/raid1/www/Hosts/bankrupt/TCR_Public/241103.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, November 3, 2024, Vol. 28, No. 307
Headlines
ABPCI DIRECT XIX: S&P Assigns BB- (sf) Rating on Class E Notes
ACRA TRUST 2024-NQM1: DBRS Gives Prov. B Rating on Class B-2 Notes
AGL CLO I: Moody's Assigns Ba3 Rating to $25.25MM Class E-RR Notes
AMCR ABS 2024-A: DBRS Finalizes BB(low) Rating on Class C Notes
AMSR TRUST 2024-SFR2: DBRS Gives Prov. BB(low) Rating on F2 Certs
APIDOS CLO XLIV: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
APIDOS CLO XLIV: Moody's Assigns B3 Rating to $500,000 F-R Notes
ARBOR REALTY 2022-FL2: DBRS Confirms B(low) Rating on G Notes
ARES LIII: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
ATLX 2024-RPL2: DBRS Gives Prov. BB(high) Rating on B-1 Notes
ATLX 2024-RPL2: Fitch Gives 'B(EXP)sf' Rating on Class B-2 Certs
ATRIUM HOTEL 2024-ATRM: DBRS Finalizes B Rating on HRR Certs
BALBOA BAY 2020-1: S&P Assigns Prelim BB-(sf) Rating on E-RR Notes
BANK 2020-BNK27: Fitch Affirms B+sf Rating on Class G Debt
BANK 2020-BNK30: DBRS Confirms BB Rating on X-G Certs
BANK5 2024-5YR10: DBRS Finalizes BB(high) Rating on Class G Certs
BANK5 2024-5YR11: Fitch Assigns 'B-(EXP)sf' Rating on Two Tranches
BBCCRE TRUST 2015-GTP: S&P Lowers Class F Certs Rating to 'B-(sf)'
BBCMS MORTGAGE 2019-C3: Fitch Affirms CCC Rating H-RR Certs
BBCMS MORTGAGE 2024-C30: Fitch Gives B-(EXP) Rating on G-RR Certs
BENCHMARK 2019-B9: DBRS Cuts Class X-F Certs Rating to B
BENCHMARK 2024-V11: Fitch Assigns B-(EXP)sf Rating on Two Tranches
BLACK DIAMOND 2024-1: S&P Assigns BB- (sf) Rating on Cl. E Notes
BPR TRUST 2024-PMDW: Fitch Assigns BB+(EXP) Rating on 2 Tranches
BRAVO RESIDENTIAL 2024-NQM7: Fitch Gives B(EXP) Rating on B-2 Notes
BRIDGECREST LENDING 2024-4: DBRS Finalizes BB(high) on E Notes
BRYANT PARK 2021-17R: S&P Assigns Prelim B- (sf) Rating on E Notes
BSPRT 2022-FL9: DBRS Confirms B(low) Rating on Class H Notes
BSPRT 2023-FL10: Fitch Affirms 'B-sf' Rating on Class H Debt
BX TRUST 2022-FOX2: Fitch Affirms 'B-sf' Rating on Class F Certs
BX TRUST 2024-FNX: Fitch Assigns 'BB-(EXP)' Rating on Cl. HRR Certs
BX TRUST 2024-FNX: Moody's Assigns (P)Ba3 Rating to Cl. HRR Certs
CBAM LTD 2017-4: Moody's Affirms Ba3 Rating on $45MM Class E Notes
CD 2017-CD4: DBRS Cuts Class E Certs Rating to B
CD 2019-CD8: DBRS Confirms CCC Rating on Class H-RR Certs
CFMT 2024-R1: DBRS Finalizes BB(low) Rating on Class M-2 Notes
CHASE HOME 2024-9: DBRS Gives Prov. B(low) Rating on B-5 Certs
CHASE HOME 2024-9: Fitch Assigns 'B+sf' Rating on Class B-5 Certs
CITIGROUP 2024-CMI1: DBRS Gives Prov. B(low) Rating on B5 Certs
CITIGROUP 2024-CMI1: Moody's Assigns B1 Rating to Cl. B-5 Certs
COMM 2014-UBS4: DBRS Cuts Class X-B Certs Rating to B
CSAIL 2018-CX11: DBRS Cuts F-RR Certs Rating to B(low)
CSAIL 2019-C15: DBRS Cuts Class F-RR Certs Rating to B(low)
DEEPHAVEN 2024-1: S&P Assigns Prelim 'B+' Rating on Cl.B-2 Notes
DIAMETER CAPITAL 1: S&P Assigns BB- (sf) Rating on Cl. D-R Notes
DIAMETER CAPITAL 2: S&P Assigns BB- (sf) Rating on Cl. D-R Notes
FIGRE TRUST 2024-HE5: DBRS Finalizes B(low) Rating on F Notes
FINANCE OF AMERICA 2024-HB1: DBRS Finalizes BB(low) on 2 Classes
FLAGSHIP CREDIT 2024-3: DBRS Gives Prov. BB Rating on E Notes
FORTRESS CREDIT XXII: S&P Assigns BB- (sf) on Class E Notes
FS RIALTO 2022-FL4: DBRS Confirms B(low) Rating on Class G Notes
FS RIALTO 2022-FL5: DBRS Confirms B(low) Rating on Class G Notes
FS RIALTO 2022-FL6: DBRS Confirms B(low) Rating on Class G Notes
GALAXY 34: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
GLS AUTO 2024-4: S&P Assigns Prelim BB (sf) Rating on Cl. E Notes
GOLDENTREE LOAN 22: Fitch Assigns 'B-(EXP)sf' Rating on Cl. F Notes
GOLUB CAPITAL 64(B)-R: Fitch Assigns 'BB-' Rating on Cl. E-R Notes
GS MORTGAGE 2013-GCJ14: DBRS Confirms C Rating on Class G Certs
GS MORTGAGE 2024-INV1: Moody's Gives (P)B3 Rating to Cl. B-5 Certs
GS MORTGAGE 2024-PJ9: DBRS Gives Prov. B(low) Rating on B-5 Notes
GS MORTGAGE 2024-RPL5: DBRS Gives BB Rating on Class B-1 Notes
GS MORTGAGE 2024-UPTN: Moody's Assigns B3 Rating to Cl. F Certs
GSF 2022-1: DBRS Confirms BB(low) Rating on Class E Notes
HOMES 2024-AFC2: S&P Assigns Prelim B (sf) Rating on Cl. B-2 Notes
HPS LOAN 5-2015: S&P Affirms 'B- (sf)' Rating on Cl. F-RR Notes
JW TRUST 2024-BERY: DBRS Gives Prov. BB Rating on Class F Certs
KREF 2022-FL3: DBRS Confirms B(low) Rating on 3 Classes
LAKE SHORE IV: S&P Assigns BB- (sf) Rating on Class E-R Notes
LCM LTD 39: Moody's Assigns B3 Rating to $1MM Class F-R Notes
LEGENDS 2024-LEGENDS: DBRS Gives Prov. B(low) Rating on G Certs
LHOME MORTGAGE 2024-RTL5: DBRS Finalizes B Rating on M2 Notes
M&T EQUIPMENT 2023-LEAF1: Moody's Ups Rating on E Notes From Ba1
MADISON PARK LIV: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
MADISON PARK LIV: Moody's Assigns B3 Rating to $250,000 F-R Notes
MADISON PARK LX: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
MADISON PARK LX: Moody's Assigns B3 Rating to $250,000 Cl. F Notes
MAGNETITE XXX: S&P Assigned Prelim BB- (sf) Rating on Cl. E-R Notes
MARINER FINANCE 2024-B: DBRS Finalizes BB Rating on E Notes
MF1 2024-FL16: DBRS Gives Prov. B(low) Rating on 3 Classes
MFA TRUST 2024-RTL3: DBRS Gives Prov. BB(low) Rating on M Notes
MJX VENTURE II: Moody's Cuts Rating on Series A/Cl. E Notes to Ba3
MORGAN STANLEY 2019-L2: DBRS Cuts Class E Certs Rating to B
MORGAN STANLEY 2022-18: Fitch Assigns BB-(EXP) Rating on E-R Notes
NEUBERGER BERMAN 52: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
OAKTREE CLO 2022-2: S&P Assigns BB (sf) Rating on Class E-R2 Notes
OCP CLO 2020-8R: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
OCP CLO 2021-22: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
OCTANE RECEIVABLES 2024-3: S&P Assigns Prelim BB Rating on E Notes
OHA CREDIT 6: S&P Assigns Prelim BB- (sf) Rating on Cl. E-R2 Notes
ORION TRUST 2024-1: S&P Assigns B (sf) Rating on Class F Notes
PRPM 2024-RCF6: DBRS Finalizes BB Rating on Class M-2 Notes
RADIAN MORTGAGE 2024-J2: DBRS Finalizes B(low) Rating on B-5 Certs
RADIAN MORTGAGE 2024-J2: Moody's Assigns Ba1 Rating to B-4 Certs
RCKT MORTGAGE 2024-CES8: Fitch Assigns Bsf Rating on Five Tranches
REALT 2016-2: DBRS Confirms B(high) Rating on G Certs
REALT 2018-1: DBRS Hikes Class G Certs Rating to BB(low)
REGATTA XVII: S&P Assigns Prelim B+ (sf) Rating on Cl. E-2R Notes
RIAL 2022-FL8: DBRS Confirms B(low) Rating on Class G Notes
ROC MORTGAGE 2024-RTL1: DBRS Finalizes B(low) Rating on M2 Notes
SELF COMMERCIAL 2024-STRG: Fitch Gives B-(EXP) Rating on HRR Certs
SHR TRUST 2024-LXRY: DBRS Finalizes BB(high) Rating on HRR Certs
SOFI PERSONAL 2024-3: Fitch Assigns 'B+sf' Rating on Class F Notes
TOWD POINT 2024-4: DBRS Gives Prov. B(low) Rating on B3 Notes
TRAPEZA CDO XII: Moody's Upgrades Rating on 2 Tranches to B1
UBS COMMERCIAL 2017-C6: Fitch Lowers X-F Debt to CCsf
VELOCITY COMMERCIAL 2024-5: DBRS Finalizes B Rating on 3 Classes
VENTURE XXVII CLO: Moody's Cuts Rating on $29.5MM Cl. E Notes to B1
VERUS SECURITIZATION 2024-R1: S&P Assigns 'B' Rating on B-2 Notes
VOYA CLO 2024-5: Fitch Assigns 'BB-sf' Rating on Class E-2 Notes
WAMU COMMERCIAL 2006-SL1: Fitch Affirms Dsf Rating on 6 Tranches
WELLS FARGO 2015-NXS1: Fitch Lowers Rating on Two Tranches to CCCsf
WELLS FARGO 2017-RB1: DBRS Confirms C Rating on 4 Classes
WELLS FARGO 2018-C45: DBRS Confirms BB Rating on Class GRR Certs
WELLS FARGO 2019-C49: DBRS Confirms BB Rating on Class G-RR Certs
[*] DBRS Reviews 13 Classes From 3 US RMBS Transactions
[*] DBRS Reviews 153 Classes From 15 US RMBS Transactions
[*] Moody's Takes Action on 12 Bonds from 10 US RMBS Deals
[*] Moody's Takes Action on 15 Bonds From 9 US RMBS Deals
[*] Moody's Upgrades Ratings on 13 Bonds From Nine US RMBS Deals
*********
ABPCI DIRECT XIX: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to ABPCI Direct Lending
Fund CLO XIX L.P.'s floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by AB Private Credit Investors LLC, a wholly owned
subsidiary of Alliance Bernstein.
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
ABPCI Direct Lending Fund CLO XIX L.P.
Class A-1, $285.00 million: AAA (sf)
Class A-2, $25.00 million: AAA (sf)
Class B, $30.00 million: AA (sf)
Class C (deferrable), $40.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $30.00 million: BB- (sf)
Subordinated notes, $61.50 million: Not rated
ACRA TRUST 2024-NQM1: DBRS Gives Prov. B Rating on Class B-2 Notes
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DBRS, Inc. assigned provisional credit ratings to the
Mortgage-Backed Notes, Series 2024-NQM1 (the Notes) to be issued by
ACRA Trust 2024-NQM1 (the Issuer) as follows:
-- $251.0 million Class A-1 at (P) AAA (sf)
-- $214.9 million Class A-1A at (P) AAA (sf)
-- $36.1 million Class A-1B at (P) AAA (sf)
-- $23.9 million Class A-2 at (P) AA (high) (sf)
-- $26.6 million Class A-3 at (P) A (high) (sf)
-- $18.6 million Class M-1A at (P) BBB (high) (sf)
-- $16.4 million Class M-1B at (P) BBB (low) (sf)
-- $9.6 million Class B-1 at (P) BB (sf)
-- $9.2 million Class B-2 at (P) B (sf)
Class A-1 is an exchangeable note and Class A-1A and A-1B are
initial exchangeable notes. These classes can be exchanged in
combinations as specified in the offering documents.
The AAA (sf) credit rating on the Class A-1 Notes reflects 30.55%
of credit enhancement provided by the subordinated notes. The AA
(high) (sf), A (high) (sf), BBB (high) (sf), BBB (low) (sf), BB
(sf), and B (sf) credit ratings reflect 23.95%, 16.60%, 11.45%,
6.90%, 4.25%, and 1.70% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of fixed- and
adjustable-rate expanded prime and nonprime first-lien residential
mortgages funded by the issuance of the Notes. The notes are backed
by 787 mortgage loans with a total principal balance of
$361,456,124 as of September 30, 2024 (the Cut-Off Date).
