
all statistics on the mortgage loans in this report are based on
the current UPB, including the applicable non-interest-bearing
deferred amounts.
Based on Issuer-provided information, certain loans in the pool
(31.1%) are not subject to or are exempt from the Consumer
Financial Protection Bureau's Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because of seasoning or because they are
business-purpose loans. The loans subject to the ATR rules are
designated as QM Safe Harbor (49.3%), QM Rebuttable Presumption
(10.4%), and Non-Qualified Mortgage (Non-QM; 9.2%) by UPB.
PRP-LB 2024-RCF5, LLC (the Sponsor) acquired the mortgage loans
prior to the upcoming Closing Date and, through a wholly owned
subsidiary, PRP Depositor 2024-RCF5, LLC (the Depositor), will
contribute the loans to the Trust. As the Sponsor, PRP-LB
2024-RCF5, LLC or one of its majority-owned affiliates will acquire
and retain a portion of the Class B Notes and the membership
certificate representing the initial overcollateralization amount
to satisfy the credit risk retention requirements.
PRPM 2024-RCF5 is the seventh scratch and dent rated securitization
for the Issuer. The Sponsor has securitized many rated and unrated
transactions under the PRPM shelf, most of which have been
seasoned, reperforming, and nonperforming securitizations.
SN Servicing Corporation (88.5%) and Fay Servicing, LLC 11.5%) will
act as the Servicers of the mortgage loans.
The Servicers will not advance any delinquent principal and
interest on the mortgages; however, the Servicers are obligated to
make advances in respect of prior liens, insurance, real estate
taxes, and assessments as well as reasonable costs and expenses
incurred in the course of servicing and disposing of properties.
The Issuer has the option to redeem the Notes in full at a price
equal to the sum of (1) the remaining aggregate Note Amount; (2)
any accrued and unpaid interest due on the Notes through the
redemption date (including any Cap Carryover); and (3) any fees and
expenses of the transaction parties, including any unreimbursed
servicing advances (Redemption Price). Such Optional Redemption may
be exercised on or after the payment date in August 2026.
Additionally, failure to pay the Notes in full by the Payment Date
in August 2029 will trigger a mandatory auction of the underlying
certificates by the Asset Manager or an agent appointed by the
Asset Manager. If the auction fails to elicit sufficient proceeds
to make-whole the Notes, another auction will follow every four
months for the first year and subsequent auctions will be carried
out every six months. If the Asset Manager fails to conduct the
auction, the holder of more than 50% of the Class M-2 Notes will
have the right to appoint an auction agent to conduct the auction.
The transaction employs a sequential-pay cash flow structure with a
bullet feature to Class A-2 and more subordinate notes on the
Expected Redemption Date or the occurrence of a Credit Event.
Interest and principal collections are first used to pay interest
and any Cap Carryover amount to the Notes sequentially and then to
pay Class A-1 until its balance is reduced to zero, which may
provide for timely payment of interest on certain rated Notes.
Class A-2 and below are not entitled to any payments of principal
until the Expected Redemption Date or upon the occurrence of a
Credit Event, except for remaining available funds representing net
sales proceeds of the mortgage loans. Prior to the Expected
Redemption Date or a Credit Event, any available funds remaining
after Class A-1 is paid in full will be deposited into a Redemption
Account. Beginning on the Payment Date in August 2028, the Class
A-1 and the other offered Notes will be entitled to its initial
Note Rate plus the step-up note rate of 1.00% per annum. If the
Issuer does not redeem the rated Notes in full by the payment date
in September 2029, the Mortgage Loans have been liquidated in full,
or an Event of Default occurs and is continuing, a Credit Event
will have occurred. Upon the occurrence of a Credit Event, accrued
interest on Class A-2 and the other offered Notes will be paid as
principal to Class A-1 or the succeeding senior Notes until it has
been paid in full. The redirected amounts will accrue on the
balances of the respective Notes and will later be paid as
principal payments.
Morningstar DBRS' credit rating on the Notes addresses the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations are Interest Payment Amount, Cap Carryover
Amount, and Note Amount.
Notes: All figures are in US Dollars unless otherwise noted.
RAD CLO 26: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to RAD CLO 26
Ltd./RAD CLO 26 LLC's floating- and fixed-rate debt.
The debt issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans.
The preliminary ratings are based on information as of Aug. 23,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
RAD CLO 26 Ltd./RAD CLO 26 LLC
Class A, $336.00 million: AAA (sf)
Class B-1, $50.00 million: AA (sf)
Class B-2, $13.00 million: AA (sf)
Class C (deferrable), $31.50 million: A (sf)
Class D-1 (deferrable), $31.50 million: BBB- (sf)
Class D-2 (deferrable), $5.25 million: BBB- (sf)
Class E (deferrable), $15.75 million: BB- (sf)
Subordinated notes, $48.20 million: Not rated
RCKT MORTGAGE 2024-CES6: Fitch Assigns 'Bsf' Rating on 5 Tranches
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Fitch Ratings has assigned ratings to the residential
mortgage-backed notes issued by RCKT Mortgage Trust 2024-CES6 (RCKT
2024-CES6).
Entity/Debt Rating Prior
----------- ------ -----
RCKT 2024-CES6
A-1A LT AAAsf New Rating AAA(EXP)sf
A-1B LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
A-1 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAsf New Rating AA(EXP)sf
A-5 LT Asf New Rating A(EXP)sf
A-6 LT BBBsf New Rating BBB(EXP)sf
B-1A LT BBsf New Rating BB(EXP)sf
B-X-1A LT BBsf New Rating BB(EXP)sf
B-1B LT BBsf New Rating BB(EXP)sf
B-X-1B LT BBsf New Rating BB(EXP)sf
B-2A LT Bsf New Rating B(EXP)sf
B-X-2A LT Bsf New Rating B(EXP)sf
B-2B LT Bsf New Rating B(EXP)sf
B-X-2B LT Bsf New Rating B(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
A-1L LT WDsf Withdrawn AAA(EXP)sf
R LT NRsf New Rating NR(EXP)sf
Transaction Summary
The notes are supported by 5,816 closed-end second-lien loans with
a total balance of approximately $424.5 million as of the cutoff
date. The pool consists of closed-end second-lien mortgages
acquired by Woodward Capital Management LLC from Rocket Mortgage
LLC. Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure in which
excess cash flow can be used to repay losses or net weighted
average coupon (WAC) shortfalls.
Fitch has withdrawn the expected rating of 'AAA(EXP)sf' for the
previous class A-1L notes as the loan was not funded at close and
is no longer being offered.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): As a result of its
updated view on sustainable home prices, Fitch views the home price
values of this pool as 12.1% above a long-term sustainable level
(versus 11.5% on a national level as of 1Q24). Housing
affordability is at its worst levels in decades, driven by both
high interest rates and elevated home prices. Home prices had
increased 5.9% yoy nationally as of May 2024, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
Prime Credit Quality (Positive): The collateral consists of 5,816
loans totaling approximately $424.5 million and seasoned at
approximately three months in aggregate as calculated by Fitch (one
month per the transaction documents), taken as the difference
between the origination date and the cutoff date. The borrowers
have a strong credit profile, including a weighted average (WA)
Fitch model FICO score of 744, a debt-to-income ratio (DTI) of
37.8%, and moderate leverage, with a sustainable loan-to-value
ratio (sLTV) of 74.4%.
Of the pool, 99.5% consist of loans where the borrower maintains a
primary residence and 0.5% represent second homes or investor
properties, while 95.8% of loans were originated through a retail
channel. In addition, 67.8% of loans are designated as safe harbor
qualified mortgages (SHQM) and 32.2% are higher-priced qualified
mortgages (HPQM). Given the 100% loss severity (LS) assumption, no
additional penalties were applied for the HPQM loan status.
Second-Lien Collateral (Negative): The entire collateral pool
comprises closed-end second-lien loans originated by Rocket
Mortgage. Fitch assumed no recovery and a 100% LS based on the
historical behavior of second-lien loans in economic stress
scenarios. Fitch assumes second-lien loans default at a rate
comparable to first-lien loans; after controlling for credit
attributes, no additional penalty was applied to Fitch's
probability of default (PD) assumption.
Sequential Structure (Positive): The transaction has a typical
sequential payment structure. Principal is used to pay down the
bonds sequentially and losses are allocated reverse sequentially.
Monthly excess cash flow is derived from remaining amounts after
allocation of the interest and principal priority of payments.
These amounts will be applied as principal, first to repay any
current and previously allocated cumulative applied realized loss
amounts and then to repay any potential net WAC shortfalls. The
senior classes incorporate a step-up coupon of 1.00% (to the extent
still outstanding) after the 48th payment date.
While Fitch has previously analyzed CES transactions using an
interest rate cut, this stress was not applied for this
transaction. Given the lack of evidence of interest rate
modifications being used as a loss mitigation tactic, applying the
stress would have been overly punitive. If interest rate
modifications reemerge as a common form of loss mitigation or if
certain structures are overly dependent on excess interest, Fitch
may apply additional sensitivities to test the structure.
180-Day Charge-off Feature (Positive): The class XS majority
noteholder has the ability, but not the obligation, to instruct the
servicer to write off the balance of a loan at 180 days delinquent
(DQ) based on the Mortgage Bankers Association (MBA) delinquency
method. To the extent the servicer expects meaningful recovery in
any liquidation scenario, the class XS majority noteholder may
direct the servicer to continue to monitor the loan and not charge
it off.
While the 180-day charge-off feature will result in losses being
incurred sooner, there is a larger amount of excess interest to
protect against them. This compares favorably with a delayed
liquidation scenario, where losses occur later in the life of a
transaction and less excess is available to cover them. If a loan
is not charged off due to a presumed recovery this will provide
added benefit to the transaction, above Fitch's expectations.
In addition, recoveries realized after the writedown at 180 days DQ
(excluding forbearance mortgage or loss mitigation loans) will be
passed on to bondholders as principal.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch 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 42.9% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC Diligence, LLC. The third-party due diligence
described in Form 15E focused on credit, regulatory compliance and
property valuation. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment to
its analysis: a 5% PD credit to the 20.2% of the pool by loan count
in which diligence was conducted. This adjustment resulted in a
12bps reduction to the 'AAAsf' 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 2015-1: Fitch Affirms Bsf Rating on Class G Certs
-------------------------------------------------------
Fitch Ratings has affirmed eight classes of Real Estate Asset
Liquidity Trust's (REAL-T) commercial mortgage pass-through
certificates, series 2015-1. The Rating Outlooks for classes E, F
and G have been revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
REAL-T 2015-1
A-1 75585RMA0 LT AAAsf Affirmed AAAsf
A-2 75585RMB8 LT AAAsf Affirmed AAAsf
B 75585RMD4 LT AAAsf Affirmed AAAsf
C 75585RME2 LT AA+sf Affirmed AA+sf
D 75585RMF9 LT BBB+sf Affirmed BBB+sf
E 75585RMG7 LT BBB-sf Affirmed BBB-sf
F 75585RMH5 LT BBsf Affirmed BBsf
G 75585RMJ1 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
Stable Performance; Loss Expectations: The affirmations reflect
stable performance from loans and anticipated paydown from loans
with imminent maturities in 2024 and 2025. Fitch's current ratings
incorporate a deal-level 'Bsf' rating case loss of 3.4%. Fitch
identified four loans (25.6% of the pool) as Fitch Loans of Concern
(FLOCs). No loans are in special servicing.
The Negative Outlooks for classes E, G and F reflect exposure to
the largest loan in the pool with outsized losses, Alta Vista Manor
Retirement Ottawa, which has experienced performance declines since
issuance. The Negative Outlooks also address refinance concerns
given the concentration of loan maturities in 2024 and 2025 and the
loans' average coupons of approximately 3.8%.
Largest Contributors to Loss: The largest FLOC in the pool and
largest contributor to loss expectations is the Alta Vista Manor
Retirement Ottawa (12.1% of the pool), which is secured by a
174-unit independent senior living property located in Ottawa, ON.
Performance of the property has deteriorated with occupancy
volatility and cash flow declines. Occupancy has ranged between 66%
and 75% between 2018 and 2022 prior to recovering to 83% in 2023.
Due to the deteriorating occupancy, cashflow has been insufficient
to service the debt since 2017, with negative cashflow reported
since 2022. Competition and other economic factors caused the
declines in performance.
Despite the cash flow declines, the loan has remained current. The
loan is sponsored by Regal Lifestyle Communities, Inc. which was
acquired by a joint venture between Welltower, Inc. and Revera,
Inc, in October 2015. The loan is scheduled to mature in March 2025
and remains full recourse to the sponsors.
Fitch's base case loss of 20% (prior to concentration adjustments)
reflects a recovery of 102,200 per unit.
The next largest FLOC is the Hilton Mississauga Meadowvale (5.6%),
which is secured by a 374-room full service hotel located in
Mississauga, ON. The hotel exhibited substantial performance
declines during the pandemic but has since made a recovery.