ACRA 2024-NQM1 represents the second RMBS securitization issued by
the Sponsor, Citadel Servicing Corporation. The pool is, on
average, two months seasoned with loan ages ranging from one to
four months. The originator and servicer of the mortgages is
Citadel Servicing Corporation (CSC) doing business as Acra Lending.
ServiceMac, LLC will subservice all but 21 of the loans on behalf
of CSC.
Computershare Trust Company, N.A., (rated BBB with a Stable trend
by Morningstar DBRS) will act as Indenture Trustee, Paying Agent,
Note Registrar, Certificate, and Custodian. Computershare Delaware
Trust Company will act as Owner Trustee.
As of the Cut-Off Date, all of the loans in the pool are
contractually current according to the Mortgage Bankers Association
(MBA) delinquency calculation method.
In accordance with the Consumer Financial Protection Bureau (CFPB)
Qualified Mortgage (QM) rules, 51.0% of the loans by balance are
designated as non-QM. Approximately 48.3% of the loans in the pool
made to investors for business purposes are exempt from the CFPB
Ability-to-Repay (ATR) and QM rules. Remaining loans subject to the
ATR rules are designated as QM Safe Harbor (0.7%) by UPB.
There will be no advancing of delinquent principal or interest on
any mortgage loan by the servicer or any other party to the
transaction; however, each servicer is obligated to make advances
in respect of taxes and insurance; the cost of preservation,
restoration, and protection of mortgaged properties; and any
enforcement or judicial proceedings, including foreclosures and
reasonable costs and expenses incurred in the course of servicing
and disposing of properties.
The Sponsor or a majority-owned affiliate of the Sponsor will
acquire and intends to retain an eligible horizontal residual
interest consisting of a portion of the Class B-3 Notes and 100% of
the Class XS Notes, collectively representing at least 5.0% of the
aggregate fair value of the Notes (other than the Class R Notes) to
satisfy the credit risk-retention requirements under Section 15G of
the Securities Exchange Act of 1934 and the regulations promulgated
thereunder.
The holder of the Trust Certificates may, at its option, on or
after the earlier of (1) the payment
date in October 2027 or (2) the date on which the balance of
mortgage loans and real estate owned properties falls to or below
30% of the loan balance as of the Cut-Off Date (Optional Redemption
Date), redeem the Notes at the optional termination price described
in the transaction documents.
The Depositor, at its option, may purchase any mortgage loan that
is 90 days or more delinquent under the MBA method at the
repurchase price (Optional Purchase) described in the transaction
documents. The total balance of such loans purchased by the
Depositor will not exceed 10% of the Cut-Off Date balance.
The transaction's cash flow structure is generally similar to that
of other non-QM securitizations. The transaction employs a
sequential-pay cash flow structure with a pro rata principal
distribution among the senior tranches subject to certain
performance triggers related to cumulative losses or delinquencies
exceeding a specified threshold (Credit Event). In the case of a
Credit Event, principal proceeds will be allocated to cover
interest shortfalls on the Class A-1A and then A-1B, then in
reduction of the Class A-1A note balance, before a similar
allocation to the Class A-1B (IIPP). However, in such cases of
credit events, principal proceeds will be allocated to cover
interest shortfalls to the Class-A2 only after the balance of the
more senior notes have been paid off. For the Class A-3 Notes (only
after a Credit Event) and for the mezzanine and subordinate classes
of notes (both before and after a Credit Event), principal proceeds
will be available to cover interest shortfalls only after the more
senior notes have been paid off in full. Also, the excess spread
can be used to cover realized losses first before being allocated
to unpaid Cap Carryover Amounts due to Class A-1A, Class A1-B, A-2,
A-3, M-1A, and M1-B.
Of note, the Class A-1A, A-1B, A-2, and A-3 Notes coupon rates step
up by 100 basis points on and after the payment date in October
2028. Beginning in November 2028, funds otherwise payable to the
Class B-3 Notes as accrued and unpaid interest may be used to pay
the Class A-1A, A-1B, A-2, and A-3 Notes Cap Carryover Amounts
after the Class A coupons step up.
Notes: All figures are in U.S. dollars unless otherwise noted.
AGL CLO I: Moody's Assigns Ba3 Rating to $25.25MM Class E-RR Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to five classes of CLO
refinancing notes issued and one class of refinancing loans
incurred by AGL CLO I Ltd.
Moody's rating action is as follows:
US$306,000,000 Class ALRR Loans maturing 2034, Assigned Aaa (sf)
US$14,000,000 Class A-RR Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$59,500,000 Class B-RR Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$23,000,000 Class C-RR Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$32,250,000 Class D-RR Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$25,250,000 Class E-RR Junior Secured Deferrable Floating Rate
Notes due 2034, Assigned Ba3 (sf)
The notes and loans listed are referred to herein, collectively, as
the Refinancing Debt. The Class ALRR Loans may not be exchanged or
converted into notes at any time.
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.
AGL CLO Credit 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 remaining
reinvestment period.
The Issuer previously issued one class of subordinated notes, which
will remain outstanding.
In addition to the issuance of the Refinancing Debt, other changes
include extension of the non-call period.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in 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: $496,058,891
Diversity Score: 85
Weighted Average Rating Factor (WARF): 3017
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.27%
Weighted Average Recovery Rate (WARR): 46.7%
Weighted Average Life (WAL): 5.5 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
AMCR ABS 2024-A: DBRS Finalizes BB(low) Rating on Class C Notes
---------------------------------------------------------------
DBRS, Inc. finalizes its provisional credit ratings on the
following classes of notes to be issued by AMCR ABS Trust 2024-A
(AMCR 2024-A or the Issuer):
-- $70,205,000 Class A Notes at A (low) (sf)
-- $18,193,000 Class B Notes at BBB (low) (sf)
-- $17,582,000 Class C Notes at BB (low) (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The credit ratings on the Notes are based on a review by
Morningstar DBRS of the following analytical considerations:
(1) The transaction's form and sufficiency of available credit
enhancement.
-- Subordination, overcollateralization, amounts held in the
Reserve Fund, and excess spread create credit enhancement levels
that are commensurate with the credit ratings.
-- Transaction cash flows are sufficient to repay investors under
all A (low)(sf), BBB (low) (sf), and BB (low) (sf) stress scenarios
in accordance with the terms of the AMCR 2024-A transaction
documents.
(2) The experience, sourcing, and servicing capabilities of
Credit9. Morningstar DBRS has performed an operational risk
assessment of Credit9 and believes the Company is an acceptable
consumer loan servicer with an acceptable Backup Servicer and
Backup Servicer Subcontractor.
(3) Americor has an experienced management team.
(4) The experience, sourcing, and servicing capabilities of
Credit9, LLC. Morningstar has performed an operational risk
assessment of Credit9 and believes the Company is an acceptable
consumer loan servicer with an acceptable Backup Servicer and
Backup Servicer Subcontractor.
(5) The experience, underwriting, and origination capabilities of
Cross River Bank (CRB).
(6) The ability of Wilmington Trust National Association to perform
duties as a Backup Servicer and the ability of Nelnet Servicing,
LLC dba Firstmark to perform duties as a Backup Servicer
Subcontractor.
(7) The annual percentage rate (APR) charged on the loans and the
status of CRB as the true lender.
-- Approximately 99% of loans included in AMCR 2024-A are
originated by CRB, a New Jersey state-chartered FDIC-insured bank.
-- Loans originated by CRB are all within the New Jersey state
usury limit of 30.00%.
-- The weighted-average APR of the loans in the pool is 28.62%.
-- Loans may be in excess of individual state usury laws; however,
CRB as the true lender is able to export rates that pre-empt state
usury rate caps.
-- Loans originated to borrowers in Vermont, Colorado, Maine, West
Virginia and Puerto Rico are excluded from the pool.
-- Under the Loan Sale Agreement, CRB is obligated to repurchase
any loan if there is a breach of representation and warranty that
materially and adversely affects the interests of the purchaser.
(8) The legal structure and legal opinions that address the true
sale of the unsecured loans, the nonconsolidation of the trust,
that the trust has a valid perfected security interest in the
assets, and consistency with the Morningstar DBRS Legal Criteria
for U.S. Structured Finance.
(9) The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary Baseline Macroeconomic Scenarios for Rated
Sovereigns September 2024 Update, published on September 25, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse coronavirus pandemic scenarios, which were
first published in April 2020.
Morningstar DBRS' credit rating on the securities referenced herein
addresses the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
The associated financial obligations for each of the rated notes
are the related Interest Distributable Amount, and the related Note
Balance.
Notes: All figures are in US Dollars unless otherwise noted.
AMSR TRUST 2024-SFR2: DBRS Gives Prov. BB(low) Rating on F2 Certs
-----------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings to the
Single-Family Rental Pass-Through Certificates (the Certificates)
to be issued by AMSR 2024-SFR2 Trust:
-- $208.3 million Class A at (P) AAA (sf)
-- $37.2 million Class B at (P) AA (sf)
-- $29.3 million Class C at (P) A (sf)
-- $41.3 million Class D at (P) BBB (sf)
-- $17.6 million Class E1 at (P) BBB (sf)
-- $23.3 million Class E2 at (P) BBB (low) (sf)
-- $16.3 million Class F1 at (P) BB (high) (sf)
-- $23.3 million Class F2 at (P) BB (low) (sf)
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Class A certificates reflects
52.01% of credit enhancement provided by subordinate certificates.
The (P) AA (sf), (P) A (sf), (P) BBB (sf), (P) BBB (low) (sf), (P)
BB (high) (sf), and (P) BB (low) (sf) credit ratings reflect
43.43%, 36.68%, 23.12%, 17.74%, 13.98% and 8.60% of credit
enhancement, respectively.
The AMSR 2024-SFR2 certificates are supported by the income streams
and values from 1,443 rental properties. The properties are
distributed across 15 states and 37 metropolitan statistical areas
(MSAs) in the United States. Morningstar DBRS maps an MSA based on
the ZIP code provided in the data tape, which may result in
different MSA stratifications than those provided in offering
documents. As measured by BPO value, 56.6% of the portfolio is
concentrated in three states: Tennessee (20.3%), Texas (18.3%), and
Florida (18.0%). The average BPO value is $323,408. The average age
of the properties is roughly 28 years as of the cut-off date. The
majority of the properties have three or more bedrooms. The
certificates represent a beneficial ownership in an approximately
five-year, fixed-rate, interest-only loan with an initial aggregate
principal balance of approximately $434.0 million.
Notes: All figures are in U.S. dollars unless otherwise noted.
APIDOS CLO XLIV: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Apidos
CLO XLIV Ltd reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Apidos CLO XLIV
Ltd
A-1R LT NRsf New Rating
A-2 037989AC4 LT PIFsf Paid In Full AAAsf
A-2R LT AAAsf New Rating
B 037989AE0 LT PIFsf Paid In Full AAsf
B-R LT AA+sf New Rating
C 037989AG5 LT PIFsf Paid In Full Asf
C-R LT A+sf New Rating
D 037989AJ9 LT PIFsf Paid In Full BBB-sf
D-1R LT BBB-sf New Rating
D-2R LT BBB-sf New Rating
E 03770KAA5 LT PIFsf Paid In Full BB-sf
E-R LT BB+sf New Rating
F-R LT NRsf New Rating
Transaction Summary
Apidos CLO XLIV Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by CVC Credit
Partners, LLC. The CLO originally closed in April 2023 and its
secured notes were refinanced on Oct. 28, 2024. Net proceeds from
the issuance of the refinancing notes and existing subordinated
notes will provide financing on a portfolio of approximately $400
million of primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Positive): 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
96.84% first-lien senior secured loans and has a weighted average
recovery assumption of 74.92%. 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 five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2R, 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-1R,
between less than 'B-sf' and 'BB+sf' for class D-2R, and between
less than 'B-sf' and 'BB-sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-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 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.'AAAsf' for
class B-R, 'AA+sf' for class C-R, 'Asf' 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.
ESG Considerations
Fitch does not provide ESG relevance scores for Apidos CLO XLIV
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 any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
APIDOS CLO XLIV: Moody's Assigns B3 Rating to $500,000 F-R Notes
----------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the Refinancing Notes) issued by Apidos CLO XLIV
Ltd (the Issuer):
US$248,000,000 Class A-1R Senior Secured Floating Rate Notes due
2037, Assigned Aaa (sf)
US$500,000 Class F-R Mezzanine Deferrable Floating Rate Notes due
2037, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans and up to 10.0% of the portfolio may consist of second lien
loans, unsecured loans, first lien last out loans, senior secured
bonds, high yield bonds or senior secured notes.
CVC Credit Partners, 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, the six other
classes of secured notes and one class of 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 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: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 3225
Weighted Average Spread (WAS): 3.18%
Weighted Average Coupon (WAC): 5.6%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the 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.
ARBOR REALTY 2022-FL2: DBRS Confirms B(low) Rating on G Notes
-------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
commercial mortgage-backed notes issued by Arbor Realty Commercial
Real Estate Notes 2022-FL2, LLC as follows:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (low) (sf)
-- Class G Notes at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which benefits from being solely
composed of loans backed by multifamily properties. The multifamily
sector has historically fared better during times of distress in
terms of retained property value and cash flow compared with other
property types. In its analysis for the review, Morningstar DBRS
determined that most of the individual borrowers are progressing
with their respective business plans to increase property cash flow
and value. For loans exhibiting increased execution and other
risks, Morningstar DBRS applied stressed scenarios in the analysis
for this review, including elevated loan-to-value ratios (LTVs)
based on higher capitalization rates (cap rates) assumed compared
with the implied cap rates based on the issuance appraisals and the
issuance or in-place cash flows. This analysis resulted in higher
expected losses (ELs) for those loans and the overall pool EL.
However, the credit rating confirmations and Stable trends are
supported as the transaction benefits from a large unrated
first-loss class totaling $89.3 million as well as more than $177.0
million of below investment-grade debt (and will continue to
benefit from principal paydown as loans are repaid following the
completion of the transaction's Reinvestment Period).
In conjunction with this press release, Morningstar DBRS has
published a Surveillance Performance Update report with in-depth
analysis and credit metrics for the transaction as well as business
plan updates on select loans. For access to this report, please
click on the link under Related Documents below or contact us at
info-DBRS@morningstar.com.
The initial collateral consisted of 32 floating-rate mortgages
secured by 40 mostly transitional properties with a cut-off balance
of $936.9 million. The transaction was a managed vehicle with a
24-month Reinvestment Period, which ended with the May 2024 Payment
Date. The transaction now has a sequential-pay structure following
the expiration of the Reinvestment Period. As of September 2024,
the pool comprises 33 loans secured by 39 properties with an
outstanding balance of $962.4 million, representing a collateral
reduction of 8.3% since issuance. Since the previous Morningstar
DBRS credit rating action in October 2023, five loans, with a
former trust balance of $4.3 million, were repaid in full and four
loans, with a cumulative trust balance of $86.0 million, were added
to the trust.
The transaction is concentrated by property type as all loans are
secured by multifamily properties. The loans are primarily secured
by properties in suburban markets as 24 loans, representing 63.6%
of the pool, are secured by properties with a Morningstar DBRS
Market Rank of 3, 4, or 5. An additional four loans, representing
23.6% of the pool, are secured by properties with a Morningstar
DBRS Market Rank of 6, denoting urban markets, while five loans,
representing 12.9% of the pool, are secured by properties with a
Morningstar DBRS Market Rank of 2, denoting rural and tertiary
markets. In comparison, at transaction issuance, properties in
suburban markets represented 58.2% of the collateral, properties in
urban markets represented 23.1% of the collateral, and properties
in tertiary and rural markets represented 15.0% of the collateral.
Based on the as-is appraised values, leverage across the pool has
increased slightly from issuance, with a current weighted-average
(WA) LTV of 72.2%, in comparison with the WA issuance LTV of 71.5%.
However, the WA stabilized LTV decreased over that same period,
dropping to 64.5% from 66.0% at issuance. For loans that have
reported delays with their respective business plans or, where
issuance appraised values do not reflect the cap rate expansion
that occurred in the past two years, Morningstar DBRS assumed
higher LTVs. In the analysis for this review, Morningstar DBRS
raised the LTVs for seven loans, representing 34.0% of the current
trust balance.
Through September 2024, the lender had advanced cumulative loan
future funding of $57.3 million to 20 individual borrowers to aid
in property stabilization efforts. The largest future funding
advance has been released to the borrower of the Hunters Ridge loan
(Prospectus ID#2, 7.2% of the pool), which is secured by 455 units
of a 487-unit multifamily condominium complex in Farmington Hills,
Michigan. The borrower's business plan consists of implementing a
$19.9 million capital improvement plan to stabilize the property.
Through Q2 2024, the property was 80.9% occupied and 105 units had
been renovated. Out of the 105 renovated units, 78 have been leased
at an average rental rate of $1,897 per unit, below the Morningstar
DBRS stabilized rental rate estimate of $1,944 per unit. As a
result of interest rate hikes and increases in operating expenses,
the borrower requested a loan modification, which was executed in
March 2024, extending the loan's maturity to December 2026 from
June 2025.
An additional $25.5 million allocated to five individual borrowers
remains available. Available funding for each respective borrower
is for planned capital expenditure improvements, with the exception
of the 55 Jordan loan (Prospectus ID#3, 5.8% of the pool), as those
funds are available to finance leasing costs. The largest portion
of available funds, $8.5 million, is allocated to the borrower of
the aforementioned Hunters Ridge loan. The second-largest
outstanding future funding balance, $7.9 million, is allocated to
the Solace on Peachtree loan (Prospectus ID#39, 6.7% of the pool),
which is secured by a 533-unit, high-rise multifamily property in
Atlanta. The sponsor is still in the early stages of executing its
business plan, which focuses on renovating all 533 units. The
property was 89.1% occupied as of May 2024 with $2.7 million of
future funding advanced as of September 2024.
As of the September 2024 remittance, there are no loans being
monitored on the servicer's watchlist; however, one loan, Sora on
Rose Apartments (Prospectus ID#26, 2.1% of the pool), is specially
serviced. The loan is secured by a 92-unit multifamily property in
Phoenix and was transferred to special servicing in August 2024 for
payment default. The loan was modified at the end of August to
extend the loan's maturity to March 2026. As a condition to the
extension, the borrower purchased a 12-month interest rate cap with
a 2.5% strike rate and paid back the missed loan payment. As of
June 2024, the property was 88.0% occupied with the entire $1.7
million future funding advanced to the borrower to renovate all 92
units. Seventy units had been renovated, 65 of which have been
leased at an average rental rate of $1,566 per unit, below the
appraiser's stabilized estimate of $1,640 per unit. Following the
loan modification, the collateral manager expects the loan to be
returned to the master servicer.
Twenty loans, representing 66.3% of the pool, have been modified.
The modifications include maturity extensions, deferrals of forced
future funding dates, changes to interest rate structure,
amendments to required interest rate caps, and reallocation of
reserves. The lender granted maturity extensions in exchange for
fresh equity deposits in the form of a principal paydown or reserve
deposits and the purchase of a new interest rate cap agreement. In
the next 12 months, 27 loans, representing 74.3% of the current
pool balance, have scheduled maturity dates. All but three of these
loans have remaining extension options. Loans that were modified to
change interest rate structure generally had their rate spreads
reduced for the next 12 months before ramping up in each
consecutive year until their respective maturity dates. Additional
borrower equity contributions to interest reserves were required as
a condition for the modifications.
Notes: All figures are in U.S. dollars unless otherwise noted.
ARES LIII: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Ares LIII
CLO Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Ares LIII
CLO Ltd.
X-R LT NRsf New Rating
A-1-R LT NRsf New Rating
A-2-R LT AAAsf New Rating
B-R LT AAsf New Rating
C-R LT Asf New Rating
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E-R LT BB-sf New Rating
Subordinated LT NRsf New Rating
Transaction Summary
Ares LIII CLO Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Ares CLO Management
LLC. Initially closed in May 2019, the transaction is set to be
refinanced on Oct. 24, 2024. The net proceeds from the refinancing
of the secured notes will provide financing on a portfolio of
approximately $550 million, primarily consisting of 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 24.42 versus a maximum covenant, in accordance with
the initial expected matrix point of 26.35. 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
97.24% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.7% versus a
minimum covenant, in accordance with the initial expected matrix
point of 69.1%.
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 three-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio 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-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 'BBB-sf' for class D-1-R,
between less than 'B-sf' and 'BB+sf' for class D-2-R, and between
less than 'B-sf' and 'BB-sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-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, 'Asf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Ares LIII CLO Ltd.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
ATLX 2024-RPL2: DBRS Gives Prov. BB(high) Rating on B-1 Notes
-------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the ATLX
2024-RPL2 Mortgage-Backed Notes, Series 2024-RPL2 (the Notes) to be
issued by ATLX 2024-RPL2 Trust (ATLX 2024-RPL2 or the Trust) as
follows:
-- $342.5 million Class A-1 at (P) AAA (sf)
-- $23.2 million Class A-2 at (P) AA (high) (sf)
-- $21.6 million Class M-1 at (P) A (high) (sf)
-- $16.8 million Class M-2 at (P) BBB (high) (sf)
-- $38.4 million Class M at (P) BBB (high) (sf)
-- $5.8 million Class B-1 at (P) BB (high) (sf)
The Class M Note is exchangeable. This class can be exchanged for
combinations of initial exchangeable notes as specified in the
offering documents.
The (P) AAA (sf) credit rating on the Notes reflects 25.55% of
credit enhancement provided by subordinated notes. The (P) AA
(high) (sf), (P) A (high) (sf), (P) BBB (high) (sf), and (P) BB
(high) (sf) credit ratings reflect 20.50%, 15.80%, 12.15%, and
10.90% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a of a portfolio of seasoned performing and
reperforming first-lien residential mortgages funded by the
issuance of the Notes. The Notes are backed by 3,170 loans with a
total principal balance of $460,104,959 as of the Cut-Off Date
(September 30, 2024).
The mortgage loans are approximately 214 months seasoned. As of the
Cut-Off Date, 85.5% of the loans are current (including 0.6%
bankruptcy-performing loans), 12.7% of the loans are 30 days
delinquent (including 0.04% bankruptcy loans), and 1.8% of the
loans are 60-plus days delinquent under the Mortgage Bankers
Association (MBA) delinquency method. Under the MBA delinquency
method, 56.9% and 66.2% of the mortgage loans have been zero times
30 days delinquent for the past 24 months and 12 months,
respectively.
The portfolio contains 80.7% modified loans as determined by the
Issuer. Morningstar DBRS considers the modifications happened more
than two years ago for 98.1% of these loans. Within the pool, 1,218
mortgages have an aggregate noninterest-bearing deferred amount of
$ 44,148,032, which comprises 9.6% of the total principal balance.
ATLX 2024-RPL2 represents the second rated securitization of
seasoned performing and reperforming residential mortgage loans
issued by the Sponsor, Resi IA SPE, LLC.
The Sponsor will contribute the loans to the Trust through Atlas
Securitization Depositor LLC (the Depositor). As the Sponsor, Resi
IA SPE or one of its majority-owned affiliates will acquire and
retain a 5% eligible interest of the amounts collected on the
mortgage loans to satisfy the credit risk retention requirements
under Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
The loans are being serviced by Select Portfolio Servicing, Inc.,
Nationstar Mortgage LLC doing business as (dba) Rushmore Loan
Management Services LLC, and NewRez LLC dba Shellpoint Mortgage
Servicing. There will not be any advancing of delinquent principal
and interest (P&I) on any mortgages by the Servicers or any other
party to the transaction; however, the Servicers is obligated to
make advances in respect of homeowners association 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.
The Controlling Holder will have the option to direct the Servicers
to sell any mortgage loan that becomes 90-plus days delinquent in a
sale conducted at arm's length terms in a commercially reasonable
manner to any person, other than the Servicers or an affiliate.
On any Payment Date on or after the date two years after the
closing, the Controlling Holder will have the option to purchase
all remaining loans and other assets of the Issuer at the Early
Repayment Price. The Controlling Holder will be the beneficial
owner of more than 50% the Class XS Notes.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on the
Notes, but such shortfalls on Class A-2 and more subordinate P&I
bonds will not be paid from principal proceeds until the more
senior classes are retired.
Notes: All figures are in U.S. dollars unless otherwise noted.
ATLX 2024-RPL2: Fitch Gives 'B(EXP)sf' Rating on Class B-2 Certs
----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by ATLX 2024-RPL2 Trust (ATLX 2024-RPL2).
Entity/Debt Rating
----------- ------
ATLX 2024-RPL2
Trust
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
M-1 LT A(EXP)sf Expected Rating
M-2 LT BBB(EXP)sf Expected Rating
M LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
B LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
PT LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
Transaction Summary
The transaction is expected to close on Oct. 30, 2024. The notes
are supported by 3,170 reperforming loans with a total balance of
approximately $460 million as of the cutoff date.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.9% 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.
RPL Credit Quality (Negative): The collateral pool consists
primarily of peak-vintage SPL and RPL first lien loans. As of the
cutoff date, the pool was 85.5% current. Approximately 57.1% of the
loans were treated as having clean payment histories for the past
two years or more (clean current) or have been clean since
origination if seasoned less than two years. Additionally, 80.7% of
loans have a prior modification. The borrowers have a weak credit
profile (650 FICO and 45% debt-to-income ratio [DTI]) and
relatively low leverage (57% sustainable LTV ratio [sLTV]).
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. The credit enhancement consists of subordinated
notes, the distributions of which will be subordinated to P&I
payments due to senior noteholders. In addition, excess cash flow
resulting from the difference between the interest earned on the
mortgage collateral and that paid on the notes may be available to
pay down the bonds sequentially (after prioritizing fees to
transaction parties, net weighted average coupon shortfalls and the
breach reserve account).
No Servicer P&I Advances (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduce liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' and 'AAsf' rated
classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 42.8% at 'AAA'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by various firms. The third-party due diligence described
in Form 15E focused on a regulatory compliance review that covered
applicable federal, state and local high-cost loan and/or
anti-predatory laws, as well as the Truth In Lending Act (TILA) and
Real Estate Settlement Procedures Act (RESPA). The scope was
consistent with published Fitch criteria for due diligence on RPL
RMBS. Fitch considered this information in its analysis and, as a
result, Fitch made the following adjustments to its analysis:
- Loans with an indeterminate HUD1 located in states that fall
under Freddie Mac's "Do Not Purchase List" received a 100% LS
over-ride;
- Loans with an indeterminate HUD1 but not located in states that
fall under Freddie Mac's "Do Not Purchase List" received a
five-point LS increase;
- Loans with a missing modification agreement received a
three-month liquidation timeline extension;
- Unpaid taxes and lien amounts were added to the LS.
In total, these adjustments increased the 'AAAsf' loss by
approximately 125bps.