According to the TTM May 2023 STR Report, the hotel reported
occupancy, ADR, and RevPAR of 73.9%, $188, and $149, respectively,
which compares with TTM May 2022 figures of 38.6%, $145, and $56,
and issuance metrics of 64.3%, $132, and $85, respectively. The
hotel outperformed its competitive set reporting a RevPAR
penetration rate of 108%, ranking second of five hotels. The YE
2022 reported NOI DSCR improved to 4.30x from -0.75x at YE 2020 and
is inline with 4.13x at YE 2019. The loan is 37% recourse to the
sponsor, Manjis Holdings Ld.
Fitch's 'Bsf' rating case loss of 0.1% (prior to concentration
adjustments) reflects a 11.25% cap rate, 25% stress to the YE 2022
NOI to account for peaking performance and factors an increased
probability of default to account for the performance volatility
and heightened maturity default concerns.
Loans with Recourse: Of the pool, 79.4% of loans feature full or
partial recourse to the borrowers and/or sponsors.
Changes to Credit Enhancement: As of the August 2024 distribution
date, the pool's aggregate balance has been paid down by 45.0% to
$183.9 million from $334.8 million at issuance. There is one loan,
the Distillery District (11.9% of the pool), that is fully
defeased. There are 18 loans (95.6% of the pool) that are currently
amortizing and 12 loans (4.4% of the pool) that are fully
amortizing. No interest shortfalls or realized losses are impacting
to the pool.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not likely due to
their position in the capital structure and expected continued
amortization and loan repayments. However, downgrades may occur if
deal-level losses increase significantly and/or interest shortfalls
occur or are likely to occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur should performance of the FLOCs, most notably Alta
Vista Manor Retirement Ottawa, Hilton Mississauga Meadowvale, St.
Regis Hotel Vancouver and 279 Yonge Street deteriorate further or
if more loans than expected default at or prior to maturity.
Downgrades for the 'BBBsf', 'BBsf' and 'Bsf' categories are likely
with higher than expected losses from continued underperformance of
the FLOCs, particularly the aforementioned FLOCs with deteriorating
performance and if loans default at maturity.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the 'AA+sf' class could occur with improvements in CE
and/or defeasance. However, adverse selections, increased
concentrations and further underperformance of the FLOCs could
cause this trend to reverse.
Upgrades to the 'BBB+sf' and 'BBB-sf', 'BBsf' and 'Bsf' classes
considers these factors but are limited to adverse selection and
potential concentrations to the Alta Vista Manor Retirement Ottawa
loan.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
REALT 2021-1: DBRS Confirms B Rating on Class G Certs
-----------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through (REALT) Certificates, Series
2021-1 issued by Real Estate Asset Liquidity Trust, Series 2021-1
as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D-1 at BBB (sf)
-- Class D-2 at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
The credit rating confirmations are reflective of the pool's
overall stable performance, which remains in line with Morningstar
DBRS' expectations. As of the July 2024 remittance, 78 of the
original 79 loans remained in the trust, with an aggregate balance
of $512.2 million, representing a collateral reduction of 5.8%
since issuance. There is one fully defeased loan, representing 0.8%
of the current pool balance. There are no delinquent or specially
serviced loans; however, four loans, representing 7.0% of the pool
balance, are on the servicer's watchlist. Ten loans, representing
18.1% of the pool balance, have scheduled maturity dates in 2025,
including the largest loans in the pool: Beverley Corners
Marketplace (Prospectus ID#1, 6.1% of the current pool balance) and
McKeown Commons North Bay (Prospectus ID#2, 4.6% of the current
pool balance). Morningstar DBRS expects the majority of these loans
will successfully repay at their scheduled maturity dates given
their current performance remains in line with Morningstar DBRS'
expectations since issuance. Excluding the defeased loans, the pool
is most concentrated by multifamily and retail properties, which
represent 31.7% and 24.0% of the pool balance, respectively.
Historically, loans secured by multifamily properties have
exhibited lower default rates and the ability to retain asset
value.
In its analysis, Morningstar DBRS identified two loans to be at
increased risk of default. Conklin Place Plaza (Prospectus ID#12,
2.1% of the current pool balance), is secured by a
34,400-square-foot (sf) mixed-use property located in Brantford,
Ontario, and has a scheduled maturity in January 2025. The loan was
added to the servicer's watchlist in October 2022 because of a
decline in DSCR, which has consistently remained below breakeven
since in YE2021 with minimal improvements year over year. According
to the rent roll from January 2024, the property was 84.0% occupied
at an average rental rate of $28.73 per sf (psf). In comparison,
the property was fully occupied at an average rental rate of $36.15
psf at issuance. Offsetting some of this concern is the minimal
scheduled rollover in the near term, limited-recourse structure,
and indications of the borrower's commitment to the property as
evidenced by periodic equity injections as required. Despite these
factors, given the decline in occupancy and DSCR metrics since
issuance, and lack of meaningful leasing activity, it is likely the
property value has declined from issuance. As such, Morningstar
DBRS' analysis for this loan includes an elevated probability of
default (POD) adjustment to reflect the increased credit risk for
the loan since issuance, resulting in an expected loss (EL) that is
more than two times the pool's weighted-average (WA) EL.
McKeown Commons North Bay is secured by a retail center in North
Bay, Ontario. The five-year loan is full recourse to the sponsor.
The property was fully occupied as per the March 2023 rent roll;
however, leases totaling 45.8% of the NRA are scheduled to expire
prior to loan maturity in December 2025. While most tenants have
been at the property since it was built in 2015 and have extension
options available to them, the high concentration of tenant
rollover and potential for occupancy and cash flow decline in the
loan's maturity year could make refinancing a challenge.
Morningstar DBRS' analysis for this loan includes an elevated POD
adjustment to reflect rollover concerns, resulting in an EL that is
almost three times the pool's WA EL.
The largest loan on the servicer's watchlist is the Tamarack
Gardens Multifamily Edmonton (Prospectus ID#8, 2.8% of the current
pool balance), which is secured by a 126-unit multifamily complex
in Edmonton. The loan was added to the servicer's watchlist in
January 2023 because of a low DSCR. The decline stems from a 57.7%
increase in total operating expenses, primarily attributable to the
Repairs & Maintenance line item, which has jumped almost 135% since
2022 and 400% from the issuer's underwritten figure. According to
the servicer's commentary, the increase in costs are because of new
maintenance and cleaning staff hired at the subject property. The
operating statement also notes that there have been extensive
repairs/replacement across several units, causing the spike this
year. Overall, operating expenses are up approximately 150% from
the Morningstar DBRS issuance amount. As per the January 2024 rent
roll, the property reported an occupancy rate of 96.2% with an
average rental rate of $1,438 per unit, compared with the occupancy
rate of 95.2% and average rental rate of $1,260 per unit at
issuance. Though improved from issuance, the current rental rates
do not sufficiently offset the increase in expenses. Unless there
is additional growth in rental rates and/or reduction in expenses,
it is likely the DSCR will remain below issuance expectations.
Morningstar DBRS applied an elevated POD adjustment in its analysis
for this loan, resulting in an EL that is three times the WA pool
level EL.
Notes: All figures are in U.S. dollars unless otherwise noted.
REALT 2021-1: Fitch Affirms Bsf Rating on Cl. G Certificates
------------------------------------------------------------
Fitch Ratings has affirmed six classes of Real Estate Asset
Liquidity Trust 2020-1 commercial mortgage pass-through
certificates, series 2020-1 (REAL-T 2020-1). All Rating Outlooks
remain Stable.
Fitch Ratings has affirmed nine classes of Real Estate Asset
Liquidity Trust 2021-1 commercial mortgage pass-through
certificates, series 2021-1 (REAL-T 2021-1). All Rating Outlooks
remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
REAL-T 2021-1
A-1 75585RRZ0 LT AAAsf Affirmed AAAsf
A-2 75585RSB2 LT AAAsf Affirmed AAAsf
B 75585RSD8 LT AAsf Affirmed AAsf
C 75585RSF3 LT Asf Affirmed Asf
D-1 75585RSH9 LT BBBsf Affirmed BBBsf
D-2 LT BBBsf Affirmed BBBsf
E LT BBB-sf Affirmed BBB-sf
F LT BBsf Affirmed BBsf
G LT Bsf Affirmed Bsf
REAL-T 2020-1
A-1 75585RRM9 LT AAAsf Affirmed AAAsf
A-2 75585RRN7 LT AAAsf Affirmed AAAsf
B 75585RRQ0 LT AAsf Affirmed AAsf
C 75585RRR8 LT Asf Affirmed Asf
D-1 75585RRS6 LT BBBsf Affirmed BBBsf
D-2 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Stable Loss Expectations: Affirmations reflect stable performance
with lower exposure to office properties in the pool and no loans
in special servicing. Fitch's current ratings incorporate a 'Bsf'
rating case loss of 3.6% and 2.1%, respectively, for the REAL-T
2020-1 and REAL-T 2021-1 transactions. Eight loans (31.6% of the
pool) were identified as FLOCs in the REAL-T 2020-1 transaction and
13 loans (17.2%) in the REAL-T 2021-1 transaction.
Largest FLOCs in the Pool: The largest FLOC in the REAL-T 2020-1
transaction is the Sheraton Gateway Hotel Toronto A1 (3.7% of the
pool), which is secured by the leasehold interest in a 474-unit
full service hotel located in Mississauga, ON. Overall loan
performance has remained stable with YE 2023 occupancy and NOI DSCR
reported at 78.1% and 6.67x, respectively. The loan was identified
as a FLOC due to the short-term leasehold interest with the ground
lease expiring in February 2031, coterminous with the loan's
maturity.
The ground lease has one 20-year extension option, which would
extend the ground lease through 2051. If the ground lease is not
extended, ownership of the hotel would revert to the owner of the
ground, which is Her Majesty the Queen in Right of Canada, a
government sponsored entity.
Fitch's 'Bsf' rating case loss of 1% (prior to concentration
adjustments) reflects the YE 2023 reported NOI with a 15% stress
and a cap rate of 11.75%. Fitch also considered a net present value
analysis to account for the near-term expiration of the ground
lease and is inline with Fitch's current valuation.
The second largest FLOC and largest contributor to loss in the
REAL-T 2020-1 transaction is the O'Shaughnessy Tower loan (5.4% of
the pool), which is secured by a 144,362 sf office property located
in Montreal, QC. The largest tenants include Securitas (9.5% of the
NRA) and Clinque Medic-Elle (9.0%). Performance at the collateral
has declined with the May 2024 occupancy falling to 63.5% from 71%
in April 2023, and remains down from 78% at YE 2020 and 94% at
issuance.
Due to the occupancy declines, the YE 2023 NOI is 44.3% below
issuance and the DSCR has remained below a 1.00x coverage since the
onset of the pandemic. The loan is 50% recourse to the sponsor,
1980 Sherbrooke West properties Inc.
Fitch's 'Bsf' rating case loss of 14.8% (prior to concentration
adjustments) reflects a 9.50% cap rate on YE 2023 NOI and factors
an increased probability of default due to the loan's heightened
potential for term default.
The next largest FLOC and second largest contributor to loss in the
REAL-T 2020-1 transaction is the Rossignol Drive Retirement
Residence (4.4%), which is secured by 118-unit senior housing
residence located in Ottawa, ON. As of YE 2023, occupancy has
declined to 72% from 75.4% at YE 2022, and remains below 78% at YE
2021 and 90.8% at issuance.
Due to the occupancy declines, NOI DSCR has remained below 1.00x
for the YE 2023 and YE 2022 reporting periods. The loan is full
recourse to the sponsor, David Choo.
Fitch's 'Bsf' rating case loss expectations of 15.4% (prior to
concentration adjustments) reflects a 9.0% cap rate on YE 2023 NOI
and factors an increased probability of default due to the loan's
heightened likelihood of term default.
The next largest contributor to loss expectations in the REAL-T
2020-1 transaction is the Regency of Lakefield Retirement (3.7%),
which is secured by a 73-unit independent living retirement
residence located in Lakefield, ON. The unit mix consists of 31
studios, 28 one-bedroom units, and 14 one-bedroom/den units. Per
the May 2024 rent roll the collateral was 61% occupied, a decline
from 63% in March 2023 and down from 70.0% in March 2022.
Current occupancy remains well below historical figures of 87.7% in
March 2021 and 92.2% at issuance. The most recent reported TTM
March 2023 NOI is approximately 30% below NOI at issuance and has a
1.00x DSCR coverage. The loan is full recourse to the sponsor, The
Regency of Lakefield Inc.
The loan is scheduled to mature in September 2024. However,
according to the servicer, the borrower has requested an
extension.
Fitch's 'Bsf' rating case loss of 16.5% (prior to concentration
adjustments) reflects a 9.0% cap rate on YE 2023 NOI and factors an
increased probability of default to account for the loan's
heightened default concerns.
In the REAL-T 2021-1 transaction, the largest FLOC is the
Commercial Way Squamish Industrial (3.4% of the pool), which is
secured by a 110,960 sf industrial property located in Squamish,
BC. The loan was identified as a FLOC due to the August 2024 lease
expiration of the largest tenant Fedex (16.5% of the NRA). Per the
January 2024 rent roll, upcoming rollover includes 25.5% of the NRA
in 2024, 22.2% in 2025 and 14.8% in 2026. The loan maintained a
stable DSCR of 1.65x as of YE 2023, an increase from 1.55x for the
YE 2022 reporting period. The loan has no recourse provision to the
sponsor.
Fitch's 'Bsf' rating case loss of 2.10% (prior to concentration
adjustments) includes a 20% stress to the YE 2023 NOI and reflects
a 9.0% cap rate.
The second largest FLOC and second largest contributor to loss in
the REAL-T 2021-1 transaction is the Tamarack Gardens Multifamily
Edmonton loan (2.8% of the pool), which is secured by a 126-unit
multifamily property located in Edmonton, AB. The loan was
identified as a FLOC due to deteriorated cash flow. While occupancy
has remained stable at 99.2% as of January 2024, 96.8% in October
2023 and 91% at YE 2022, the servicer reported NOI DSCR had fallen
to 1.04x as of YE 2022. An updated financial report was
unavailable.
Fitch's 'Bsf' rating case loss of 10.9% (prior to concentration
adjustments) reflects an 8.75% cap rate to the September 2022 NOI
and factors an increased probability of default due to the loan's
heightened potential for payment default.
The next largest FLOC and largest contributor to pool-loss
expectations is the Conklin Plaza loan (2.1%), which is secured by
a 34,412 sf mixed-use building located in Brantford, ON and
includes Conklin Pharmacy (14.5% of the NRA), Anytime Fitness
(13.1%) and Ontario, Inc (8.7%). The loan was identified as FLOC
due to occupancy volatility and low DSCR.
Occupancy has recovered to 84% as of January 2024 from 68% at YE
2022 and 71% at YE 2021, but remains lower than 100% at issuance.
The most recently reported NOI DSCR is 0.73x and 0.87x for the
respective YE 2022 and YE 2021 reporting periods. An updated
financial report was unavailable.
The loan is scheduled to mature in January 2025 and is 50% recourse
to the sponsor, Conklin Management Investments.
Fitch's 'Bsf' rating case loss of 24.1% (prior to concentration
adjustments) reflects a 9.0% cap rate on YE 2023 NOI and factors a
higher probability of default due to the loan's heightened maturity
default concerns.
Recourse Provisions: There are 39 loans (77.3% of the pool) and 68
loans (80.4% of the pool) that have full or partial recourse to the
sponsor in the REAL-T 2020-1 and REAL-T 2021-1 transactions,
respectively.
Improving Credit Enhancement: As of the August 2024 distribution
date, the pool balances for REAL-T 2020-1 and REAL-T 2021-1 have
been reduced by 18.3% and 6.0%, respectively. There is one loan
(0.8% of the pool) that is fully defeased in the REAL-T 2021-1
transaction. There are no interest shortfalls or realized losses
impacting either transaction.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to 'AAAsf' and 'AAsf' category rated classes are
unlikely, but may occur if deal-level expected losses increase
significantly and/or interest shortfalls impact these classes.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly and/or larger FLOCs
incur outsized losses.
Downgrades to 'BBsf' and 'Bsf' category rated classes could occur
with continued performance declines on the FLOCs, including
O'Shaughnessy Tower, Rossignol Drive Retirement Residence, Robinson
Street Office, and/or Regency of Lakefield Retirement in the REAL-T
2020-1 transaction or the Commercial Way Squamish Industrial,
Tamarack Gardens, Place Val Est, and/or Conklin Place Plaza in the
REALT 2021-1 transaction.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes would occur
with continued amortization and/or defeasance and stable
performance of loan's in the pool.
Upgrades to 'BBBsf', 'BBsf' and 'Bsf' category rated classes are
possible with improving credit enhancement resulting from paydown
of amortizing loans, refinance of loan's and/or performance
improvements from the FLOCs including O'Shaughnessy Tower,
Rossignol Drive Retirement Residence, Robinson Street Office,
and/or Regency of Lakefield Retirement in the REAL-T 2020-1
transaction or the Commercial Way Squamish Industrial, Tamarack
Gardens, Place Val Est, and/or Conklin Place Plaza in the REALT
2021-1 transaction.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
RR 30: Fitch Assigns Final 'BB+sf' Rating on Class D Notes
----------------------------------------------------------
Fitch Ratings has assigned final ratings and Ratings Outlooks to RR
30 LTD.
Entity/Debt Rating Prior
----------- ------ -----
RR 30 LTD
A-1a LT AAAsf New Rating AAA(EXP)sf
A-1b LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
B LT A+sf New Rating A+(EXP)sf
C LT WDsf Withdrawn BBB-(EXP)sf
C-1 LT BBB+sf New Rating
C-2 LT BBB-sf New Rating
D LT BB+sf New Rating BB+(EXP)sf
E LT NRsf New Rating NR(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
Transaction Summary
RR 30 LTD (the issuer) is an arbitrage cash flow collateralized
loan obligation (CLO) that will be managed by Redding Ridge 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.
Fitch has withdrawn the 'BBB-(EXP)sf' rating of class C notes.
These notes were not issued and thus no longer exist. Instead, new
class C-1 notes rated 'BBB+sf' and class C-2 notes rated 'BBB-sf'
were issued.
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
99.21% first-lien senior secured loans and has a weighted average
recovery assumption of 73.54%. 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 37% 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 'A-sf' and 'AA+sf' for class A-1a, between
'BBB+sf' and 'AA+sf' for class A-1b, between 'BB+sf' and 'A+sf' for
class A-2, between 'B+sf' and 'BBB+sf' for class B, between less
than 'B-sf' and 'BB+sf' for class C-1, between less than 'B-sf' and
'BB+sf' for class C-2, and between less than 'B-sf' and 'BB-sf' for
class D.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1a and class
A-1b 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 A-2, 'AA+sf' for class B, 'A+sf'
for class C-1, 'A+sf' for class C-2, and 'BBB+sf' for class D.
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 RR 30 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.
SILVER ROCK IV: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Silver Rock
CLO IV Ltd./Silver Rock CLO IV 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 Silver Rock Management LLC, a
subsidiary of Silver Rock Financial L.P.
The preliminary ratings are based on information as of Aug. 28,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Silver Rock CLO IV Ltd./Silver Rock CLO IV LLC
Class X, $4.00 million: AAA (sf)
Class A, $252.00 million: AAA (sf)
Class B-1, $37.00 million: AA (sf)
Class B-2, $15.00 million: AA (sf)
Class C-1 (deferrable), $21.50 million: A (sf)
Class C-2 (deferrable), $2.50 million: A (sf)
Class D-1 (deferrable), $16.00 million: BBB+ (sf)
Class D-2 (deferrable), $8.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $28.60 million: Not rated
STEELE CREEK 2017-1: Moody's Cuts Rating on $18MM Cl. E Notes to B1
-------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Steele Creek CLO 2017-1, Ltd.:
US$51,750,000 Class B Senior Secured Floating Rate Notes due 2030
(the "Class B Notes"), Upgraded to Aaa (sf); previously on March
20, 2023 Upgraded to Aa1 (sf)
US$28,125,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class C Notes"), Upgraded to Aa2 (sf);
previously on March 20, 2023 Upgraded to A1 (sf)
Moody's have also downgraded the rating on the following notes:
US$18,000,000 Class E Mezzanine Secured Deferrable Floating Rate
Notes due 2030 (the "Class E Notes"), Downgraded to B1 (sf);
previously on September 14, 2020 Confirmed at Ba3 (sf)
Steele Creek CLO 2017-1, Ltd., issued in December 2017, is a
managed cashflow CLO. The notes are collateralized primarily by a
portfolio of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in December 2022.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating actions are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since August 2023. The Class A
notes have been paid down by approximately 53.0% or $143.0 million
since then. Based on the trustee report dated July 31, 2024[1], the
OC ratios for the Class A/B and Class C notes are reported at
147.41% and 127.63%, respectively, versus July 2023[2] levels of
129.75% and 119.32%, respectively.
The downgrade rating action on the Class E notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the trustee report dated July 31, 2024 [3], the OC ratio for the
Class E notes is reported at 104.36% versus July 2023[4] level of
105.42%. Furthermore, the trustee-reported weighted average rating
factor (WARF) has been deteriorating and is currently reported at
3137 based on the trustee report dated July 31, 2024[5], compared
to 2959 in July 2023[6].
No actions were taken on the Class A and Class D notes because
their expected losses remain commensurate with their current
ratings, after taking into account the CLO's latest portfolio
information, its relevant structural features and its actual
over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in 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: $267,876,739
Defaulted par: $889,872
Diversity Score: 58
Weighted Average Rating Factor (WARF): 2908
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.31%
Weighted Average Coupon (WAC): 8.00%
Weighted Average Recovery Rate (WARR): 46.6%
Weighted Average Life (WAL): 3.4 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, 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.
SYMPHONY CLO 41: Fitch Assigns 'BB-sf' Rating on Class E Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Symphony
CLO 41, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Symphony CLO 41,
Ltd.
A-1 LT NRsf New Rating NR(EXP)sf
A-1 Loan 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-1 LT BBB-sf New Rating BBB-(EXP)sf
D-2 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
Symphony CLO 41, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Symphony 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'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.21, versus a maximum covenant, in
accordance with the initial expected matrix point of 27. 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
98.72% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.3% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.68%.
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 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 'BBBsf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D-1,
between less than 'B-sf' and 'BB+sf' for class D-2, and between
less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AA+sf' for class C, 'A+sf' for
class D-1, 'Asf' for class D-2, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to 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 Symphony CLO 41,
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. For more information on Fitch's ESG Relevance
Scores, visit the Fitch Ratings ESG Relevance Scores page.
Date of Relevant Committee
12 August 2024
SYMPHONY CLO 45: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Symphony CLO 45, LTD.
Entity/Debt Rating
----------- ------
Symphony CLO 45, LTD.
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B-1 LT AA(EXP)sf Expected Rating
B-2 LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D-1 LT BBB-(EXP)sf Expected Rating
D-2 LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
Transaction Summary
Symphony CLO 45, LTD. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Symphony 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'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.94, versus a maximum covenant, in
accordance with the initial expected matrix point of 27. 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
98.5% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.72% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.8%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1, between
'BBBsf' 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-1 and class A-2
notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'AA+sf' for class C, 'A+sf' for
class D-1, 'A-sf' for class D-2, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Symphony CLO 45,
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.
SYMPHONY CLO XIX: Moody's Cuts Rating on $10MM Cl. F Notes to Caa2
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Symphony CLO XIX, Ltd.:
US$57,500,000 Class B Senior Secured Floating Rate Notes due 2031
(the "Class B Notes"), Upgraded to Aaa (sf); previously on April
12, 2023 Upgraded to Aa1 (sf)
US$27,500,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2031 (the "Class C Notes"), Upgraded to Aa3 (sf); previously on
April 12, 2023 Upgraded to A1 (sf)
Moody's have also downgraded the rating on the following notes:
US$10,000,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class F Notes"), Downgraded to Caa2 (sf); previously
on April 12, 2023 Downgraded to Caa1 (sf)
Symphony CLO XIX, Ltd., originally issued in April 2018, is a
managed cashflow CLO. The notes are collateralized primarily by a
portfolio of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in April 2023.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The upgrade rating actions are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since July 2023. The Class A
notes have been paid down by approximately 8.0% or $71.2 million
since that time. Based on the trustee's July 2024 report[1], the OC
ratios for the Class A/B and Class C notes are reported at 131.25%
and 121.15%, respectively versus July 2023 levels[2] of 129.73% and
120.92%, respectively. Moody's note that the July 2024
trustee-reported OC ratios do not reflect the July 2024 payment
distribution, when $25.5 million of principal proceeds were used to
pay down the Class A notes.
The downgrade rating action on the Class F notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
Moody's calculation, the OC ratio for the Class F notes (as
inferred by the interest diversion test) is at 102.49% versus July
2023 level[3] of 104.20%. Additionally based on Moody's
calculation, the weighted average rating factor (WARF) has been
deteriorating and is currently 3298 compared to 3126 in July 2023.