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.
ATRIUM HOTEL 2024-ATRM: DBRS Finalizes B Rating on HRR Certs
------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following classes of Commercial Mortgage Pass-Through Certificates,
Series 2024-ATRM (the Certificates) issued by Atrium Hotel
Portfolio Trust 2024-ATRM (the Trust):
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (high) (sf)
-- Class HRR at B (sf)
All trends are Stable.
The Atrium Hotel Portfolio Trust 2024-ATRM transaction is secured
by the borrower's fee-simple and/or leasehold interests in 24
hospitality properties across 14 states. The portfolio totals 6,106
keys and includes 14 properties that operate under the Hilton brand
family (3,946 keys, representing 73.5% of the allocated loan amount
(ALA)), nine properties that operate under the Marriott brand
family (1,859 keys, representing 21.5% of ALA), and one independent
property (301 keys, representing 5.1% of ALA). The portfolio
includes 18 full-service hotels (5,060 keys), three limited-service
hotels (609 keys), and three extended-stay hotels (437 keys). The
properties were constructed between 1992 and 2009, with a
weighted-average (WA) year built of 2003 and a WA year renovated of
2015.
The sponsor of the transaction is Atrium Holding Company (Atrium),
a leading owner and operator of hospitality properties in the
United States. Atrium has acquired approximately $5 billion of
hospitality properties since 2001 and has a portfolio of 77 hotels
totaling approximately 20,000 keys across 28 states. Atrium
acquired 21 of the 24 properties in the subject portfolio out of a
bankruptcy reorganization of The Revocable Trust of John Q. Hammons
and its affiliates. Nineteen of these properties were acquired in
2018 and securitized in the AHPT 2018-ATRM transaction. The sponsor
acquired the remaining five properties between 2005 and 2019; three
have existing debt (two of which were securitized), while two are
currently unencumbered.
From 2019 to July 2024, the borrower invested approximately $121.1
million ($19,830 per key) into property improvement plan (PIP)
renovations and other capital expenditures across the portfolio,
with investment at each property ranging from $4,085 per key to
$56,606 per key. The borrower plans to spend approximately an
additional $126.1 million ($20,659 per key or $34,466 per renovated
key) from Q4 2024 to 2029 to complete brand-mandated PIP
renovations at 14 properties. From 2019 to 2023, properties in the
portfolio that received full renovations experienced revenue per
available room (RevPAR) penetration growth of 16.5%, compared with
1.0% for nonrenovated properties. Morningstar DBRS believes that
the future PIP renovations will help the portfolio maintain or
improve its competitive position and sustain its current RevPAR
growth.
The brand-mandated PIP renovations will be partially funded by a
$40.0 million upfront PIP reserve. The remaining approximate $86.1
million of renovation costs will be funded via an ongoing monthly
PIP work, replacements, and furniture, fixtures, and equipment
reserve in the amount of 4% of gross revenue and an additional
ongoing monthly reserve in the amount of $1.0 million per month
that begins in November 2026. Morningstar DBRS considers using
ongoing reserves to fund future capital improvements to be a less
prudent loan feature for loans secured by hospitality properties
compared with reserving all costs for future capital improvements
upfront. Morningstar DBRS considered the portfolio's reliance on
ongoing reserves to fund the brand-mandated PIP renovations when
making adjustments to the Morningstar DBRS loan-to-value (LTV)
Sizing Benchmarks.
The largest properties by net cash flow (NCF) for the trailing
12-month period ended August 31, 2024 (T-12 2024), are Rogers
(Bentonville) Embassy Suites, which represents approximately 11.6%
of the T-12 2024 NCF; Frisco Embassy Suites, which represents
approximately 7.7% of the T-12 2024 NCF; and Hilton Long Beach,
which represents approximately 6.7% of the T-12 NCF. The portfolio
is located across 14 states and 21 distinct metropolitan
statistical areas, with the largest concentrations by ALA in Texas
(18.4% of ALA), Arkansas (14.3% of ALA), Nebraska (11.1% of ALA),
and Missouri (10.3% of ALA). Most properties in the portfolio are
in areas with a Morningstar DBRS Market Rank of 2 (41.4% of ALA), 3
(21.3% of ALA), or 5 (21.2% of ALA), and the portfolio has a
Morningstar DBRS WA Market Rank of 3.3. The majority of the
properties are in suburban areas within secondary or tertiary
markets, but they benefit from being near local demand drivers.
In 2019, prior to the coronavirus pandemic, the portfolio achieved
an occupancy rate of 68.8% and an average daily rate (ADR) of
$145.63, resulting in a RevPAR of $100.13. Following a significant
decline during 2020 because of the pandemic, the portfolio's
performance was able to recover to pre-pandemic levels by 2022,
with the YE2022 RevPAR of $101.83 representing a 1.7% increase over
the YE2019 RevPAR. Over the past two years, the portfolio has
continued to experience consistent topline growth. During the T-12
2024, the portfolio achieved a RevPAR of $115.55, representing a
15.4% increase over the YE2019 RevPAR and a 3.2% increase over the
YE2023 RevPAR. The portfolio achieved a WA RevPAR penetration of
127.3% during the T-12 ended July 31, 2024, and did not see WA
RevPAR penetration decline to less than 105.9% between 2015 and
2023, indicating that the majority of properties in the portfolio
have historically outperformed their respective competitive sets.
Based on an occupancy rate of 70.1% and an ADR of $161.81,
Morningstar DBRS concluded a RevPAR of $113.46, which is 1.8% lower
than the T-12 2024 RevPAR of $115.55 and 1.4% greater than the
YE2023 RevPAR of $111.93.
The portfolio's appraised value is approximately $1.45 billion,
which includes a premium of approximately 4.8% for the treatment of
the individual properties as a portfolio; this equates to a
moderately high Issuer LTV of 68.0%. Without the portfolio premium,
the Issuer LTV increases to 71.3%. The Morningstar DBRS-concluded
value of approximately $1.11 billion ($181,733 per key) represents
a 23.4% discount to the appraised value and results in a
Morningstar DBRS whole loan LTV of 88.8%, which indicates
high-leverage financing.
Notes: All figures are in U.S. dollars unless otherwise noted.
BALBOA BAY 2020-1: S&P Assigns Prelim BB-(sf) Rating on E-RR Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-RR, A-2-RR, B-RR, C-RR, D-1-RR, D-2-RR, and E-RR replacement
debt and proposed new class X debt from Balboa Bay Loan Funding
2020-1 Ltd./Balboa Bay Loan Funding 2020-1 LLC, a CLO managed by
Pacific Investment Management Company LLC that was originally
issued on Dec. 22, 2020, and underwent a refinancing on Dec. 23,
2021.
The preliminary ratings are based on information as of Oct. 30,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 4, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the Dec. 23, 2021, debt.
S&P said, "At that time, we expect to withdraw our ratings on the
Dec. 23, 2021, debt and assign ratings to the replacement debt.
However, if the refinancing doesn't occur, we may affirm our
ratings on the Dec. 23, 2021, debt and withdraw our preliminary
ratings on the replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class X, A-1-RR, A-2-RR, B-RR, C-RR, D-1-RR,
D-2-RR, and E-RR debt is expected to be issued at a lower spread
over three-month SOFR than the original debt.
-- The replacement class X, A-1-RR, A-2-RR, B-RR, C-RR, D-1-RR,
and E-RR debt is expected to be issued at a floating spread, while
the class D-2-RR debt will be issues at a fixed coupon, replacing
the current floating spread classes.
-- The non-call period will be extended to Oct. 20, 2025.
-- The reinvestment period will be extended to Oct. 20, 2027.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) will be extended to Oct. 20,
2035.
-- Class X debt will be issued on the refinancing date and is
expected to be paid down using interest proceeds during the first
eight payment dates in equal installments of $500,000, beginning on
the Jan. 20, 2025, payment date and ending on the Oct. 20, 2026,
payment date.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- An additional $11.00 million of subordinated notes will be
issued on the refinancing date bringing the total to $53.30
million.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- An additional $11.0 million of subordinated notes will be
issued on the refinancing date, bringing the total to $53.3
million.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Balboa Bay Loan Funding 2020-1 Ltd./
Balboa Bay Loan Funding 2020-1 LLC
Class X, $4.0 million: AAA (sf)
Class A-1-RR, $248.0 million: AAA (sf)
Class A-2-RR, $16.0 million: AAA (sf)
Class B-RR, $40.0 million: AA (sf)
Class C-RR (deferrable), $24.0 million: A (sf)
Class D-1-RR (deferrable), $20.0 million: BBB (sf)
Class D-2-RR (deferrable), $6.0 million: BBB- (sf)
Class E-RR (deferrable), $14.0 million: BB- (sf)
Other Debt
Balboa Bay Loan Funding 2020-1 Ltd./
Balboa Bay Loan Funding 2020-1 LLC
Subordinated notes, $53.3 million: Not rated
BANK 2020-BNK27: Fitch Affirms B+sf Rating on Class G Debt
----------------------------------------------------------
Fitch Ratings has affirmed 26 classes of BANK 2020-BNK27 commercial
mortgage pass-through certificates, series 2020-BNK27. The Rating
Outlooks for classes F and G were revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
BANK 2020-BNK27
A-1 06539XAA2 LT AAAsf Affirmed AAAsf
A-4 06539XAC8 LT AAAsf Affirmed AAAsf
A-4-1 06539XAD6 LT AAAsf Affirmed AAAsf
A-4-2 06539XAE4 LT AAAsf Affirmed AAAsf
A-4-X1 06539XAF1 LT AAAsf Affirmed AAAsf
A-4-X2 06539XAG9 LT AAAsf Affirmed AAAsf
A-5 06539XAH7 LT AAAsf Affirmed AAAsf
A-5-1 06539XAJ3 LT AAAsf Affirmed AAAsf
A-5-2 06539XAK0 LT AAAsf Affirmed AAAsf
A-5-X1 06539XAL8 LT AAAsf Affirmed AAAsf
A-5-X2 06539XAM6 LT AAAsf Affirmed AAAsf
A-S 06539XAQ7 LT AAAsf Affirmed AAAsf
A-S-1 06539XAR5 LT AAAsf Affirmed AAAsf
A-S-2 06539XAS3 LT AAAsf Affirmed AAAsf
A-S-X1 06539XAT1 LT AAAsf Affirmed AAAsf
A-S-X2 06539XAU8 LT AAAsf Affirmed AAAsf
A-SB 06539XAB0 LT AAAsf Affirmed AAAsf
B 06539XAV6 LT AA-sf Affirmed AA-sf
C 06539XAW4 LT A-sf Affirmed A-sf
D 06539YAA0 LT BBBsf Affirmed BBBsf
E 06539YAE2 LT BBB-sf Affirmed BBB-sf
F 06539YAG7 LT BB+sf Affirmed BB+sf
G 06539YAJ1 LT B+sf Affirmed B+sf
X-A 06539XAN4 LT AAAsf Affirmed AAAsf
X-B 06539XAP9 LT AA-sf Affirmed AA-sf
X-D 06539YAC6 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Performance and 'Bsf' Loss Expectations: The affirmations reflect
generally stable pool performance and loss expectations that are in
line with the prior rating action. Deal-level 'Bsf' rating case
loss is 2.6%. There are three Fitch Loans of Concern (FLOCs; 15.4%
of the pool); there are currently no delinquent or specially
serviced loans.
The Negative Outlooks on classes F and G reflect the potential for
downgrades should performance of the FLOCs fail to stabilize, as
well as the high office concentration of 51.5% (including nine of
the top 10 loans).
Largest Contributors to Loss: The largest contributor to overall
loss expectations is the Ralph Lauren HQ New Jersey (7.1%) loan,
which is secured by a 255,018-sf, single-tenant office building
located in Nutley, NJ. The property is 100% leased to Ralph Lauren
Corporation on a 16-year lease through December 2035. Ralph Lauren
has downsized its space from 100% at issuance, vacating floors four
through seven (72.2% of NRA) which are now dark, reducing physical
occupancy to 27.8%.
According to the servicer commentary, Ralph Lauren continues to pay
all contractual rent and the dark space is currently being marketed
for sublease. The loan is currently cash managed and reported $2.4
million ($10.7 psf) in total reserves as of the October 2024 loan
level reserve report. The servicer-reported NOI DSCR was 3.42x as
of June 2024, 3.14x at YE 2023 and 3.05x at YE 2022.
According to CoStar, the property lies within the Bloomfield/GSP
Office Submarket of the New Jersey, NJ market area. As of 3Q24,
average rental rates were $29.27 psf and $29.08 psf for the
submarket and market, respectively. Vacancy for the submarket and
market was 5.5% and 13.2%, respectively. Fitch's 'Bsf' case loss of
14.0% (prior to a concentration adjustment) is based on a 9.0% cap
rate and 20% stress to the annualized trailing six months ended
June 2024 NOI, and factors in an increased probability of default
due to the low physical occupancy and uncertainty regarding future
leasing prospects to backfill the vacant space.
The second largest contributor to expected losses is the 200 West
57th Street (7.3%) loan, which is secured by a 171,395-sf office
building located in Manhattan, NY. The major tenants include The
St. Luke's Roosevelt Hospital (17.3% of total NRA; 12.6% leased
through January 2026 and 4.7% through October 2034), Extended
Fertility LLC (4.1%; January 2039) and Orthology Inc. (4.1%;
December 2029). Property occupancy was 84.0% as of June 2024, 83.7%
at YE 2023 and 86.7% at YE 2022. The servicer-reported NOI DSCR was
1.63x as of June 2024, 1.69x at YE 2023 and 1.62x at YE 2022.