No actions were taken on the Class A, Class D and Class E notes
because their expected losses remain commensurate with their
current ratings, after taking into account the CLO's latest
portfolio information, its relevant structural features and its
actual over-collateralization and interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on Moody's
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $409,230,031
Defaulted par: $5,619,557
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3298
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.49%
Weighted Average Coupon (WAC): 10.00%
Weighted Average Recovery Rate (WARR): 47.42%
Weighted Average Life (WAL): 3.9 years
Par haircut in OC tests and interest diversion test: 1.2%
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, and lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
TCW CLO 2024-2: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to TCW CLO 2024-2 Ltd./TCW
CLO 2024-2 LLC's floating- and fixed-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by TCW Asset Management Co. LLC, a
subsidiary of The TW Group Inc.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
TCW CLO 2024-2 Ltd./TCW CLO 2024-2 LLC
Class X, $4.0 million: AAA (sf)
Class A-1, $148.0 million: AAA (sf)
Class A-1L, $100.0 million: AAA (sf)
Class A-J, $8.0 million: AAA (sf)
Class B, $48.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D-1 (deferrable), $24.0 million: BBB- (sf)
Class D-J (deferrable), $4.0 million: BBB- (sf)
Class E (deferrable), $12.0 million: BB- (sf)
Subordinated notes, $35.3 million: Not rated
TMSQ 2014-1500: Moody's Downgrades Rating on Cl. D Certs to B1
--------------------------------------------------------------
Moody's Ratings has downgraded the ratings on five CMBS classes and
placed the five downgraded CMBS classes on review for further
downgrade in TMSQ 2014-1500 Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2014-1500 as follows:
Cl. A, Downgraded to A3 (sf) and Placed On Review for Downgrade;
previously on Apr 6, 2023 Downgraded to Aa2 (sf)
Cl. B, Downgraded to Baa2 (sf) and Placed On Review for Downgrade;
previously on Apr 6, 2023 Downgraded to A1 (sf)
Cl. C, Downgraded to Ba1 (sf) and Placed On Review for Downgrade;
previously on Apr 6, 2023 Downgraded to A3 (sf)
Cl. D, Downgraded to B1 (sf) and Placed On Review for Downgrade;
previously on Apr 6, 2023 Downgraded to Baa3 (sf)
Cl. X-A*, Downgraded to A3 (sf) and Placed On Review for Downgrade;
previously on Apr 6, 2023 Downgraded to Aa2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on the four P&I classes were downgraded due to an
increase in Moody's loan-to-value (LTV) ratio driven by the
declines in the property's occupancy and cash flow since 2020 as
well as anticipated further declines in its occupancy from upcoming
tenant expiration dates. Furthermore, the loan faces imminent
refinancing risk due to its October 2024 maturity date and has
recently transferred to special servicing as of the August 2024
remittance statement. While the loan remained current on its
interest-only debt service payments, given the property's recent
performance trends, upcoming lease rollover concerns and recent
transfer to special servicing, Moody's believe the loan faces
heightened refinancing risk and is unlikely to pay off ahead of its
upcoming maturity date. The downgrades also reflect weaker
fundamentals in the Time Square office market, which has seen
consecutive years of negative net absorptions since 2019.
The rating on the interest only (IO) class was downgraded based on
the credit quality of the referenced class.
The ratings on all classes were also placed on review for further
downgrade primarily due to the recent transfer to special servicing
and uncertainty of the loan resolution strategy and performance
given upcoming lease rollover risk. During the review period,
Moody's will monitor the loan's payment status, servicer resolution
strategy, servicer advances and any interest shortfall impact. As
part of the review Moody's will also consider any leasing activity
at the property as well as market data for comparable properties.
The property was 75% leased in March 2024, and the two largest
tenants, currently leasing 15% (with a lease expiration in April
2025) and 10% (with a lease expiration in August 2024) of the
property's net rentable area (NRA), respectively, are not expected
to renew at their upcoming lease expiration dates. While property's
net cash flow (NCF) has dropped in recent years, the loan has
maintained a NCF debt service coverage ratio (DSCR) above 2.00X on
its fixed rate of 3.844% on the first mortgage loan and a total
debt NCF DSCR above 1.20X inclusive of the encumbered fixed rate
(5.375%) mezzanine debt through the first quarter of 2024. However,
if the borrower is unable to backfill upcoming lease expirations,
the property's cash flow performance may continue to decline and
the NCF DSCR may drop below 1.00X in 2025.
In this credit rating action Moody's also considered qualitative
and quantitative factors in relation to the senior-sequential
structure and location and quality of the assets. 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.
Factors that could lead to a downgrade of the ratings include a
further 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
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-backed Securitizations" published in
July 2024.
DEAL PERFORMANCE
As of the August 12, 2024 distribution date, the transaction's
aggregate certificate balance remains unchanged at $335 million.
The interest only, 10-year, fixed-rate loan matures in October 2024
and is secured by a 506,614 SF Class-A Office and retail building
located at 1500 Broadway in New York City. There is additional
mezzanine debt of $170 million held outside the trust. The property
is located on Broadway along the "Bow Tie" of Times Square with a
full block of frontage between 43rd and 44th Streets. The 33-story
building was originally constructed in 1974. The sponsor, Tamares
Real Estate Holdings, Inc., acquired the property in 1995 and
previously reinvested capital into the improvements to upgrade and
renovate the property.
The loan was recently transferred to special servicing as of the
August 2024 remittance statement due to imminent default ahead of
its upcoming maturity date. The loan remains current on its debt
service payments through August 2024 and servicer commentary
indicated the borrower has been exploring refinancing options since
January 2024 with some lenders performing preliminary underwriting.
However, no formal agreement has been reported to date and the loan
faces imminent refinancing risk.
The property's occupancy had historically been stable at
approximately 93% between securitization and 2018 before it dropped
to 88% in 2019. The property's occupancy subsequently decreased to
74% in 2021 due to loss of some tenants during the pandemic, and
has remained around that level since 2021. Additionally, the
occupancy is likely to further decline due to the potential
departure of the two largest tenants with upcoming lease expiration
dates. The property's largest tenant, Times Square Studios (TSS),
an affiliate of the Walt Disney Company ("Disney"), currently
leases 15% of the NRA with an upcoming lease expiration in April
2025. TSS utilize their space as television studio and associated
office space filming Good Morning America along with programming
for ESPN and ABC Sports at the location. However, as part of
Disney's strategic decision to consolidate its physical operations
it was announced Good Morning America is moving to Disney's new
headquarters in Hudson Square in 2025. The second largest tenant,
NASDAQ OMX Group ("NASDAQ"), 10% of the property's NRA, has a lease
expiration in August 2024 and has been subleasing the majority of
its space at the property. The servicer indicated that NASDAQ is
not excepted to renew its lease.
The property's reported NOI peaked in 2020 at $33.8 million,
however, it has since gradually declined and the annualized NOI
reported as of September 2023 was $30.5 million, 10% lower than its
2020 NOI. Despite the performance declines, the interest-only fixed
rate (3.844%) mortgage loan had a DSCR of 2.24X based on the
annualized NCF of September 2023 and the loan remained current on
its interest-only debt service payments as of the August 2024
remittance statement. However, the property's NCF may see
significant near-term declines if the borrower is unable to lease
up the vacant space from potential departure of the two largest
tenants and the NCF DSCR could drop to below 1.00X in 2025.
Time Square office market fundamentals have been deteriorating
since the COVID pandemic. According to CBRE EA, as of Q2 2024, the
Class A office vacancy in Times Square/ West Side submarket was
19.5% and the average gross asking rent was $70.84 PSF, compared to
6.0% and $82.35 PSF, respectively, in 2019 and 8.5% and $73.08 PSF,
respectively, in 2014. The Times Square/ West Side office submarket
has also seen consecutive years of negative net absorptions since
2019.
The property benefits from its flagship retail and signage location
and provides approximately 200 feet of retail store frontage and
seven billboard signs along the "Bow Tie" of New York City's Times
Square as well as proximity to nearby public transportation
including multiple subway stations as well as the Port Authority
Bus Terminal and the shuttle to Grand Central Terminal.
Moody's NCF is now $24.6 million, compared to $29.1 million at
Moody's last review and Moody's analysis factored in submarket rent
and vacancy assumptions. Moody's LTV ratio for the first mortgage
balance is 106% based on Moody's Value. Moody's Adjusted Moody's
LTV ratio for the first mortgage balance is 97% based on Moody's
Value using a cap rate adjusted for the current interest rate
environment. There is an interest shortfall of $41,875 caused by
special servicer fee, which impacts Cl. D, as of the August 2024
distribution date.
UBS COMMERCIAL 2018-C9: Fitch Corrects Aug. 15 Ratings Release
--------------------------------------------------------------
Fitch Ratings issues a correction of a release on UBS Commercial
Mortgage Trust 2018-C9 Commercial Mortgage Pass-Through
Certificates (UBS 2018-C9) published on August 15, 2024. It
corrects references to the transaction to USB 2018, rather than USB
2019, in the heading and within certain areas of the text.
The amended press release is as follows:
Fitch Ratings has downgraded seven and affirmed five classes of UBS
Commercial Mortgage Trust 2018-C9 Commercial Mortgage Pass-Through
Certificates (UBS 2018-C9). The Rating Outlook for class AS has
been revised to Negative from Stable. Classes B, X-B, C and D have
been assigned Negative Outlooks following their downgrades.
Fitch has also affirmed 12 classes of UBS Commercial Mortgage Trust
2018-C8 Commercial Mortgage Pass-Through Certificates (UBS
2018-C8). The Outlooks for classes B, X-B, C and D have been
revised to Negative from Stable. The Outlooks remain Negative on
classes D-RR, E-RR and F-RR.
Entity/Debt Rating
----------- ------
UBS Commercial
Mortgage Trust 2018-C8
A-3 90276VAD1 LT AAAsf Affirmed
A-4 90276VAE9 LT AAAsf Affirmed
A-S 90276VAH2 LT AAAsf Affirmed
A-SB 90276VAC3 LT AAAsf Affirmed
B 90276VAJ8 LT AA-sf Affirmed
C 90276VAK5 LT A-sf Affirmed
D 90276VAN9 LT BBBsf Affirmed
D-RR 90276VAQ2 LT BBB-sf Affirmed
E-RR 90276VAS8 LT BBsf Affirmed
F-RR 90276VAU3 LT B-sf Affirmed
X-A 90276VAF6 LT AAAsf Affirmed
X-B 90276VAG4 LT AA-sf Affirmed
UBS 2018-C9
A3 90291JAV9 LT AAAsf Affirmed
A4 90291JAW7 LT AAAsf Affirmed
AS 90291JAZ0 LT AAAsf Affirmed
ASB 90291JAU1 LT AAAsf Affirmed
B 90291JBA4 LT Asf Downgrade
C 90291JBB2 LT BBB-sf Downgrade
D 90291JAC1 LT Bsf Downgrade
D-RR 90291JAE7 LT CCCsf Downgrade
E-RR 90291JAG2 LT CCsf Downgrade
F-RR 90291JAJ6 LT CCsf Downgrade
XA 902 91JAX5 LT AAAsf Affirmed
XB 90291JAY3 LT Asf Downgrade
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' rating case
losses are 11.2% in UBS 2018-C9 and 5.2% in UBS 2018-C8. Fitch
Loans of Concerns (FLOCs) comprise 10 loans (39.6%) in UBS 2018-C9,
including five specially serviced loans (22.4%), and eight loans
(20.7% of the pool) in UBS 2018-C8, including one specially
serviced loan (5.1%).
The downgrades in UBS 2018-C9 reflect increased pool loss
expectations since Fitch's last rating action. The increase was
primarily driven by a significantly lower updated office appraisal
value on 22 West 38th Street (4.6%) and further performance
deterioration on the largest loan in pool, Aspen Lake Office
Portfolio (8.6%) due to upcoming rollover of a major tenant.
Continued performance declines on the specially serviced City
Square and Clay Street (6%) and Radisson Oakland (3.8%) loans were
also contributing factors.
The Negative Outlooks on classes AS, B, X-B, C and D in UBS 2018-C9
reflect possible downgrades without performance stabilization or
with additional valuation declines of the aforementioned FLOCs.
The affirmations in UBS 2018-C8 reflect the relatively stable pool
performance and loss expectations since Fitch's last rating
action.
The Negative Outlooks on classes B, X-B, C, D, D-RR, E-RR and F-RR
in UBS 2018-C8 reflect their exposure to the high concentration of
FLOCs in the pool. The Negative Outlooks also reflect possible
downgrades should performance deteriorate further on the FLOCs,
particularly Tryad Industrial & Business Center (5.7%), Park Place
at Florham Park (5.1%) and the specially serviced City Square and
Clay Street (5.1%). All three have experienced a decline in
occupancy
FLOCs; Largest Loss Contributors: The largest increase in loss
since the prior rating action and largest contributor to loss in
UBS 2018-C9 is the 22 West 38th Street loan, which transferred to
special servicing in May 2020 for imminent monetary default. The
loan is secured by a 69,026-sf office property located in
Manhattan's Garment District and includes two ground floor retail
spaces.
The largest tenant at issuance, Knotel (previously 51.5% of NRA;
55% of gross rents), filed for bankruptcy in February 2021 and has
vacated. Per the March 2024 rent roll, the property was 57.4%
occupied. Upcoming rollover consists of 8.5% in 2024, 25.6% in 2025
and 19.9% in 2026. The largest tenant is Prudent Financial
Solutions, Inc. (17% of NRA; lease expires Dec. 31, 2025). Fitch's
'Bsf' rating case loss of 53.6% (prior to concentration
adjustments) incorporates a discount to the most recent March 2024
appraisal value, resulting in a stressed value psf of $275.