Fitch's 'Bsf' case loss of 6.0% (prior to a concentration
adjustment) is based on an 8.0% cap rate and 10% stress to the YE
2023 NOI.
Minimal Increase in CE: As of the October 2024 remittance
reporting, the pool's aggregate principal balance has been reduced
by 0.3% since issuance. Twenty-nine loans (92.7%) are full term,
interest-only. Five loans (5.8%) have a partial, interest-only
component of which three loans (3.5%) have begun amortizing. One
loan, Stor-All Portfolio KS (1.0%), is fully defeased. Cumulative
interest shortfalls are impacting the risk-retention RRI class and
class H.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades to the senior 'AAAsf' rated classes are not expected
due to the position in the capital structure and expected continued
increased credit enhancement through 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', 'Asf' and 'BBBsf'
categories may occur should performance of the FLOCs and/or office
properties deteriorate further, or should expected losses for the
pool increase significantly and/or if additional loans become
FLOCs.
- Downgrades to classes rated in the 'BBsf' and 'Bsf' categories,
which have Negative Outlooks, could occur with higher than expected
losses from continued underperformance of the FLOCs and with new
defaults or transfers to special servicing.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with stable
to improved pool-level loss expectations and performance
stabilization of FLOCs. Upgrades of these classes to 'AAAsf' will
also consider the concentration of defeased loans in the
transaction;
- Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration, and would only occur with sustained improved
performance of the FLOCs;
- Upgrades to 'BBsf' and 'Bsf' category rated classes are not
likely until the later years in a transaction and only if the
performance of the remaining pool is stable and there is sufficient
CE to the classes.
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.
BANK 2020-BNK30: DBRS Confirms BB Rating on X-G Certs
-----------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates (the Certificates),
Series 2020-BNK30 issued by BANK 2020-BNK30 (the Issuer) as
follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB 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 A-4 at AAA (sf)
-- Class A-4-1 at AAA (sf)
-- Class A-4-2 at AAA (sf)
-- Class A-4-X1 at AAA (sf)
-- Class A-4-X2 at AAA (sf)
-- Class X-A at AAA (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 AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class X-D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class X-G at BB (sf)
-- Class G at BB (low) (sf)
All trends are Stable.
The credit rating confirmations and Stable trends reflect the
overall stable performance of the underlying loans in the pool as
evidenced by a strong weighted-average (WA) debt service coverage
ratio (DSCR) of 3.27 times (x) and the healthy WA debt yield of
more than 11.2% based on the most recent financials reported. While
the pool is concentrated by property type, with office properties
representing 43.7% of the pool, those loans are performing as
expected with a WA DSCR of 3.53x, suggesting the term risks remain
generally low. The pool also benefits from three loans--605 Third
Avenue (Prospectus ID#1; 10.1% of the pool), McDonald's Global HQ
(Prospectus ID #4; 7.0% of the pool), and The Grace Building
(Prospectus ID#6; 7.6% of the pool) that Morningstar DBRS shadow
rated as investment grade at issuance and maintained as such with
this review--that all have low expected losses.
Despite this, Morningstar DBRS' analysis considered stressed
loan-to-value ratios (LTVs) for each of the office loans in the
pool. The resulting WA expected loss for these loans was still
below the overall pool average. Morningstar DBRS also noted
significant credit support provided by the unrated and
below-investment-grade-rated certificates in the capital stack.
As of the October 2024 remittance, all 40 of the original loans
remain in the pool, and there has been limited collateral reduction
of only 3.24% since issuance. No loans are in special servicing,
and only one loan, McDonald's Global HQ, is on the servicer's
watchlist for failure to submit financials, however, the property
remains 92% occupied by McDonald's with the only termination option
co-terminus with the loan's maturity in November 2030. As noted
above, the pool is quite concentrated by property type with
office-, retail-, and industrial-backed loans comprising 43.7%,
33.9%, and 10.2% of the pool, respectively. Six loans securitized
in the subject transaction and comprising 33.8% of the pool are
pari passu with notes securitized in the BANK 2020-BNK29
transaction, which Morningstar DBRS reviewed in September 2024.
As mentioned previously, the office loans in the transaction
continue to exhibit very strong credit metrics, supported by high
DSCRs and low short-term risk. Of the office loans, three,
representing 24.7% of the pool, are secured by two Class A and one
Class B office properties in Manhattan. The Class A properties, 605
Third Avenue and The Grace Building, both have occupancy rates
above 95%, and the Class B property, 250 W 57th Street (Prospectus
ID#7; 7.0% of the pool), reported an 84.7% occupancy rate as of the
June 2024 operating statement analysis report. All of the
properties have low rollover risk in the near term and all reported
healthy DSCRs above 2.9x as of the YE2023 financials.
At issuance, 605 Third Avenue, McDonald's Global HQ, and The Grace
Building were assigned investment-grade shadow ratings by
Morningstar DBRS. With this review, Morningstar DBRS confirms the
performance of these loans remains consistent with investment-grade
characteristics based on strong credit metrics and continued stable
performance.
Notes: All figures are in U.S. dollars unless otherwise noted.
BANK5 2024-5YR10: DBRS Finalizes BB(high) Rating on Class G Certs
-----------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following classes of Commercial Mortgage Pass-Through Certificates
Series, 2024-5YR10 (the Certificates) issued by BANK5 2024-5YR10
(the Trust):
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (low) (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-D at A (low) (sf)
-- Class X-F at BBB (sf)
-- Class X-G at BBB (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class F at BBB (low) (sf)
-- Class G at BB (high) (sf)
All trends are Stable.
Classes X-D, X-F, X-G, D, E, F, G, and H-RR will be privately
placed.
The collateral for the BANK5 2024-5YR10 transaction consists of 42
fixed-rate loans secured by 83 commercial and multifamily
properties with an aggregate cut-off date balance of $837.84
million. Two loans (The Galt House and ExchangeRight 68),
representing 15.4% of the pool, are shadow-rated investment grade
by Morningstar DBRS. The conduit pool was analyzed to determine the
provisional credit ratings, reflecting the long-term probability of
loan default within the term and its liquidity at maturity. When
the cut-off balances were measured against the Morningstar DBRS Net
Cash Flow (NCF) and their respective constants, the initial
Morningstar DBRS Weighted-Average (WA) Debt Service Coverage Ratio
(DSCR) of the pool was 1.55 times (x). The WA Morningstar DBRS
Issuance Loan-to-Value Ratio (LTV) of the pool was 57.1% and the
loan is scheduled to amortize to a WA Morningstar DBRS Balloon LTV
of 56.7% at maturity. These credit metrics are based on the A note
balances. Excluding the shadow-rated loans, the deal still exhibits
a reasonable WA Morningstar DBRS Issuance LTV of 61.0% and a WA
Morningstar DBRS Balloon LTV of 60.8%. However, 10 loans,
representing 13.7% of the allocated pool balance, exhibit a
Morningstar DBRS Issuance LTV in excess of 67.1%, a threshold
generally indicative of above-average default frequency,
Additionally, 16 loans, representing 22.3% of the allocated pool
balance, exhibit a Morningstar DBRS DSCR below 1.25x, a threshold
indicative of a higher likelihood of midterm default. The
transaction has a sequential-pay pass-through structure.
The Galt House and ExchangeRight 68, together representing 15.4% of
the pool, exhibit credit characteristics consistent with
investment-grade shadow ratings. The credit characteristics of The
Galt House were consistent with a AA shadow rating and those of
ExchangeRight 68 were consistent with a BBB (high) shadow rating.
Three loans, representing 14.8% of the pool, are located 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. Additionally, 12 loans, representing 50.1% of the
allocated pool balance, are located in areas with Morningstar DBRS
Market Ranks of 5 or 6. Markets with these rankings benefit from
lower default frequencies than less dense suburban, tertiary, and
rural markets. New York and Los Angeles are the predominant urban
markets represented in the deal. Another 12 loans, representing
35.3% of the pool, are located in Metropolitan Statistical Area
(MSA) Group 3, which represents the best-performing group among the
top 25 MSAs in historical commercial mortgage-backed securities
(CMBS) default rates.
Fourteen loans, representing 37.6% of the pool, have Morningstar
DBRS Issuance 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 15.4% of the pool, the
transaction exhibits a WA Morningstar DBRS Issuance LTV of 61.0%.
There are only three loans in the pool (Kimpton Journeyman Hotel,
River Apartments, and The Reserve at Homosassa Springs) with
Morningstar DBRS LTVs equal to or above 70.0%.
Five loans, representing 16.1% of the pool, received a property
quality assessment of Average +, with no loans in the pool
receiving a property quality assessment of Below 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 42 loans and is concentrated with a lower
Herfindahl score of 19.5, with the top 10 loans representing 60.8%
of the pool. These metrics are lower than the Morningstar
DBRS-rated BANK5 2024-5YR7 transaction, which had a Herfindahl
score of 21.2, while the BANK5 2024-5YR8 deal had a Herfindahl
score of 16.7. 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 16 loans, representing 45.1% of the
pool balance. These property types were among the most affected by
the COVID-19 pandemic. Future demand for office space is uncertain
because of the post-pandemic growth of work from home or hybrid
work, resulting in less 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. Two
of the office loans and two of the retail loans, representing 24.7%
of the total pool balance, are located in areas with Morningstar
DBRS Market Ranks of 6, 7, and 8, which exhibit the lowest
historical CMBS probabilities of default (PODs) and loss severity
given default. Furthermore, three of the office loans and three of
the retail loans, representing 28.3% of the total pool balance, are
in MSA Group 3, which is the best-performing group among the top 25
MSAs in historical CMBS default rates. All office loans in the pool
were sampled as were six of the 11 retail properties, representing
90.9% of the property type's trust balance. Three of the five
office properties sampled were assessed as having Average +
property quality. Two of the six retail properties sampled were
deemed to have Strong sponsorship strength.
In today's challenging interest rate environment, debt service
payments have nearly doubled since mid-2022. Elevated interest
rates have severely constrained DSCRs, and the subject transaction
has a WA Morningstar DBRS DSCR of 1.55x, or 1.40x when excluding
the shadow-rated loans. While adequate to service debt, the ratio
is considerably lower than historical conduit transactions and
provides for a smaller cushion should cash flows be disrupted.
Loans with lower DSCRs receive a POD penalty in the Morningstar
DBRS model.
Thirty-eight, or 85.1%, of the 42 loans in the pool are structured
with interest-only (IO) payment structures and do not benefit from
any amortization. The four remaining loans amortize over their full
loan terms with no periods of IO payments. One of the IO loans,
ExchangeRight 68, which represents 5.5% of the pool, is
shadow-rated investment grade by Morningstar DBRS. The IO loans
have a WA Morningstar DBRS LTV of 60.3%, indicative of moderately
low leverage. Of the 38 loans with full-term IO periods, six loans,
representing 30.5% of the pool, are located in areas with
Morningstar DBRS Market Ranks of 6 or higher, while 14.8% of the
pool is in areas with Morningstar DBRS Market Ranks of 7 or 8.
These urban markets benefit from increased liquidity even during
times of economic stress.
Thirty-four loans, representing 86.3% 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 from the
sponsor, which aligns its interests more closely with those of the
lender, 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 those loans debts
are 57.4% and 57.0%, respectively.
Thirty of the 42 loans in the pool exhibit negative leverage,
defined as the Issuer's implied capitalization rate (cap rate)
(Issuer's NCF divided by the appraised value), less the current
interest rate. On average, the transaction exhibits -0.79% 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 their borrowers' ability to refinance their loans.
Notes: All figures are in US dollars unless otherwise noted.
BANK5 2024-5YR11: Fitch Assigns 'B-(EXP)sf' Rating on Two Tranches
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BANK5 2024-5YR11 commercial mortgage pass-through certificates,
series 2024-5YR11 as follows:
- $225,000,000ab class A-2 'AAAsf'; Outlook Stable;
- $0b class A-2-1 'AAAsf'; Outlook Stable;
- $0bc class A-2-X1 'AAAsf'; Outlook Stable;
- $0b class A-2-2 'AAAsf'; Outlook Stable;
- $0bc class A-2-X2 'AAAsf'; Outlook Stable;
- $303,928,000ab class A-3 'AAAsf'; Outlook Stable;
- $0b class A-3-1 'AAAsf'; Outlook Stable;
- $0bc class A-3-X1 'AAAsf'; Outlook Stable;
- $0b class A-3-2 'AAAsf'; Outlook Stable;
- $0bc class A-3-X2 'AAAsf'; Outlook Stable;
- $528,928,000c class X-A 'AAAsf'; Outlook Stable;
- $72,728,000b class A-S 'AAAsf'; Outlook Stable;
- $0b class A-S-1 'AAAsf'; Outlook Stable;
- $0bc class A-S-X1 'AAAsf'; Outlook Stable;
- $0b class A-S-2 'AAAsf'; Outlook Stable;
- $0bc class A-S-X2 'AAAsf'; Outlook Stable;
- $41,559,000b class B 'AA-sf'; Outlook Stable;
- $0b class B-1 'AA-sf'; Outlook Stable;
- $0bc class B-X1 'AA-sf'; Outlook Stable;
- $0b class B-2 'AA-sf'; Outlook Stable;
- $0bc class B-X2 'AA-sf'; Outlook Stable;
- $29,280,000b class C 'A-sf'; Outlook Stable;
- $0b class C-1 'A-sf'; Outlook Stable;
- $0bc class C-X1 'A-sf'; Outlook Stable;
- $0b class C-2 'A-sf'; Outlook Stable;
- $0bc class C-X2 'A-sf'; Outlook Stable;
- $143,567,000c class X-B 'A-sf'; Outlook Stable;
- $17,945,000d class D 'BBBsf'; Outlook Stable;
- $8,501,000d class E 'BBB-sf'; Outlook Stable;
- $26,446,000cd class X-D 'BBB-sf'; Outlook Stable;
- $17,001,000d class F 'BB-sf'; Outlook Stable;
- $17,001,000cd class X-F 'BB-sf'; Outlook Stable;
- $12,279,000d class G 'B-sf'; Outlook Stable;
- $12,279,000cd class X-G 'B-sf'; Outlook Stable.
The following classes are not expected to be rated by Fitch:
- $27,391,425d class J;
- $27,391,425d class X-J;
- $26,159,075e class RR;
- $13,610,000e RR Interest.
(a) The initial certificate balances of classes A-2 and A-3 are
unknown and expected to be $528,928,000 in aggregate, subject to a
5% variance. The certificate balances will be determined based on
the final pricing of those classes of certificates. The expected
class A-2 balance range is $0 to $225,000,000 (net of the vertical
risk retention interest), and the expected class A-3 balance range
is $303,928,000 to $528,928,000 (net of the vertical risk retention
interest). Fitch's certificate balances for classes A-2 and A-3
reflect the high and low point of each range, respectively.
(b) Exchangeable Certificates. The class A2, class A3, class AS,
class B and class C are exchangeable certificates. Each class of
exchangeable certificates may be exchanged for the corresponding
classes of exchangeable certificates, and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the surrendered
classes of certificates.
The class A2 may be surrendered (or received) for the received (or
surrendered) classes A-2-1, A-2-X1, A-2-2 and A-2-X2. The class A-3
may be surrendered (or received) for the received (or surrendered)
classes A-3-1, A-3-X1, A-3-2 and A-3-X2. The class AS may be
surrendered (or received) for the received (or surrendered) classes
A-S -1, AS -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.
(c) Notional amount and interest only.
(d) Privately placed and pursuant to Rule 144A.
(e) Vertical-risk retention interest.
Transaction Summary
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 33 loans secured by 77
commercial properties with an aggregate principal balance of
$795,381,500 as of the cut-off date.
The loans were contributed to the trust by Wells Fargo Bank,
National Association, Bank of America, National Association, Morgan
Stanley Mortgage Capital Holdings LLC, and JPMorgan Chase Bank,
National Association.
The master servicer is expected to be Wells Fargo Bank, National
Association and the special servicer is expected to be Midland Loan
Services, a division of PNC Bank, National Association. The trustee
and certificate administrator are both expected to be Computershare
Trust Company, National Association.
The certificates are expected to follow a sequential paydown
structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 20 loans
totaling 91.3% of the pool by balance. Fitch's resulting net cash
flow (NCF) of $70.0 million represents an 11.8% decline from the
issuer's underwritten NCF of $79.4 million. Aggregate NCFs include
only the prorated trust portion of any pari passu loan. The NCF
decline is below the 2024 YTD five-year and 2023 five-year averages
of 13.2% and 12.9%, respectively.
Higher Fitch Leverage: The pool has higher leverage compared to
recent five-year multiborrower transactions rated by Fitch. The
pool's Fitch loan-to-value ratio (LTV) of 99.0% is worse than both
the 2024 YTD and 2023 averages of 94.3% and 89.7%, respectively.
The pool's Fitch NCF debt yield (DY) of 9.5% is below the 2024 YTD
and 2023 averages of 10.3% and 10.6%, respectively.
Investment-Grade Credit Opinion Loans: Two loans representing 15.7%
of the pool balance received an investment-grade credit opinion.
Queens Center received a credit opinion of 'BBBsf*' on a standalone
basis and Atrium Hotel Portfolio 24 Pack received a credit opinion
of 'BBB+sf*' on a standalone basis. The pool's total credit opinion
percentage is above the 2024 YTD five-year and 2023 five-year
averages of 12.2% and 14.6%, respectively. Fitch NCF DY and LTV net
of the credit opinion loan are 8.9% and 104.3%, respectively.
High Loan Concentration: The largest 10 loans constitute 70.5% of
the pool, which is higher than the 2024 YTD five-year and 2023
five-year average of 58.9% and 65.3%, 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 17.9, which is worse than the 2024
YTD five-year and 2023 five-year averages of 23.1 and 19.7,
respectively. Fitch views diversity as a key mitigant to
idiosyncratic risk. Fitch raises the overall loss for pools with
effective loan counts below 40.
High Geographic Concentration: The transaction has a higher
geographic concentration compared to recent five-year multiborrower
transactions Fitch has rated. The top three MSA concentrations are
New York-Newark-Jersey City, NY-NJ-PA (36.2%), Riverside-San
Bernardino-Ontario, CA (9.5%), and Boston-Cambridge-Newton, MA-NH
(7.2%). The pool's effective geographic count of 6.3 is below the
2024 YTD five-year and 2023 five-year averages of 10.4 and 10.7,
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 (regions for Canada).
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 lists below indicate 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'/'Bsf'/less
than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Similarly, improvement in cash flow increases property value and
capacity to meet its debt service obligations.
The lists below indicate 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 Deloitte & Touche LLP and Ernst & Young LLP. The
third-party due diligence described in Form 15E focused on a
comparison and re-computation of certain characteristics with
respect to each of the mortgage loans. Fitch considered this
information in its analysis and it did not have an effect on its
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.
BBCCRE TRUST 2015-GTP: S&P Lowers Class F Certs Rating to 'B-(sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on eight classes of
commercial mortgage pass-through certificates from BBCCRE Trust
2015-GTP, a U.S. CMBS transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a 10-year, fixed-rate, interest-only (IO) mortgage loan secured
by the borrower's fee simple (40) and leasehold (one) interests in
a portfolio of 41 single-tenant properties totaling 2.6 million sq.
ft. in 19 U.S. states, a majority of which are currently leased to
U.S. federal government agencies via the General Services
Administration (GSA) or its delegated leasing authority.
Rating Actions
The downgrades on the class A, B, C, D, E, and F certificates
primarily reflect:
-- The portfolio's occupancy has declined to 92.7% from 100% in
our last published review in November 2020 and at issuance, using
the June 30, 2024, rent roll and leasing updates from the master
servicer, Wells Fargo Bank N.A.
-- The properties' office submarkets are generally experiencing
increased vacancy and availability rates since 2020. We considered
that these weakened fundamentals will challenge leasing efforts for
any properties that have or are expected to become vacant.
-- The revised expected-case valuation for the portfolio, which is
now 9.4% lower than the value we derived in our last published
review. To arrive at our revised value, we utilized a higher
vacancy rate assumption.
S&P said, "We lowered our ratings on the class X-A and X-B IO
certificates based on 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. Class X-A's notional
amount references the balance of class A. Class X-B's notional
amount references the balances of classes B and C.
"We will continue to monitor the tenancy and performance of the
properties, their respective submarkets, 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 appropriate."
Property-Level Analysis
The loan collateral consists of 41 single-tenant properties
totaling 2.6 million sq. ft. in 19 U.S. states. The properties are
concentrated by allocated loan amount (ALA) in Florida (eight
properties, 25.2% of ALA) and Texas (eight, 15.7%). No other state
accounts for more than 6.2% of ALA. The properties were built
between 1902 and 2013 with an average built year, by sq. ft., of
2007 and range in size from approximately 16,000 sq. ft. to 165,000
sq. ft.
S&P said, "At issuance and in our November 2020 published review,
we noted that the 41 single-tenant properties were 100% leased to
16 U.S. federal government agencies via the GSA, an independent
agency with the authority to enter into binding leases on behalf of
the U.S. federal government or via a federal agency with
GSA-delegated leasing activity. Since each building was
built-to-suit or retrofit-to-suit to meet tenant agency
requirements and GSA standards and the U.S. federal government has
historically had high renewal rates, in our November 2020 published
review, we assumed a 95.0% occupancy rate, despite significant
lease rollover--about 61.4% of the net rentable area (NRA) expiring
between 2022 and 2025, the loan's maturity. Using a $32.19 per sq.
ft. S&P Global Ratings gross rent and a 30.6% operating expense
ratio, we arrived at an S&P Global Ratings long-term sustainable
net cash flow (NCF) of $56.6 million. Utilizing a 7.68%
weighted-average S&P Global Ratings capitalization rate, we derived
an S&P Global Ratings expected-case value of $737.5 million or $286
per sq. ft."
According to the June 30, 2024, rent roll, while the GSA has
renewed a majority of the space rolling through 2024, the
portfolio's occupancy dropped to 92.7%, after reflecting leasing
updates from Wells Fargo. Specifically, the Veterans Affairs tenant
in the Austin, Texas, property (5.8% of NRA) vacated as of its
Sept. 30, 2024, lease expiration and the Federal Emergency
Management Agency tenant has occupied the Denton, Texas, property
(2.3%).
The five largest U.S. federal government agencies, by NRA,
occupying the properties in the portfolio are:
-- Federal Bureau of Investigation (25.3% of NRA; 22.0% of S&P
Global Ratings' in-place gross rent; various lease expirations
[2035, 2038, 2041, and 2044]).
-- Citizenship and Immigration Services (14.2%; 17.5%; various
[2025, 2026, 2033, and 2038]).
-- Drug Enforcement Agency (11.2%; 10.9%; various [2026, 2027,
2028, and 2029]).
-- Social Security Administration (5.9%; 5.1%; various [2029,
2034, and 2038]).
-- Department of Justice (5.3%; 5.9%; various [2028, 2029, and
2037]).
-- After reflecting leasing updates from Wells Fargo, the lease
rollover schedule is relatively staggered: 5.5% of NRA rolls in
2025, 5.2% in 2026, and 3.4% in 2027.
S&P said, "In our current analysis, we considered the portfolio's
performance trends, the upcoming lease rollover, and the weakened
office submarket conditions due to lower office demand overall. As
a result, we assumed a 90.0% occupancy rate, an S&P Global Ratings
gross rent of $36.56 per sq. ft., and a 34.8% operating expense
ratio to arrive at an S&P Global Ratings long-term sustainable NCF
of $51.4 million, 9.1% lower than our last published review NCF.
"Using a 7.68% weighted-average S&P Global Ratings capitalization
rate (unchanged from our last published review), we arrived at an
S&P Global Ratings expected-case value of $669.8 million or $260
per sq. ft., 9.2% lower than our last published review value, and
34.4% below the issuance as-is appraised value for the individual
properties of $1.02 billion. This yielded an S&P Global Ratings
loan-to-value ratio of 98.5% on the loan balance."
Table 1
Servicer-reported collateral performance
Six months ended
June 30, 2024(i) 2023(i) 2022(i) 2021(i)
Occupancy rate (%) 97.7 97.7 99.1 100.0
Net cash flow (mil. $) 28.5 57.9 59.2 57.5
Debt service coverage (x) 1.85 1.89 1.93 1.87
Appraisal value (mil. $)(ii) 1,021.0 1,021.0 1,021.0 1,021.0
(i)Reporting period.
(ii)As is for the individual properties.
Table 2
S&P Global Ratings' key assumptions
Current review Last review Issuance
(October 2024)(i) (November 2020)(i) (August 2015)
Occupancy rate (%) 90.0 95.0 95.0
Net cash flow (mil. $) 51.4 56.6 56.0
Capitalization rate (%) 7.68 7.68 7.68
Value (mil. $) 669.8 737.5 731.1
Value per sq. ft. ($) 260 286 284
Loan-to-value ratio (%) 98.5 89.5 90.3
(i)Review period.
Transaction Summary
According to the Oct. 11, 2024, trustee remittance report, the IO
mortgage loan has a current balance of $660.0 million (same as in
our last published review and at issuance), pays an annual fixed
interest rate of 4.588%, and matures on Aug. 10, 2025. There is no
subordinate debt, and the borrower is prohibited from incurring
additional subordinate debt in the future. To date, the trust has
not incurred any principal losses.
Ratings Lowered
BBCCRE Trust 2015-GTP
Class A to 'AA+ (sf)' from 'AAA (sf)'
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)'
Class F to 'B- (sf)' from 'B (sf)'
Class X-A to 'AA+ (sf)' from 'AAA (sf)'
Class X-B to 'BBB+ (sf)' from 'A (sf)'
BBCMS MORTGAGE 2019-C3: Fitch Affirms CCC Rating H-RR Certs
-----------------------------------------------------------
Fitch Ratings has affirmed 15 classes of BBCMS Mortgage Trust
2019-C3 Commercial Mortgage Pass-Through Certificates, Series
2019-C3. The Rating Outlooks for classes D, E-RR, F-RR, G-RR and
X-D remain Negative.
Entity/Debt Rating Prior
----------- ------ -----
BBCMS 2019-C3
A-2 05550MAR5 LT AAAsf Affirmed AAAsf
A-3 05550MAS3 LT AAAsf Affirmed AAAsf
A-4 05550MAU8 LT AAAsf Affirmed AAAsf
A-S 05550MAX2 LT AAAsf Affirmed AAAsf
A-SB 05550MAT1 LT AAAsf Affirmed AAAsf
B 05550MAY0 LT AA-sf Affirmed AA-sf
C 05550MAZ7 LT A-sf Affirmed A-sf
D 05550MAC8 LT BBBsf Affirmed BBBsf
E-RR 05550MAE4 LT BBsf Affirmed BBsf
F-RR 05550MAG9 LT B+sf Affirmed B+sf
G-RR 05550MAJ3 LT B-sf Affirmed B-sf
H-RR 05550MAL8 LT CCCsf Affirmed CCCsf
X-A 05550MAV6 LT AAAsf Affirmed AAAsf
X-B 05550MAW4 LT A-sf Affirmed A-sf
X-D 05550MAA2 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Performance and 'Bsf' Loss Expectations: The affirmations reflect
the generally stable pool loss expectations. The deal-level 'Bsf'
rating case loss is 5.42%, which is in line with Fitch's prior
rating action.