The second largest increase in loss since the prior rating action
and third largest contributor to loss in UBS 2018-C9 is the Aspen
Lake Office Portfolio loan, which is secured by a portfolio of
three adjacent suburban office properties totaling 381,588 sf and
located in northwest Austin, TX. The largest tenants are LDR Spine
USA, Inc. (23.4% of NRA and 31.3% rent; lease expires December
2024) and Transunion (9.4% of NRA and 13.8% rent; lease expires
February 2025).
Fitch designated the loan as a FLOC due to upcoming rollover risk,
including the two largest tenants, and consists of 27.1% of the NRA
in 2024 (36.5% rent), 8.6% in 2025 (8.3% rent) and 5% in 2026 (7.2%
rent). As of the latest available September 2023 rent roll, the
portfolio was 78.6% occupied. The servicer-reported NOI DSCR was
1.53x at YE 2023 and unchanged from the prior year.
A cash sweep was triggered when the largest tenant LDR Spine USA
failed to give notice to renew 12 months in advance of its lease
expiration. Fitch's 'Bsf' rating case loss of 20.7% (prior to
concentration adjustments) is based on a 10% cap rate and 25%
stress to the YE 2023 NOI due to upcoming rollover risk.
Radisson Oakland is the fourth largest increase in loss in UBS
2018-C9 since the prior rating action. The loan, which transferred
to special servicing in September 2023 due to imminent monetary
default, is secured by a 266-key full-service hotel located in
Oakland, CA. Property cashflow was positively affected by the
pandemic in 2020 and 2021, as the State of California utilized the
hotel to house unsheltered residents in response to the pandemic.
However, NOI has since trended downward for the past several years:
negative $329,000 (for YTD September 2023), $5.8 million (YE 2022),
$7.7 million (YE 2021), $9.5 million (YE 2020) and $3.4 million (YE
2019). Fitch did not receive a response to its inquiry regarding
the current status of the hotel's operations. The servicer
indicates they are dual tracking borrower negotiations with
foreclosure proceedings. Fitch's 'Bsf' rating case loss of 24.8%
(prior to concentration adjustments) is based on an 11.25% cap rate
to the YE 2019 NOI.
The largest increase in loss since the prior rating action and
largest contributor to loss in UBS 2018-C8 is the City Square and
Clay Street loan, which transferred to special servicing in April
2023 due to imminent monetary default. This loan is also the third
largest increase in loss since the prior rating action in UBS
2018-C9. The loan is secured by a 246,136- sf mixed use property
consisting of 151,304-sf of office space, 94,832-sf of retail space
and a 1,154-stall parking garage.
Occupancy declined to 64% in 2022 from 78% in 2021 after Chevron
(14%) vacated at its June 2022 lease expiration. Occupancy remains
unchanged as of the March 2024 rent roll. Major tenants include The
Club at City Center (23.1% of NRA; lease expiry in October 2036),
Kaiser Foundation Health Plan (6.9%; May 2028) and ENGIE Services
U.S. (5.7%; March 2029). Upcoming rollover consists of 8.1% of the
NRA in 2024, 6.3% in 2025 and 0.8% in 2026.
The servicer-reported NOI DSCR was 1.0x as of YE 2023. Per the
special servicer, a settlement agreement was executed with the
borrower in March 2024; there were no changes to the loan's
interest rate or term. The loan is expected to remain in special
servicing for a short rehabilitation period prior to being returned
to the master servicer. Fitch's 'Bsf' rating case loss of 27.5%
(prior to a concentration adjustment) is based on a 10% cap rate
and 7.5% stress to YE 2023 NOI.
The second largest increase in loss since the prior rating action
and second largest contributor to loss in UBS 2018- C8 is the Park
Place at Florham Park loan, which is secured by a four-building
suburban office park totaling 360,265-sf and located in Florham
Park, NJ. Fitch designated the loan a FLOC due to declining
performance. Occupancy declined to 75.5% as of the March 2024 rent
roll from 84.7% as of June 2022, after three tenants (9.9% NRA and
11.6% rent) vacated at or prior to their lease expiration. These
tenants were McCusker Anselmi Rosen Carvell (vacated ahead of
scheduled May 31,2026 lease expiration), Normandy FundSub Mgmt Co.,
LLC (lease expired May 31, 2022) and Phoenix Power Group, Inc.
(lease expired April 22, 2023).
The servicer-reported NOI DSCR was 1.24x at YE 2023 compared to
1.44x the prior year. Upcoming rollover consists of 7% of the NRA
in 2024 and 8.8% in 2025. Fitch's 'Bsf' rating case loss of 16.7%
(prior to a concentration adjustment) is based on a 10% cap rate
and 10% stress to YE 2023 NOI.
The third largest contributor to loss in UBS 2018- C8 is Tryad
Industrial & Business Center, which is secured by a 3.3 million-sf,
11-building industrial flex property located in Rochester, NY. The
largest tenants include Hammer Packaging Corp. (9.7%; recently
extended through 2028), Harris Corporation (7.8%; multiple leases
between 2025 and 2028) and Kodak Alaris (6.5%; expires in December
2028). Fitch designated the loan a FLOC due to low occupancy,
fluctuating DSCR and upcoming rollover concerns.
Occupancy has remained in the low to mid 60s since YE 2020. The
property was 61% occupied as of March 2024. The servicer-reported
NOI DSCR was 1.16x at YE 2023 compared to 1.11x the prior year.
Upcoming rollover consists of 12.3% in 2024 (12.7% rent), 8.2% in
2025 (11.1% rent) and 9% in 2026 (26.8% rent). Fitch's 'Bsf' case
loss of 9.2% (prior to a concentration adjustment) is based on a
9.5% cap rate and 15% stress to YE 2023 NOI due to upcoming
rollover risk.
Increased Credit Enhancement (CE): As of the July 2024 remittance
report, the aggregate pool balances of the UBS 2018-C9 and UBS
2018-C8 transactions have been reduced by 10.1% and 15.2%,
respectively, since issuance. The UBS 2018-C9 transaction includes
seven loans (13.9% of the pool) that have fully defeased and UBS
2018-C8 has seven defeased loans (10.2%).
Interest shortfalls of about $4.6 million are affecting classes
E-RR through the non-rated NR-RR class in UBS 2018-C9 and $139,000
are affecting the non-rated class NR-RR in UBS 2018-C8.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' rated classes with Stable Outlooks are
not likely due to their position in the capital structure and
expected continued amortization and loan repayments. However,
downgrades could occur if deal-level losses increase significantly
and/or interest shortfalls occur or are expected to occur.
Downgrades to 'AAAsf' rated classes with Negative Outlooks are
possible with continued performance and/or valuation deterioration
of the FLOCs.
Downgrades to classes rated in 'AAsf', 'Asf' and 'BBBsf'
categories, especially those which have Negative Outlooks, are
likely with lack of performance stabilization of the FLOCs and/or
prolonged workouts and valuation declines of the loans in special
servicing. These FLOCs include Tryad Industrial & Business Center,
Park Place at Florham Park and City Square and Clay Street in UBS
2018-C9; and Aspen Lake Office Portfolio, City Square and Clay
Street, 22 West 38th Street and Radisson Oakland in UBS 2018- C9.
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 and mixed-use FLOCs with deteriorating performance and/or
with greater certainty of losses on the specially serviced loans or
other FLOCs.
Downgrades to distressed ratings 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.
These FLOCs include Tryad Industrial & Business Center, Park Place
at Florham Park and City Square and Clay Street in UBS 2018-C9; and
Aspen Lake Office Portfolio, City Square and Clay Street, 22 West
38th Street and Radisson Oakland in UBS 2018- C9.
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', 'CCCsf' and 'CCsf' category rated
classes are not likely, but would be possible in the later years in
a transaction 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.
UPSTART SECURITIZATION 2022-3: Moody's Cuts B Notes Rating to Caa1
------------------------------------------------------------------
Moody's Ratings has downgraded two classes of notes from two
Upstart Securitization Trusts issued in 2022, and upgraded five
classes of notes from four Upstart Securitization Trusts issued in
2022 and 2023. These transactions are backed by pools of unsecured
consumer installment loan contracts serviced by Upstart Network,
Inc. (Upstart).
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
Issuer: Upstart Securitization Trust 2022-1
Class A Notes, Upgraded to A1 (sf); previously on Apr 4, 2022
Definitive Rating Assigned A2 (sf)
Issuer: Upstart Securitization Trust 2022-2
Class B Notes, Upgraded to A1 (sf); previously on Jun 3, 2022
Definitive Rating Assigned A3 (sf)
Class C Notes, Downgraded to Caa3 (sf); previously on Mar 6, 2024
Downgraded to Caa1 (sf)
Issuer: Upstart Securitization Trust 2022-3
Class B Notes, Downgraded to Caa1 (sf); previously on Mar 6, 2024
Downgraded to B3 (sf)
Issuer: Upstart Structured Pass-Through Trust, Series 2022-4A
2022-4A Class A Exchange Notes, Upgraded to A1 (sf); previously on
Oct 19, 2022 Definitive Rating Assigned A2 (sf)
Issuer: Upstart Securitization Trust 2023-1
Class B Notes, Upgraded to A3 (sf); previously on Mar 6, 2024
Upgraded to Baa2 (sf)
Issuer: Upstart Securitization Trust 2023-2
Class B Notes, Upgraded to A3 (sf); previously on Jul 6, 2023
Definitive Rating Assigned Baa2 (sf)
RATINGS RATIONALE
The downgrade actions are primarily driven by weak pool performance
and reductions in overcollateralization levels. The deals have
experienced higher loss and delinquency rates compared to
historical ranges, prompting an increase in Moody's lifetime loss
expectations. The downgraded bonds are at risk of taking higher
losses due to the weaker pool performance.
The upgrades actions are primarily driven by buildup of credit
enhancement due to structural features including sequential pay
structures, subordination, non-declining reserve accounts and
overcollateralization. The rating actions also consider the
experience of Upstart as a servicer and regulatory risk due to the
partner-bank arrangement through which the loans were originated.
Overcollateralization continues to decline in the Upstart
Securitization Trust (UPST) 2022-1 and UPST 2022-2 deals, reducing
credit enhancement available to protect the notes.
Overcollateralization levels remain below target levels as of the
May payment date for 2022 transactions. UPST 2022-1 is currently
undercollateralized, with the total note balances exceeding the
pool balances by 6.65%. Overcollateralization is 6.11% compared to
the target level of 16.20% for UPST 2022-2, 14.33% compared to the
target level of 17.50% for UPST 2022-3, and 20.25% compared to the
target level of 22% for USPTT 2022-4A.
The rating action reflects recent performance and Moody's updated
loss assumptions on the underlying collateral. Moody's lifetime
cumulative gross loss expectations are noted below for the
transaction pools.
Upstart Securitization Trust 2022-1: 35%
Upstart Securitization Trust 2022-2: 38%
Upstart Securitization Trust 2022-3: 33%
Upstart Structured Pass-Through Trust, Series 2022-4A: 36%
Upstart Securitization Trust 2023-1: 25%
Upstart Securitization Trust 2023-2: 26%
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Consumer Loan-Backed ABS" 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
offset current expectations of loss could drive the ratings up.
Losses could decline below Moody's expectations as a result of a
lower-than-expected cumulative charge-offs. Favorable regulatory
policies and legal actions could also move the ratings up.
Down
Levels of credit protection that are lower than necessary to offset
current expectations of loss could drive the ratings down. Losses
could increase above Moody's expectations as a result of
higher-than-expected cumulative charge-offs. Adverse regulatory and
legal risks, specifically legal issues stemming from the
origination model and whether interest rates charged on some loans
could violate usury laws, could also move the ratings down.
VOYA CLO 2024-4: Fitch Assigns 'BB-(EXP)sf' Rating on Class E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Voya CLO 2024-4, Ltd.
Entity/Debt Rating
----------- ------
Voya CLO 2024-4,
Ltd.
A-1 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-1 LT BBB-(EXP)sf Expected Rating
D-2 LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
Transaction Summary
Voya CLO 2024-4, 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 $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 24.24, versus a maximum covenant, in accordance with
the initial expected matrix point of 24.24. 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
98.72% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.23% versus a
minimum covenant, in accordance with the initial expected matrix
point of 68.3%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting 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-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, 'AAsf' for class C, 'A+sf' for
class D-1, 'A-sf' for class D-2, and 'BBB+sf' for class E.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, 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 Voya CLO 2024-4,
Ltd. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
WARWICK CAPITAL 4: S&P Assigns Prelim 'BB-' Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Warwick
Capital CLO 4 Ltd./Warwick Capital CLO 4 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 Warwick Capital CLO Management
LLC--Management Series, a subsidiary of Warwick Capital Partners
LLP.
The preliminary ratings are based on information as of Aug. 23,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Warwick Capital CLO 4 Ltd./Warwick Capital CLO 4 LLC
Class A-1, $216.00 million: AAA (sf)
Class A-1 loans, $40.00 million: AAA (sf)
Class A-2, $6.00 million: AAA (sf)
Class B, $42.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D-1 (deferrable), $24.00 million: BBB- (sf)
Class D-2 (deferrable), $4.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $35.00 million: NR
WELLFLEET CLO 2022-1: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
-------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Wellfleet
CLO 2022-1, Ltd. Reset Transaction.
Entity/Debt Rating
----------- ------
Wellfleet CLO
2022-1, Ltd.
A-1-R Loan LT NRsf New Rating
A-1-R Notes LT NRsf New Rating
A-2-R LT AAAsf New Rating
B-R LT AA+sf New Rating
C-R LT Asf New Rating
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E-R LT BB-sf New Rating
F-R LT NRsf New Rating
Subordinated LT NRsf New Rating
X LT NRsf New Rating
Transaction Summary
Wellfleet CLO 2022-1, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that originally closed in July
2022 and will be managed by Blue Owl Liquid Credit Advisors LLC.
This is the first refinancing in which the original notes will be
refinanced in whole on Aug. 22, 2024. Net proceeds from the
issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $495 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
98.17% first-lien senior secured loans and has a weighted average
recovery assumption of 74.53%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% of the portfolio balance in aggregate while the
top five obligors can represent up to 11.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2-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-2-R notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, 'Asf'
for class D-1-R, 'A-sf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Wellfleet CLO
2022-1, 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.
WELLFLEET CLO 2022-1: Moody's Gives B3 Rating to $750,000 F-R Notes
-------------------------------------------------------------------
Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes issued and one class of loans incurred (the
Refinancing Notes) by Wellfleet CLO 2022-1, Ltd. (the Issuer):
US$5,000,000 Class X-R Senior Secured Floating Rate Notes due 2037,
Assigned Aaa (sf)
US$61,850,000 Class A-1-R Senior Secured Floating Rate Loans due
2037, Assigned Aaa (sf)
US$250,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2037, Assigned Aaa (sf)
US$750,000 Class F-R Junior Secured Deferrable Floating Rate Notes
due 2037, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
92.5% of the portfolio must consist of first lien senior secured
loans and eligible investments, and up to 7.5% of the portfolio may
consist of second lien loans, senior unsecured loans and first-lien
last out loans, and permitted non-loan assets provided that no more
than 5.0% of the portfolio consists of permitted non-loan assets.
Blue Owl Liquid Credit Advisors LLC (the Manager) will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes and the other
classes of secured notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test
levels; and changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2024.
The key model inputs Moody's used in 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:
Portfolio par: $495,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2910
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 46.50%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the 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.
WELLINGTON MANAGEMENT 3: S&P Assigns BB- (sf) Rating on E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Wellington Management
CLO 3 Ltd./Wellington Management CLO 3 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 Wellington Management CLO Advisors
LLC, affiliated with Wellington Management Co. LLP and Wellington
Alternate Investments LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Wellington Management CLO 3 Ltd./Wellington Management CLO 3 LLC
Class A-1, $181.00 million: AAA (sf)
Class A loans, $75.00 million: AAA (sf)
Class A-2, $6.00 million: AAA (sf)
Class B, $42.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D-1 (deferrable), $24.00 million: BBB- (sf)
Class D-2 (deferrable), $4.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $36.66 million: Not rated
WELLS FARGO 2015-LC22: Fitch Lowers Rating on Two Tranches to B-sf
------------------------------------------------------------------
Fitch Ratings has downgraded three classes and affirmed 10 classes
of Wells Fargo Commercial Mortgage Trust 2015-LC22 (WFCM
2015-LC22). Following their downgrades, classes D, E and X-E were
assigned Negative Rating Outlooks. The Outlooks for affirmed
classes B, C and PEX were revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
WFCM 2015-LC22
A-3 94989TAY0 LT AAAsf Affirmed AAAsf
A-4 94989TAZ7 LT AAAsf Affirmed AAAsf
A-S 94989TBB9 LT AAAsf Affirmed AAAsf
A-SB 94989TBA1 LT AAAsf Affirmed AAAsf
B 94989TBE3 LT AA-sf Affirmed AA-sf
C 94989TBF0 LT A-sf Affirmed A-sf
D 94989TBH6 LT BBsf Downgrade BBB-sf
E 94989TAL8 LT B-sf Downgrade BB-sf
F 94989TAN4 LT CCCsf Affirmed CCCsf
PEX 94989TBG8 LT A-sf Affirmed A-sf
X-A 94989TBC7 LT AAAsf Affirmed AAAsf
X-E 94989TAA2 LT B-sf Downgrade BB-sf
X-F 94989TAC8 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Increased Loss Expectations/Refinancing Concerns: The downgrades of
classes D, E and X-E reflect an increase in pool loss expectations
since Fitch's prior rating action driven by continued
underperformance and refinance concerns for Fitch Loans of Concern
(FLOCs), in particular the two largest loans in the transaction:
The Meadows (11.6% of the pool) and 40 Wall Street (9.5%). In
addition, the pool is exposed to a high concentration of office
FLOCs (24% of the pool).
Fitch's current ratings incorporate a 'Bsf' rating case loss of
6.4%, an increase from 5.3% at the prior rating action. Fitch
identified 16 loans (36% of the pool) as FLOCs, including the
specially serviced Homewood Suites Austin (1.3%).
The Negative Outlooks reflects the potential for downgrades should
FLOCs experience further performance declines, if additional loans
transfer to special servicing, and also reflect refinancing
concerns of FLOCs at their upcoming loan maturity. Approximately
98% of the pool is scheduled to mature in 2025; there are seven
anticipated repayment date (ARD) loans with a final maturity in
2030.
Largest Contributors to Loss Expectations: The largest FLOC and
largest contributor to loss expectations is The Meadows, which is
secured by a 605,000 sf two-building suburban office property
located in Rutherford, NJ, approximately 10 miles west of
Manhattan. The rent roll is granular with the largest tenants
Shiseido Americas Corp (8.8%, December 2026 lease expiration) and
SGS North America (6.1%, March 2025). At issuance, Sony Music
Entertainment occupied 8.8% of NRA, but have since downsized to
2.3% with a lease expiration in September 2025. The calculated
rollover through YE 2025 is approximately 24%.
As of Q1 2024, the NOI debt service coverage ratio (DSCR) and
occupancy were reported to be 1.45x and 84%, respectively. Given
liquidity challenges facing office properties and current interest
rate environment Fitch has concerns with the borrower's ability to
refinance the loan at maturity in September 2025.
Fitch's 'Bsf' rating case loss of approximately 23% (prior to
concentration adjustments) is based on a 9.5% cap rate and 25%
stress to YE 2023 NOI, and factors a higher probability of default
to account for refinance risks, higher availability and weakening
office submarket.
The second largest contributor to loss expectations is the 40 Wall
Street loan, which is secured by a 71-story, 1.23 million-sf office
building located in the Financial District of Lower Manhattan. The
loan remains a FLOC due to further occupancy declines after Duane
Reade (6.5% of the NRA) exercised a lease termination option and
vacated their office space in March 2023. Duane Reade also vacated
their retail premises (1.9% of the NRA), but continues to pay
according to the contractual lease agreement, which expires in
January 2032.
Property occupancy has declined to 75% as of Q1 2024 with a NOI
DSCR of 0.96x. Property-level NOI in 2022 and 2023 are
approximately 43% below NOI at issuance. According to CoStar, the
subject is located in the Financial District submarket, which has a
vacancy rate of 19.6% with a higher availability rate of 25.9% for
similar quality properties.
Fitch's 'Bsf' rating case loss of approximately 22% (prior to
concentration adjustments) is based on a 9.25% cap rate and a 25%
stress to the YE 2023 NOI to account for rollover. It also
incorporates a higher probability of default to account for
heightened maturity default concerns.
The third largest contributor to loss is San Diego Park N' Fly
(FLOC, 2.7% of the pool), which is secured by an 860-space parking
garage located in San Diego, CA, approximately two miles east of
the arrival/departure terminal access for the San Diego
International Airport. The property was built in 2005 and provides
continuous shuttle service to the airport. The property performance
has struggled since issuance and also declined sharply in 2020
given its dependence on air travel and the effects of the
pandemic.
Several other parking outlets were also constructed after issuance
which increased competition. Revenues have been recovering;
however, operating expenses have sharply increased. The YE 2023 NOI
DSCR was 1.39x, which is in line with the reported DSCR of 1.37x at
YE 2019. Fitch's 'Bsf' rating case loss of 11.5% reflects an 11%
cap rate and a 7.5% stress to the YE 2023 NOI.
Specially Serviced Loan: The specially serviced Homewood Suites
Austin loan is secured by a 96-key limited service hotel located in
Austin, TX. The reported hotel performance has continued to
improve, with a reported YE 2023 NOI DSCR of 2.19x. Per the
servicer provided March 2024 STR report, the hotel's TTM occupancy
was 79.6%; ADR was $159 and RevPAR was $126; all the metrics were
above the subject's competitive set, with RevPAR penetration of
141%. Recent servicer commentary indicated the loan could return to
the master servicer later in 2024.
Change in Credit Enhancement: As of the July 2024 distribution
date, the pool's aggregate balance has been reduced by 23% to
$742.1 million from $963.7 million at issuance. Of the 100 loans in
the transaction at issuance, 89 loans remain. As of July, there are
21 loans (26.1%) that have defeased compared with 18 loans (21.5%)
at the prior review; two additional loans (2.2%) defeased as of the
August 2024 distribution date. Eleven loans (15.5%) are full-term
IO loans. The transaction has experienced realized losses to date
totaling $5.2 million (0.54% of the original pool) and cumulative
interest shortfalls are affecting the non-rated class G.
Co-Op Collateral: Seven loans (2.1%) are secured by multifamily
cooperatives. All of the properties are located within the greater
New York City metro area.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets. Downgrades to the 'AAAsf' classes are unlikely due to
increasing credit enhancement (CE) and expected continued
amortization, but may occur should interest shortfalls affect these
classes or are expected to impact these classes
Downgrades to the 'AA-sf' and 'A-sf' classes could occur if a
higher than expected proportion of the pool defaults prior to or at
maturity and/or transfers to special servicing, particularly for
The Meadows and 40 Wall Street.
Downgrades to the 'B-sf' and 'BBsf' classes categories are likely
with higher than expected losses as well as sustained performance
declines on FLOCs, and if a greater number of loans fail to payoff
at loan maturity, including the aforementioned FLOCs.
A downgrade to the distressed class F and X-F would occur with
greater certainty of losses or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with paydown and/or defeasance.
Upgrades to the 'A-sf' and 'AA-sf' categories could occur with
large improvement in CE due to loan payoffs at maturity and/or
defeasance and with the stabilization of performance amongst the
FLOCs.
Upgrades to the 'B-sf' and 'BBsf' categories would also consider
these factors, but would be limited based on sensitivity to
concentrations or the potential for future concentrations. Classes
would not be upgraded above 'Asf' if there is a likelihood of
interest shortfalls. An upgrade to class F and X-F is not likely
until the later years in a transaction and only if significant
paydown occurs and there is sufficient CE to the class.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WIND RIVER 2013-2: S&P Affirms 'B (sf)' Rating on Class E-2-R Debt
------------------------------------------------------------------
S&P Global Ratings raised its ratings on the class B-R2 and C-R
debt from Wind River 2013-2 CLO Ltd./Wind River 2013-2 CLO LLC. At
the same time, S&P affirmed its ratings on the class A-R2, D-R,
E-1-R, and E-2-R debt. S&P also removed the ratings on classes
E-1-R and E-2-R from CreditWatch, where it had placed them with
negative implications on May 31, 2024.
The transaction is a U.S. CLO that was originally issued in
November 2013 and refinanced in October 2017 and July 2021. It is
managed by First Eagle Alternative Credit LLC.
S&P said, "The rating actions follow our review of the
transaction's performance using data from the July 2024 trustee
report and additional information provided by the collateral
manager.
"On May 31, 2024, we placed our ratings on the class E-1-R and
E-2-R debt on CreditWatch negative primarily due to the classes'
decreased credit support, increased exposure to defaulted
collateral and collateral rated in the 'CCC' category, and
indicative cash flow results. On Nov. 12, 2021, we raised our
ratings on classes D-R, E-1-R, and E-2-R by one notch each and
removed the ratings from CreditWatch positive, citing passing cash
flow results and reduced exposure to 'CCC' rated assets and
defaulted assets."
Since its November 2021 rating actions, the transaction has exited
its reinvestment period in October 2022, and the senior class A-R2
debt was paid down by $217.40 million, with about 30% of its
original balance currently outstanding. These paydowns (excluding
the large paydown on the July 2024 payment date, which wasn't
reported in the July 2024 trustee report) resulted in improved
reported overcollateralization (O/C) ratios for the top two tests
but did not fully offset the increased exposure to defaulted and
'CCC' rated assets for the bottom two tests:
-- The class A/B O/C ratio improved to 185.23% from 165.82%.