Ten loans (21.2%) are considered Fitch Loans of Concern (FLOC),
including four loans (6.7%) in special servicing: The Colonnade
Office Complex (3.3%), 4201 Connecticut (2.3%), North Attleboro
Shopping Center (0.8%) and 123 Whiting Street (0.3%). Office loans
comprise 25.8% of the transaction.
The Negative Outlooks for classes D, E-RR, F-RR, H-RR, G-RR and X-D
reflect the underperformance of the FLOCs and the potential for
downgrades if there is a prolonged workout of the specially
serviced loans that would lead to a value decline and/or higher
than expected losses.
Fitch Loans of Concern: 4201 Connecticut Avenue Northwest (2.3%) is
largest contributor to loss expectations. The loan is secured by a
70,600-sf office building in Washington, DC and transferred to
special servicing in November 2023 for imminent monetary default. A
receiver has been appointed to address deferred maintenance items
and lease renewals for tenants expiring in the near term.
Occupancy has continued to decline since issuance with several
tenants vacating upon lease expiration. As of August 2024, the
property was 58.5% occupied compared to 71% as of August 2023, 85%
as of December 2021 and 100% at issuance. The special servicer is
evaluating disposition options including a receiver sale.
Fitch's 'Bsf' rating case loss of 64.4% (prior to concentration
adjustments) is based on a 40% stress to recent appraised value,
reflecting concerns with a potential near-term sale at a distressed
sales price. Fitch's value equates to approximately $110 psf.
The largest FLOC is the ATRIA Corporate Center (4.4%), which is
secured by 360,047-sf office building located in Plymouth, MN, a
suburb of Minneapolis, MN. The loan is considered a FLOC due to due
to declining occupancy. The second largest tenant at issuance
(Covidien Medtronic; 21.4% of NRA) vacated upon lease expiration in
November 2021. As of June 2024, occupancy was reported at 79%
compared to 69.4% as of October 2023, 90.5% as of December 2021 and
99.7% at issuance. According to the servicer, two of the five
largest tenants (The Mosaic Company (8.2%) and Cannon Technologies
(6.8%)) are in discussions with the sponsor regarding a potential
lease renewal.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 6.6% is based on a 10% cap rate and 25% stress to T-12 March
2024 NOI to account for low occupancy and uncertainty with rolling
tenants.
The smaller specially serviced loans, North Attleboro Shopping
Center (0.8%) and 123 Whiting Street (0.3%) have Fitch 'Bsf' rating
case losses (prior to concentration adjustments) of 36.7% and
31.8%, respectively. Both losses are based on Fitch stressed cap
rates and stresses to the most recent reported NOIs, as updated
valuations are not available.
Minimal Change in CE: As of the September 2024 distribution date,
the pool's aggregate balance has been reduced by 4.1%. Three loans
(1.1%) have been defeased. At issuance, based on the scheduled
balance at maturity, the pool was expected to pay down by 6.3%
prior to maturity, which is less than the average for transactions
of a similar vintage. Cumulative interest shortfalls of
approximately $135,000 are affecting the non-rated class J-RR.
Investment-Grade, Credit Opinion Loans: At issuance, four loans,
representing 9.1% of the pool, were credit assessed. Two of the
investment-grade credit opinion loans are in the top 10; at
issuance NEMA San Francisco (3.9% of the pool) received a credit
opinion of 'BBB-sf' on a standalone basis and 787 Eleventh Avenue
(3.3% of the pool) received a credit opinion of 'BBB-sf' on a
standalone basis.
However, NEMA San Francisco is no longer considered a credit
opinion loan due to its significant performance decline and recent
transfer to special servicing. The loan is secured by a 754-unit
class A multi-family high rise located in San Francisco, CA. The
loan transferred to special servicing in August 2024 after property
cash flow had declined and was no longer sufficient to cover
operating expenses after payment of debt service. A modification
was executed in February 2024 with terms including a $10.5 capital
infusion from the borrower and an interest rate reduction for the
subordinate B notes. The loan returned to the master servicer in
May 2024 and remains current.
Fitch's 'Bsf' rating case loss of 4.8% (prior to concentration
adjustments) reflects a 7% cap rate and a 7.5% stress to the
annualized June 2024 NOI.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades to the senior 'AAAsf' rated classes are not expected
due to the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur or
are expected to occur;
- Downgrades to classes rated in the 'AAsf', and 'Asf' categories
may occur should performance of the FLOCs deteriorate further, most
notably the larger office loans including ATRIA Corporate Center,
NEMA San Francisco and the specially serviced office loans The
Colonnade Office Complex and 4201 Connecticut Avenue Northwest
loans;
- Downgrades to classes rated in the 'BBBsf', 'BBsf', and 'Bsf'
categories, which have Negative Outlooks, could occur with higher
than expected losses from continued underperformance of the FLOCs
and/or with greater certainty of losses on the specially serviced
loans or other FLOCs;
- Downgrades to classes with distressed ratings would occur as
losses are realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs. Upgrades of these classes to 'AAAsf' will
also consider the concentration of defeased loans in the
transaction;
- Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration and would only occur with sustained improved
performance of the FLOCs;
- Upgrades to 'BBsf', and 'Bsf' category rated classes, as well as
the 'CCCsf' rated class, 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.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BBCMS MORTGAGE 2024-C30: Fitch Gives B-(EXP) Rating on G-RR Certs
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BBCMS Mortgage Trust 2024-C30 Commercial Mortgage Pass-through
Certificates Series 2024-C30 as follows:
- $6,128,000 class A-1 'AAAsf'; Outlook Stable;
- $27,740,000 class A-2 'AAAsf'; Outlook Stable;
- $200,000,000a class A-4 'AAAsf'; Outlook Stable;
- $350,530,000a class A-5 'AAAsf'; Outlook Stable;
- $8,160,000 class A-SB 'AAAsf'; Outlook Stable;
- $103,698,000 class A-S 'AAAsf'; Outlook Stable;
- $592,558,000b class X-A 'AAAsf'; Outlook Stable;
- $39,151,000 class B 'AA-sf'; Outlook Stable;
- $28,062,000 class C 'A-sf'; Outlook Stable;
- $170,911,000b class X-B 'A-sf'; Outlook Stable;
- $15,322,000cd class D-RR 'BBBsf'; Outlook Stable;
- $8,465,000cd class E-RR 'BBB-sf'; Outlook Stable;
- $15,872,000cd class F-RR 'BB-sf'; Outlook Stable;
- $9,523,000cd class G-RR 'B-sf'; Outlooks Stable.
Fitch does not expect to rate the following class:
- $33,861,145cd class H-RR.
a) The exact initial certificate balances of the class A-4 and
class A-5 certificates are unknown and will be determined based on
the final pricing of those classes of certificates. The respective
initial certificate balances of these classes are expected to be
within the following ranges and $550,530,000 in the aggregate,
subject to a variance of plus or minus 5.0%. The balances above
reflect the high and low point of each range, respectively.
The expected class A-4 balance range is $0-$200,000,000, and the
expected class A-5 balance range is $350,530,000-$550,530,000.
Fitch's certificate balances for classes A-4 and A-5 reflect the
high and low point of each range, respectively.
b) Notional Amount and interest only.
c) Privately Placed and pursuant to Rule 144A.
d) Horizontal Risk Retention.
NR-Not Rated
Transaction Summary
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 41 loans secured by 67
commercial properties having an aggregate principal balance of
$846,512,146 as of the cut-off date. The loans were contributed to
the trust by Barclays Capital Inc., German American Capital Corp.,
Bank of America, N.A., KeyBank, N.A., Société Générale
Financial Corporation, LMF Commercial, LLC, Bank of Montreal,
Starwood Mortgage Capital LLC and Goldman Sachs Mortgage Company.
The master servicer is expected to be Midland Loan Services, a
Division of PNC Bank, National Association and the special servicer
is expected to be Rialto Capital Advisors, LLC. KeyBank National
Association will act as primary servicer pursuant to a primary
servicing agreement with the master servicer with respect to 15
loans totaling 20.4% of the pool balance. The trustee and
certificate administrator is expected to be Computershare Trust
Company, N.A. The certificates are expected to follow a sequential
paydown structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analysis on 26 loans
totaling 88.8% of the pool by balance. Fitch's resulting net cash
flow (NCF) of $93.6 million represents a 10.2% decline from the
issuer's underwritten NCF of $104.3 million. Aggregate NCFs include
only the pro-rated trust portion of any pari passu loan. The NCF
decline is below the 2024 YTD 10-year and 2023 10-year averages of
13.4% and 12.9%, respectively.
Lower Fitch Leverage: The pool has lower leverage compared to
recent U.S. Private Label Multiborrower transactions rated by
Fitch. The pool's Fitch loan to value ratio (LTV) of 88.2% is lower
than the YTD 2024 and 2023 averages of 91.1% and 88.3%,
respectively. The pool's Fitch NCF debt yield (DY) of 11.1% is
higher than the YTD 2024 and 2023 averages of 11.0% and 10.9%,
respectively.
Investment-Grade Credit Opinion Loans: Three loans representing
21.9% of the pool received an investment-grade credit opinion.
Newport Centre (9.5% of the pool) received a standalone credit
opinion of 'BBBsf*', St Johns Town Center (6.5% of the pool)
received a standalone credit opinion of 'Asf*', and VISA Global HQ
(5.9% of the pool) received a standalone credit opinion of 'Asf*'.
The pool's total credit opinion percentage is higher than the YTD
2024 and 2023 averages of 15.2% and 17.8%, respectively. The pool's
Fitch LTV and DY, excluding credit opinion loans, are 93.6% and
10.7%, respectively.
High Pool Concentration: The largest 10 loans constitute 60.1% of
the pool, which is slightly better than the 2024 YTD and 2023
averages of 60.3% and 63.7%, respectively. Despite this
improvement, the pool remains concentrated. Fitch measures loan
concentration risk with an effective loan count, which accounts for
both the number and size of loans in the pool. The pool's effective
loan count is 21.3, which is slightly lower than the 2024 YTD
average of 22.4 and higher than 2023 averages of 20.6. 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 has an average property type
diversity compared to recent Fitch rated transactions but the
concentration of retail mall properties is higher. The pool's
effective property type count of 4.2 is lower than the YTD 2024
average of 4.3 and higher than the 2023 average of 4.0. Retail is
the largest property type concentration in the pool, comprising 13
properties (42.1% of the pool). This includes six mall properties
($242.3 million, 28.6% of the pool), with four of these among the
top 15 properties.
This retail concentration exceeds the YTD 2024 and 2023 retail
averages of 28.1% and 31.2%, respectively. However, the transaction
has lower concentration of both office (13.7% of the pool) and
hotel (9.9%) properties. The pool's office concentration is lower
than both the YTD 2024 and 2023 office concentration of 20.3% and
27.6%, respectively. Similarly, the pool's hotel concentration is
lower than the YTD 2024 and 2023 averages of 12.1% and 12.3%,
respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' /'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / B-sf';
- 10% NCF Decline: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB-sf' / 'BB+sf'
/ 'BBsf' / 'B-sf' /less than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' /'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / '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 Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BENCHMARK 2019-B9: DBRS Cuts Class X-F Certs Rating to B
--------------------------------------------------------
DBRS Limited downgraded its credit ratings on 14 classes of
Commercial Mortgage Pass-Through Certificates, Series 2019-B9
issued by Benchmark 2019-B9 Mortgage Trust as follows:
-- Class X-A to AA (high) (sf) from AAA (sf)
-- Class A-S to AA (sf) from AAA (sf)
-- Class B to A (high) (sf) from AA (sf)
-- Class X-B to A (sf) from A (high) (sf)
-- Class C to A (low) (sf) from A (sf)
-- Class D to BBB (low) (sf) from BBB (high) (sf)
-- Class X-D to BB (high) (sf) from BBB (sf)
-- Class E to BB (sf) from BBB (low) (sf)
-- Class X-F to B (sf) from BB (high) (sf)
-- Class F to B (low) (sf) from BB (sf)
-- Class G to CCC (sf) from B (high) (sf)
-- Class H to CCC (sf) from B (low) (sf)
-- Class X-G to CCC (sf) from BB (low) (sf)
-- Class X-H to CCC (sf) from B (sf)
In addition, Morningstar DBRS confirmed its credit ratings on the
remaining classes as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
Morningstar DBRS changed the trends on Classes A-S, B, C, D, E, F,
X-A, X-B, X-D, and X-F to Stable from Negative. There are no trends
on Classes G, H, X-G, and X-H, which have credit ratings that do
not typically carry trends in commercial mortgage-backed securities
(CMBS) transactions. The trends on all other classes are Stable.
On October 25, 2023, Morningstar DBRS changed the trends on Classes
A-S, X-A, B, X-B, C, X-D, D, E, X-F, F, X-G, G, X-H, and H to
Negative from Stable because of concerns about the high
concentration of loans in the pool secured by office collateral
(37.7% as of the September 2024 remittance), most of which are
located in suburban markets. The credit rating downgrades with this
review reflect Morningstar DBRS' view that those loans are
exhibiting increased risks from issuance that are likely to be
sustained through the longer term and could contribute to increased
losses over the life of the deal.