-- The class C O/C ratio improved to 138.26% from 132.59%.
-- The class D O/C ratio declined to 110.72% from 111.28%.
-- The class E-1 O/C ratio declined to 104.50% from 107.53% and
was failing by 39 basis points as of the July 2024 trustee report.
-- However, based on S&P's calculations, after accounting for the
sizeable senior debt paydowns on the July 2024 payment date, S&P
expects the class E-1 O/C ratio to reach a passing level in August
2024 and the class D O/C ratio to show an improvement against the
November 2021 level.
S&P said, "Meanwhile, the collateral portfolio's credit quality has
deteriorated somewhat since our November 2021 rating actions.
Collateral obligations with ratings in the default category
increased to $2.49 million as of the July 2024 trustee report
(attributable to a single obligor) from none reported as of the
November 2021 trustee report. However, obligations in the 'CCC'
rating category fell to $27.52 million from $33.33 million. That
said, the obligor accounting for the defaulted exposure has since
exited Chapter 11 bankruptcy and the collateral manager has
confirmed receipt of a performing position in exchange for the
defaulted asset previously held. We note that although the
percentage of assets rated in the 'CCC' rating category and those
with distressed prices had increased to elevated levels since our
November 2021 rating actions, assets in the 'CCC' rating category
have declined slightly since our May 2024 rating actions.
"The upgrades reflect the improved credit support at the prior
rating levels, while the affirmations reflect our view that the
credit support available is commensurate with the current rating
levels. Although our cash flow analysis indicated higher ratings
for the class C-R, D-R, and E-1-R debt, our rating actions reflect
additional sensitivity runs that consider the portfolio's high
exposures to defaulted assets, assets in the 'CCC' rating category,
and assets trading at distressed prices in order to offset future
potential negative credit migration in the underlying collateral.
"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 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 debt remain consistent with the credit enhancement
available to support them, and we will take rating actions as we
deem necessary."
Ratings Raised
Wind River 2013-2 CLO Ltd./Wind River 2013-2 CLO LLC
Class B-R2 to 'AAA (sf)' from 'AA (sf)'
Class C-R to 'AA- (sf)' from 'A (sf)'
Ratings Affirmed And Removed From CreditWatch Negative
Wind River 2013-2 CLO Ltd./Wind River 2013-2 CLO LLC
Class E-1-R to 'BB- (sf)' from 'BB- (sf)/Watch Neg'
Class E-2-R to 'B (sf)' from 'B (sf)/Watch Neg'
Ratings Affirmed
Wind River 2013-2 CLO Ltd./Wind River 2013-2 CLO LLC
Class A-R2: AAA (sf)
Class D-R: BBB- (sf)
WIND RIVER 2021-1: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Wind
River 2021-1 CLO Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Wind River
2021-1 CLO Ltd.
A 97314HAA7 LT PIFsf Paid In Full AAAsf
A-1-R LT AAAsf New Rating
A-2-R LT AAAsf New Rating
B-R LT AAsf New Rating
C-R LT Asf New Rating
D-1-R LT BBBsf New Rating
D-2-R LT BBB-sf New Rating
E-R LT BB-sf New Rating
Transaction Summary
Wind River 2021-1 CLO Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by First Eagle
Alternative Credit, LLC and originally closed in March 2021. This
is the first refinancing in which the original notes will be
refinanced in whole on Aug. 23, 2024. Net proceeds from the
issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $300 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 21.88 versus a maximum covenant, in
accordance with the initial expected matrix point of 23. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.1% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 77.47% versus a
minimum covenant, in accordance with the initial expected matrix
point of 68.3%.
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 'Asf' and 'AAAsf' for class A-1-R, between
'BBB+sf' and 'AA+sf' for class A-2-R, between 'BB+sf' and 'A+sf'
for class B-R, between 'B+sf' and 'BBB+sf' for class C-R, between
less than 'B-sf' and 'BB+sf' for class D-1-R, between less than
'B-sf' and 'BB+sf' for class D-2-R, and between less than 'B-sf'
and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R and class
A-2-R notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, 'A+sf'
for class D-1-R, 'A-sf' for class D-2-R, 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 Wind River 2021-1
CLO Ltd. In cases where Fitch does not provide ESG relevance scores
in connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
[*] DBRS Reviews 64 Classes in 15 US RMBS Transactions
------------------------------------------------------
DBRS, Inc. reviewed 64 classes in 15 U.S. residential
mortgage-backed securities (RMBS) transactions. The reviewed
transactions are classified as RMBS backed by reperforming
mortgages. Of the 64 classes reviewed, Morningstar DBRS upgraded
its credit ratings on 32 classes and confirmed its credit ratings
on the remaining 32 classes.
The Affected Ratings are available at https://bit.ly/4e1C0pP
The Issuers are:
Towd Point Mortgage Trust 2018-4
Towd Point Mortgage Trust 2018-5
GS Mortgage-Backed Securities Trust 2023-RPL2
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2021-3
GS Mortgage-Backed Securities Trust 2020-RPL2
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-3
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-2
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2022-2
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-3
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2020-3
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-2
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-3
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-2
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2018-4
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2019-4
The credit rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new credit rating levels. The credit rating confirmations
reflect asset-performance and credit-support levels that are
consistent with the current credit ratings.
The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns June 2024 Update," published on June 28, 2024
(https://dbrs.morningstar.com/research/435206). These baseline
macroeconomic scenarios replace Morningstar DBRS' moderate and
adverse coronavirus pandemic scenarios, which were first published
in April 2020.
The credit rating actions are the result of Morningstar DBRS'
application of its "U.S. RMBS Surveillance Methodology," published
on June 28, 2024.
Notes: All figures are in US Dollars unless otherwise noted.
[*] Moody's Downgrades Rating on $53.9MM US RMBS Issued 2007
------------------------------------------------------------
Moody's Ratings has downgraded the rating of one bond from one US
residential mortgage-backed transactions (RMBS), backed by Home
Equity Conversion Mortgages (HECM). Moody's also downgraded one
HECM reverse mortgage backed resecuritization bond from one deal.
The collateral backing HECM transaction consists primarily of HECM
reverse mortgages that benefit from mortgage insurance protection
from the Federal Housing Administration, a federal agency in the
Department of Housing and Urban Development (HUD).
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: Riverview HECM Trust, Series 2007-1
CL. A, Downgraded to Caa1 (sf); previously on May 27, 2015
Downgraded to B2 (sf)
Issuer: Riverview HECM Trust 2007-4
CL. A, Downgraded to Caa1 (sf); previously on Jun 4, 2019 Affirmed
B2 (sf)
RATINGS RATIONALE
The rating action on the class A certificates from Riverview HECM
Trust, Series 2007-1 is triggered by Moody's revised loss
projections and the decrease in credit enhancement. The deal shows
a downward trend in the Over-Collateralization Percentage (OC%)
since Moody's last review as the ending balance of the HECMs plus
the funding account is now less than the remaining balance of the
certificates, causing the deal to be under collateralized. The
collateral pool has seen a 60% reduction since the previous review
as the number of loans assigned to HUD, which have reached 98% of
their Maximum Claim Amount (MCA), has accelerated.
The rating action on Cl. A from the resecuritization transaction,
Riverview HECM Trust 2007-4, reflects the rating action on the
class A certificates from Riverview HECM Trust, Series 2007-1, the
bond underlying the 2007-4 transaction.
Home equity conversion mortgages are a type of reverse mortgage in
the US that is guaranteed by the Federal Housing Administration
(FHA). The FHA guarantees any deficiency between the loan balance
and the home value, as long as the home is sold within six months
of entering real-estate-owned (REO) status. If the servicer does
not sell the home within six months of it entering REO status, the
FHA requires that the servicers obtain an appraisal of the property
from a Department of Housing and Urban Development (HUD) approved
appraiser, and the FHA will only guarantee the deficiency up to the
appraisal value. Therefore, if the home is subsequently sold for
less than the appraisal value, the FHA covers the difference
between the outstanding value of the loan and the appraisal value,
but the securitization suffers a loss equal to the difference
between the appraisal value and the actual sale price of the home.
Principal Methodologies
The principal methodology used in rating Riverview HECM Trust,
Series 2007-1 was "Reverse Mortgage Securitizations" published in
May 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 Raises Ratings on $179MM of US RMBS Issued 2021-2022
----------------------------------------------------------------
Moody's Ratings, on August 26, 2024, upgraded the ratings of 63
bonds from six US residential mortgage-backed transactions (RMBS).
Citigroup Mortgage Loan Trust 2021-J2 and Provident Funding
Mortgage Trust 2021-2 are backed by prime jumbo and agency eligible
mortgage loans. Bayview MSR Opportunity Master Fund Trust
2021-INV2, Bayview MSR Opportunity Master Fund Trust 2022-INV5,
Provident Funding Mortgage Trust 2021-INV1 and Citigroup Mortgage
Loan Trust 2022-INV2 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 MSR Opportunity Master Fund Trust 2021-INV2
Cl. A-19, Upgraded to Aaa (sf); previously on Jul 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-20, Upgraded to Aaa (sf); previously on Jul 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-21, Upgraded to Aaa (sf); previously on Jul 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-IO20*, Upgraded to Aaa (sf); previously on Jul 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-IO21*, Upgraded to Aaa (sf); previously on Jul 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-IO22*, Upgraded to Aaa (sf); previously on Jul 30, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Jul 30, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jul 30, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-3A, Upgraded to Baa1 (sf); previously on Jul 30, 2021
Definitive Rating Assigned Baa3 (sf)
Issuer: Bayview MSR Opportunity Master Fund Trust 2022-INV5
Cl. B-1, Upgraded to Aa2 (sf); previously on Apr 12, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Apr 12, 2022 Definitive
Rating Assigned A3 (sf)
Cl. B-3A, Upgraded to Baa2 (sf); previously on Apr 12, 2022
Definitive Rating Assigned Baa3 (sf)
Issuer: Citigroup Mortgage Loan Trust 2021-J2
Cl. B-1, Upgraded to Aa1 (sf); previously on Jan 20, 2023 Upgraded
to Aa2 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jan 20, 2023 Upgraded
to A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Jun 30, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Jun 30, 2021
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Jun 30, 2021
Definitive Rating Assigned B2 (sf)
Cl. B-1W, Upgraded to Aa1 (sf); previously on Jan 20, 2023 Upgraded
to Aa2 (sf)
Cl. B-2W, Upgraded to A1 (sf); previously on Jan 20, 2023 Upgraded
to A2 (sf)
Cl. B-3W, Upgraded to A3 (sf); previously on Jun 30, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-2-IO*, Upgraded to A1 (sf); previously on Jan 20, 2023
Upgraded to A2 (sf)
Cl. B-2-IOX*, Upgraded to A1 (sf); previously on Jan 20, 2023
Upgraded to A2 (sf)
Cl. B-2-IOW*, Upgraded to A1 (sf); previously on Jan 20, 2023
Upgraded to A2 (sf)
Cl. B-1-IO*, Upgraded to Aa1 (sf); previously on Jan 20, 2023
Upgraded to Aa2 (sf)
Cl. B-1-IOW*, Upgraded to Aa1 (sf); previously on Jan 20, 2023
Upgraded to Aa2 (sf)
Cl. B-1-IOX*, Upgraded to Aa1 (sf); previously on Jan 20, 2023
Upgraded to Aa2 (sf)
Cl. B-3-IO*, Upgraded to A3 (sf); previously on Jun 30, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-3-IOW*, Upgraded to A3 (sf); previously on Jun 30, 2021
Definitive Rating Assigned Baa2 (sf)
Cl. B-3-IOX*, Upgraded to A3 (sf); previously on Jun 30, 2021
Definitive Rating Assigned Baa2 (sf)
Issuer: Citigroup Mortgage Loan Trust 2022-INV2
Cl. B-1, Upgraded to Aa2 (sf); previously on Apr 1, 2022 Definitive
Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A2 (sf); previously on Apr 1, 2022 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Apr 1, 2022 Definitive
Rating Assigned Ba3 (sf)
Cl. B-1W, Upgraded to Aa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-IO*, Upgraded to Aa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-IOW*, Upgraded to Aa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-IOX*, Upgraded to Aa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Aa3 (sf)
Cl. B-2W, Upgraded to A2 (sf); previously on Apr 1, 2022 Definitive
Rating Assigned A3 (sf)
Cl. B-2-IO*, Upgraded to A2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned A3 (sf)
Cl. B-2-IOW*, Upgraded to A2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned A3 (sf)
Cl. B-2-IOX*, Upgraded to A2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned A3 (sf)
Cl. B-3W, Upgraded to Baa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-3-IO*, Upgraded to Baa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-3-IOW*, Upgraded to Baa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-3-IOX*, Upgraded to Baa2 (sf); previously on Apr 1, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Apr 1, 2022 Definitive
Rating Assigned B3 (sf)
Issuer: Provident Funding Mortgage Trust 2021-2
Cl. B-1, Upgraded to Aa2 (sf); previously on Jun 11, 2021
Definitive Rating Assigned A1 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jun 11, 2021 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Jun 11, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Jun 11, 2021
Definitive Rating Assigned Ba1 (sf)
Cl. B-5, Upgraded to Ba1 (sf); previously on Jun 11, 2021
Definitive Rating Assigned Ba3 (sf)
Cl. A-9, Upgraded to Aaa (sf); previously on Jun 11, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-10, Upgraded to Aaa (sf); previously on Jun 11, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-10A, Upgraded to Aaa (sf); previously on Jun 11, 2021
Definitive Rating Assigned Aa1 (sf)
Issuer: Provident Funding Mortgage Trust 2021-INV1
Cl. A-14, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-1*, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. A-X-15*, Upgraded to Aaa (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Aug 13, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Aug 13, 2021
Definitive Rating Assigned A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Aug 13, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Aug 13, 2021
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Aug 13, 2021
Definitive Rating Assigned B2 (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
Bayview MSR Opportunity Master Fund Trust 2021-INV2, Bayview MSR
Opportunity Master Fund Trust 2022-INV5, Citigroup Mortgage Loan
Trust 2021-J2, and Provident Funding Mortgage Trust 2021-2, and
cumulative losses of less than .01% for Provident Funding Mortgage
Trust 2021-INV1 and Citigroup Mortgage Loan Trust 2022-INV2. 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, 17% 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 $131MM of US RMBS Issued 2019
-------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 21 bonds from two US
residential mortgage-backed transactions (RMBS). The transactions
are backed by seasoned performing and modified re-performing
residential mortgage loans (RPL). The collateral is serviced by
multiple servicers.
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: Mill City Mortgage Loan Trust 2019-GS1
Cl. A3, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Aa1 (sf)
Cl. A4, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Aa3 (sf)
Cl. B1, Upgraded to Aa2 (sf); previously on Oct 10, 2023 Upgraded
to Ba3 (sf)
Cl. B1A, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Ba1 (sf)
Cl. B1B, Upgraded to Aa2 (sf); previously on Oct 10, 2023 Upgraded
to Ba3 (sf)
Cl. B2, Upgraded to A3 (sf); previously on Oct 10, 2023 Upgraded to
B2 (sf)
Cl. B2A, Upgraded to A2 (sf); previously on Oct 10, 2023 Upgraded
to B1 (sf)
Cl. B2B, Upgraded to A3 (sf); previously on Oct 10, 2023 Upgraded
to B2 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Aa2 (sf)
Cl. M3, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Baa2 (sf)
Cl. M3A, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Baa1 (sf)
Cl. M3B, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Baa2 (sf)
Issuer: MILL CITY MORTGAGE LOAN TRUST 2019-GS2
Cl. A3, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Aa1 (sf)
Cl. A4, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Aa2 (sf)
Cl. B1, Upgraded to A2 (sf); previously on Oct 10, 2023 Upgraded to
Ba2 (sf)
Cl. B1A, Upgraded to Aa2 (sf); previously on Oct 10, 2023 Upgraded
to Ba1 (sf)
Cl. B1B, Upgraded to A2 (sf); previously on Oct 10, 2023 Upgraded
to Ba3 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Aa2 (sf)
Cl. M3, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Baa1 (sf)
Cl. M3A, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to A3 (sf)
Cl. M3B, Upgraded to Aaa (sf); previously on Oct 10, 2023 Upgraded
to Baa1 (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, a reduction in expected losses, and an increase in
credit enhancement of 2.92%, on average, for the bonds Moody's
upgraded since last review. The loans underlying the pools have
fewer delinquencies and have prepaid at a faster rate than
originally anticipated, resulting in an improvement of
approximately 22.29%, on average, in Moody's loss projections for
the pools since Moody's last review (link above provides Moody's
current estimates).
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. 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. Moody's analysis also
considered the relationship of exchangeable bonds to the bonds they
could be exchanged for.
Principal Methodologies
The methodologies used in these ratings were "Non-performing and
Re-performing Loan Securitizations" published in April 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades Ratings on $35MM of US RMBS Issued 2021
------------------------------------------------------------
Moody's Ratings, on August 26, 2024, upgraded the ratings of 15
bonds issued by Hundred Acre Wood Trust 2021-INV1. The collateral
backing this deal consists of 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: Hundred Acre Wood Trust 2021-INV1
Cl. A26, Upgraded to Aaa (sf); previously on Jun 3, 2021 Definitive
Rating Assigned Aa1 (sf)
Cl. A27, Upgraded to Aaa (sf); previously on Jun 3, 2021 Definitive
Rating Assigned Aa1 (sf)
Cl. A28, Upgraded to Aaa (sf); previously on Jun 3, 2021 Definitive
Rating Assigned Aa1 (sf)
Cl. AX26*, Upgraded to Aaa (sf); previously on Jun 3, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. AX27*, Upgraded to Aaa (sf); previously on Jun 3, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. AX28*, Upgraded to Aaa (sf); previously on Jun 3, 2021
Definitive Rating Assigned Aa1 (sf)
Cl. B1, Upgraded to Aa2 (sf); previously on Jun 3, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. B1A, Upgraded to Aa2 (sf); previously on Jun 3, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. B2, Upgraded to Aa3 (sf); previously on Jun 3, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B2A, Upgraded to Aa3 (sf); previously on Jun 3, 2021 Definitive
Rating Assigned A2 (sf)
Cl. B3, Upgraded to A3 (sf); previously on Jun 3, 2021 Definitive
Rating Assigned Baa2 (sf)
Cl. B4, Upgraded to Baa3 (sf); previously on Jun 3, 2021 Definitive
Rating Assigned Ba2 (sf)
Cl. B5, Upgraded to Ba2 (sf); previously on Jun 3, 2021 Definitive
Rating Assigned B2 (sf)
Cl. BX1*, Upgraded to Aa2 (sf); previously on Jun 3, 2021
Definitive Rating Assigned Aa3 (sf)
Cl. BX2*, Upgraded to Aa3 (sf); previously on Jun 3, 2021
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 pool. The
transaction Moody's reviewed continues to display stable collateral
performance, with no cumulative losses to date and had no loans in
delinquency over 60 days as of July 2024. In addition, enhancement
levels for all tranches have grown, as the pool amortized. The
credit enhancement since closing has grown, on average, 23.1% 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.
No actions were taken on the remaining rated classes in this deal
as those classes are already at the highest achievable levels
within Moody's rating scale.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in 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 $6.5MM of US RMBS Issued 1996-1998
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings of three bonds from three
US residential mortgage-backed transactions (RMBS), backed by
manufactured housing loans, 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: Bombardier Capital Mortgage Securitization Corp 1998-A
M, Upgraded to Ba3 (sf); previously on Jun 25, 2015 Upgraded to
Caa2 (sf)
Issuer: Green Tree Financial Corporation MH 1996-04
M-1, Upgraded to B3 (sf); previously on Mar 30, 2009 Downgraded to
Ca (sf)
Issuer: Green Tree Financial Corporation MH 1997-01
M-1, Upgraded to Baa3 (sf); previously on Mar 30, 2009 Downgraded
to Caa2 (sf)
RATINGS RATIONALE
The rating actions reflect the current levels of credit enhancement
available to the bonds, the recent performance, analysis of the
transaction structures, and Moody's updated loss expectations on
the underlying pools.
Each of the upgraded bonds has seen strong growth in credit
enhancement since Moody's last review, which is the key driver for
these upgrades.
The rating upgrades 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 also reflects the potential for collateral
volatility given the number of deal-level and macro factors that
can impact collateral performance, and the potential impact of any
collateral volatility on the model output.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Takes Various Action on 17 Classes From Three LCM Deals
---------------------------------------------------------------
S&P Global Ratings took various rating actions on 17 classes of
notes from LCM 27 Ltd., LCM XVI L.P., and LCM 28 Ltd., U.S. broadly
syndicated CLO transactions managed by LCM Asset Management. Three
of the ratings were placed on CreditWatch negative on May 31, 2024,
due to a combination of increase in exposure to collateral
obligations in the 'CCC' category and indicative cash flow results
at that time. While S&P raised three ratings, S&P also lowered the
ratings on the three classes on CreditWatch and removed them from
CreditWatch negative. Additionally, we affirmed 11 ratings.
S&P said, "The rating actions follow our review of each
transaction's performance using data from the July 2024 trustee
report. In our review, we analyzed each transaction's performance
and cash flows and applied our global corporate CLO criteria in our
rating decisions. The ratings list highlights the key performance
metrics behind the specific rating actions."
The transactions have all exited their reinvestment period 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
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 overcollateralization (O/C)
levels 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 incorporate 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 levels 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 other
considerations.
-- The upgrades primarily reflect the classes' increased credit
support due to the senior note paydowns, improved O/C levels, and
passing cash flow results at higher rating levels.
The downgrades primarily reflect the classes' indicative cash flow
results and decreased credit support as a result of principal
losses and/or negative migration in portfolio credit quality.
The affirmations reflect S&P's view that the available credit
enhancement for each respective class is still commensurate with
the assigned ratings.
Although S&P's cash flow analysis indicated a different rating for
some classes of notes, it took the rating action after considering
one or more qualitative factors listed above.
S&P will continue to review whether, in its view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and will take rating actions as it deems
necessary.
Ratings List
RATING
ISSUER CLASS CUSIP TO FROM
LCM 27 Ltd. A-1 AA (sf) AAA (sf)
MAIN RATIONALE: Cash flow passes at the current rating level.
LCM 27 Ltd. B AA+ (sf) AA (sf)
MAIN RATIONALE: note paydowns, O/C improvement, and passing cash
flows. Our rating action considered the current credit enhancement
level, which is commensurate with the raised rating.
LCM 27 Ltd. C A (sf) A (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. Although our base-case analysis indicated a
higher rating, the rating action considered the current credit
enhancement level, which is commensurate with the current rating
rather than the higher rating, and the sensitivty results margin.
LCM 27 Ltd. D BBB- (sf) BBB- (sf)
MAIN RATIONALE: Cash flow passes at the current rating level. Our
base- case analysis indicated an affirmation and the current credit
enahncement level commensurate with the current rating.
LCM 27 Ltd. E B BB- (sf)/Watch Neg
MAIN RATIONALE: Failing cash flows at previous rating level.
Rating action also considered the current credit enhancement level,
which is commensurate with the new rating.
LCM XVI L.P. A-1A-R AAA (sf) AAA (sf)
MAIN RATIONALE: Cash flow passes at the current rating level.
LCM XVI L.P. A-1A-R AAA (sf) AAA (sf)
MAIN RATIONALE: Cash flow passes at the current rating level.
LCM XVI L.P. A-1A-R AAA (sf) AAA (sf)
MAIN RATIONALE: Cash flow passes at the current rating level.
LCM XVI L.P. B-R2 AA+ (sf) AA (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. Our rating action considered the current credit
enhancement level, which is commensurate with the raised rating.
LCM XVI L.P. C-R2 A (sf) A (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. Although our base-case analysis indicated a
higher rating, the rating action considered the current credit
enhancement level, which is commensurate with the current rating
rather than the higher rating, and the sensitivty results margin.
LCM XVI L.P. D-R2 BBB- (sf) BBB- (sf)
MAIN RATIONALE: Cash flow passes at the current rating level. Our
base-case analysis indicated an affirmation, and the current credit
enahncement level is commensurate with the current rating.
LCM XVI L.P. E-R2 B BB- (sf)/Watch Neg
MAIN RATIONALE: Failing cash flows at previous rating level.
Although our base-case analysis indicated a lower rating, our
rating action considered the passing trustee O/C test and the
current credit enhancement level, which is commensurate wih the
assigned rating rather than the lower rating indicated by the
base-case analysis.
LCM 28 Ltd. A AAA (sf) AAA (sf)
MAIN RATIONALE: Cash flow passes at the current rating level.
LCM 28 Ltd. B AA+ (sf) AA (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. Our rating action considered the current credit
enhancement level, which is commensurate with the raised rating.
LCM 28 Ltd. C A (sf) A (sf)
MAIN RATIONALE: Senior note paydowns, O/C improvement, and
passing cash flows. Although our base-case analysis indicated a
higher rating, rating action considered the current credit
enhancement level, which commensurates with the current rating
rather than the higher rating, and the sensitivty results margin.
LCM 28 Ltd. D BBB- (sf) BBB- (sf)
MAIN RATIONALE: Cash flow passes at the current rating level. Our
base-case analysis indicated an affirmation, and the current credit
enahncement level is commensurate with the current rating.
LCM 28 Ltd. E B BB- (sf)/Watch Neg
MAIN RATIONALE: Failing cash flows at the previous rating level.
The rating action also considered the current credit enhancement
level, which is commensurate with the new rating.
O/C--Overcollateralization.
*********
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