The most notable of these loans are the largest loans in the pool:
3 Park Avenue (Prospectus ID#1; 10.4% of the pool), secured by an
office tower in New York that is reporting an occupancy rate around
50%; Plymouth Corporate Center (Prospectus ID#3; 5.5% of the pool),
backed by an office campus in suburban Minneapolis with significant
rollover risk; and the Fairbridge Office Portfolio (Prospectus
ID#7; 3.7% of the pool) loan, secured by a portfolio of two office
properties in suburban Chicago that is exhibiting increased vacancy
and a declining debt service cover ratio (DSCR). In addition, since
the previous credit rating action, 120 Spring Street (Prospectus
ID#32; 1.2% of the pool), backed by a single-tenant retail property
in New York, transferred to special servicing in December 2023 for
maturity default. The loans are discussed in further detail below.
To account for these risks, Morningstar DBRS analyzed stressed
scenarios for seven of the 11 non-specially serviced office- or
mixed-use with office-backed loans. Those scenarios considered
stressed loan-to-value ratios (LTV) and/or probability of default
(POD) adjustments. The risk for further performance and/or value
deterioration of loans backed by office properties is exacerbated
by the relatively skinny class structure at the bottom of the
capital stack, which results in a relatively low cushion against
liquidated losses over the remainder of the deal term.
The credit rating confirmations at the top of the capital stack are
reflective of the overall healthy performance of the underlying
loans in the pool, as well as the significant cushion against loss
remaining for those classes. As the analysis for this review
accounts for the increased risks as described above and as
reflected in the credit rating downgrades, the change in trends to
Stable from Negative was warranted.
As of the September 2024 remittance, 48 of the original 50 loans
remained in the pool with a trust balance of $843.5 million,
representing a collateral reduction of 4.5% from issuance. Twelve
loans, representing less than 30% of the deal, are on the
servicer's watchlist being monitored for deferred maintenance
items, low occupancy rate and/or low DSCRs, and three loans,
representing 3.2% of the pool, are in special servicing. Four loans
, representing 3.6% of the pool balance, are defeased. Loans backed
by office properties represent the largest concentration in the
pool at 37.7%.
The largest loan in special servicing is the aforementioned 120
Spring Street. After the default on the December 2023 maturity, a
12-month forbearance, which required an undisclosed principal
payment, closed in January 2024. The agreement is structured with a
one-time 12-month extension to November 30, 2025, with an
additional principal payment required. The 2,306 square foot retail
property is solely occupied by Birkenstock, on a lease running
through 2033. Performance remains stable, with a healthy DSCR.
Given the maturity default and the unknown details about the
required paydown amounts, with this review, Morningstar DBRS
applied a probability of default (POD) adjustment resulting in an
expected loss (EL) equal to the pool average.
The largest loan on the servicer's watchlist, 3 Park Avenue, is
secured by a mixed-use office and retail building on the corner of
34th Street and Park Avenue in New York. The loan first became
delinquent in May 2020 and has subsequently faced multiple
short-term periods of delinquency but was current as of the
September 2024 reporting. The loan is being monitored because of a
low DSCR and occupancy rate, most recently reported at 0.67 times
(x) and 54.0%, respectively, as of December 2023. The decline in
occupancy rate from 85.4% at issuance followed the loss of two
tenants and the downsizing of another. Cash flow has declined
significantly since issuance, with the financial reporting for the
trailing12 months (T-12) ended December 31, 2023, reflecting an
annualized net cash flow (NCF) of $5.8 million. Although higher
than the YE2022 figure of $4.9 million (DSCR of 0.56x), NCF remains
64.0% below the issuance figure of $16.1 million (DSCR of 1.84x).
In its analysis, Morningstar DBRS applied a stressed LTV and
maintained a conservative POD adjustment for this loan, resulting
in an EL approximately 15.0% greater than the pool average.
Morningstar DBRS also has concerns about the Plymouth Corporate
Center loan, backed by a suburban office property in Plymouth,
Minnesota, part of the greater Minneapolis area. The largest tenant
at the property, TCF National Bank (69.0% of net rentable area
(NRA)) was acquired by Huntington Bank in June 2021, and is in
place on a lease scheduled to expire in December 2025. The loan is
structured with a cash management trigger to that trap excess cash
30 months prior to lease expiry. Given that a lease renewal does
not appear to have been signed to date, Morningstar DBRS believes a
cash sweep should have been initiated in July 2022 and has asked
the servicer to confirm. According to the financials for the
trailing six months (T-6) ended June 30, 2024, the property
generated annualized NCF of $3.4 million (DSCR of 1.16x), a notable
decline from $4.4 million (DSCR of 1.83x) at YE2023. The decline is
attributed to decreased revenue and increased expenses, although
the occupancy rate was reported at 91.0%, unchanged from YE2023.
The low in-place cover is exacerbated by the near-term scheduled
rollover for the largest tenant amid sluggish demand within the
submarket, as Reis reported a Q2 2024 vacancy rate of 19.2%. Given
these increased risks, Morningstar DBRS analyzed the loan with a
stressed scenario that considered a high LTV, resulting in an EL
that was approximately triple the pool average.
The Fairbridge Office Portfolio loan, secured by two suburban
office properties in the Chicago suburbs of Oak Brook, Illinois,
and Warrenville, Illinois, was added to the servicer's watchlist in
September 2021 for a low DSCR. Performance declines have persisted
since, and coverage fell below breakeven as of the March 2024
reporting. The decline is attributable to the loss of tenants over
the past few years, pushing the occupancy rate down to 58.8% as of
March 2024, well below the issuance rate of 84.7%. According to
Reis, the submarket reported an average office vacancy rate of
25.9% as of Q2 2024. The servicer does report some positive
developments in a recent renewal for Lewis University (7.4% of the
total NRA), and other renewals or new leases, all with relatively
small footprints, in ongoing discussions. Based on the financial
reporting for the T-6 ended June 30, 2024, the property generated
NCF of $2.4 million, below the YE2022 NCF and Morningstar DBRS NCF
derived at issuance of $3.2 million and $4.3 million, respectively.
At issuance, the property was valued at $64.7 million; however,
given the low occupancy rate and general challenges for office
properties in suburban markets, Morningstar DBRS expects that the
collateral's value has significantly declined since that time. As
such, Morningstar DBRS stressed the LTV and POD for this loan,
resulting in an EL approximately three times the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
BENCHMARK 2024-V11: Fitch Assigns B-(EXP)sf Rating on Two Tranches
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Benchmark 2024-V11 Mortgage Trust Commercial Mortgage Pass-Through
Certificates series 2024-V11 as follows:
Transaction Summary
- $300,000,000d class A-2 'AAAsf'; Outlook Stable;
- $430,565,000d class A-3 'AAAsf'; Outlook Stable;
- $120,021,000 class A-M 'AAAsf'; Outlook Stable;
- $850,586,000a class X-A 'AAAsf'; Outlook Stable;
- $50,879,000 class B 'AA-sf'; Outlook Stable;
- $36,528,000 class C 'A-sf'; Outlook Stable;
- $87,407,000a,b class X-B 'A-sf'; Outlook Stable;
- $12,211,000b class D 'BBBsf'; Outlook Stable;
- $12,211,000a,b class X-D 'BBBsf'; Outlook Stable;
- $20,404,000b,c class E-RR 'BBB-sf'; Outlook Stable;
- $20,873,000b,c class F-RR 'BB-sf'; Outlook Stable;
- $13,046,000b,c class G-RR 'B-sf'; Outlook Stable.
- $20,404,000a,b,c class X-ERR 'BBB-sf'; Outlook Stable;
- $20,873,000a,b,c class X-FRR 'BB-sf'; Outlook Stable;
- $13,046,000a,b,c class X-GRR 'B-sf'; Outlook Stable.
Fitch does not expect to rate the following classes:
- $39,138,000b,c class J-RR.
- $39,138,000a,b,c class X-JRR.
Notes:
(a) Notional amount and interest only.
(b) Privately placed 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.
(d) The initial certificate balances of classes A-2 and A-3 are
unknown and expected to be $730,565,000 in aggregate, subject to a
5% variance. The certificate balances will be determined based on
the final pricing of those classes of certificates. The expected
class A-2 balance range is $0 to $300,000,000, and the expected
class A-3 balance range is $430,565,000 to $730,565,000. Fitch's
certificate balances for classes A-2 and A-3 reflect the highest
and lowest respective value of each range.
The expected ratings are based on information provided by the
issuer as of Nov. 15, 2024.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 20 loans
totaling 96.1% of the pool by balance. Fitch's resulting aggregate
net cash flow (NCF) of $218.9 million represents a 15.9% decline
from the issuer's aggregate underwritten NCF of $260.3 million.
Higher Fitch Leverage: The pool has higher leverage than recent
multiborrower transactions rated by Fitch. The pool's Fitch
loan-to-value ratio (LTV) of 95.4% is higher than both the 2024 YTD
and 2023 five-year multiborrower transaction averages of 94.3% and
89.7%, respectively. The pool's Fitch NCF debt yield (DY) of 11.8%
is lower than both the 2024 YTD and 2023 averages of 11.9% and
12.2%, respectively.
Office Concentration: In general, the pool's property type
diversity is comparable to that of recent Fitch-rated transactions;
the pool's effective property type count of 5.4 is higher than the
YTD 2024 and 2023 five-year multiborrower transaction averages of
4.3 and 4.1, respectively. However, the largest property type
concentration is office (27.2% of the pool), which is higher than
the YTD 2024 office average of 22.6% and in line with the 2023
office average of 27.7%. In particular, the office concentration
includes two of the largest 10 loans (13.8% of the pool).
Investment-Grade Credit Opinion Loans: One loan representing 4.8%
of the pool by balance received an investment-grade credit opinion.
Atrium Hotel Portfolio 24 Pack received an investment-grade credit
opinion of 'BBB+sf*' on a standalone basis. The pool's total credit
opinion percentage is significantly lower than both the 2024 YTD
average of 12.2% and the 2023 average of 14.6% for five-year
multiborrower transactions. Excluding the credit opinion loans, the
pool's Fitch LTV and DY are 97.2% and 9.8%, respectively, compared
to the equivalent five-year multiborrower 2024 YTD LTV and DY
averages of 98.1% and 10.0%, respectively.
Higher Pool Concentration: The pool is more concentrated than other
recently rated Fitch transactions. The top 10 loans represent 66.1%
of the pool, which is higher than both the 2024 YTD five-year
multiborrower average of 58.9% and the 2023 average of 65.3%. 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 19.3. Fitch views diversity as a
key mitigant to idiosyncratic risk. Fitch raises the overall loss
for pools with effective loan counts below 40.
Shorter-Duration Loans: Loans with five-year terms constitute 100%
of the pool, whereas Fitch-rated multiborrower transactions have
historically included mostly loans with 10-year terms. Fitch's
historical loan performance analysis shows that five-year loans
have a modestly lower probability of default (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
Reduction in cash flow decreases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes to the same one
variable, Fitch NCF:
--Original Rating:
'AAAsf'/'AA-sf'/'A-f'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
--10% NCF Decline:
'AAsf'/'A-sf'/'BBBsf'/'BBB-sf'/'BBsf'/'Bsf'/
BLACK DIAMOND 2024-1: S&P Assigns BB- (sf) Rating on Cl. E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Black Diamond CLO 2024-1
Ltd./Black Diamond CLO 2024-1 LLC's fixed- and floating-rate debt
(see list).
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 Black Diamond CLO 2024-1 Adviser
LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Black Diamond CLO 2024-1 Ltd./Black Diamond CLO 2024-1 LLC
Class A-1, $240.00 million: AAA (sf)
Class A-2, $20.00 million: AAA (sf)
Class B, $44.00 million: AA (sf)
Class C-1 (deferrable), $19.00 million: A (sf)
Class C-2 (deferrable), $5.00 million: A (sf)
Class D-1 (deferrable), $16.00 million: BBB (sf)
Class D-2 (deferrable), $12.00 million: BBB- (sf)
Class E (deferrable), $10.00 million: BB- (sf)
Subordinated notes, $38.50 million: Not rated
BPR TRUST 2024-PMDW: Fitch Assigns BB+(EXP) Rating on 2 Tranches
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BPR Trust 2024-PMDW, Commercial Mortgage Pass-Through Certificates,
Series 2024-PMDW as follows:
- $241,680,000 class A 'AAAsf'; Outlook Stable;
- $446,500,000a class X 'BB+sf'; Outlook Stable;
- $45,980,000 class B 'AA-sf'; Outlook Stable;
- $54,150,000 class C 'A-sf'; Outlook Stable;
- $73,245,000 class D 'BBB-sf'; Outlook Stable;
- $31,445,000 class E 'BB+sf'; Outlook Stable;
- $446,500,000a class X-IO 'BB+sf'; Outlook Stable.
Fitch does not expect to rate the following class:
- $23,500,000b class RR.
(a)Notional amount and IO class. (b) Non-offered vertical risk
retention interest representing approximately 5.0% of the estimated
fair value of all classes.
Transaction Summary
The BPR 2024-PMDW commercial mortgage pass-through certificates,
series 2024-PMDW, represent the beneficial interest in a trust that
holds $470.0 million of a five-year, fixed-rate, IO $630.0 million
commercial mortgage loan. The mortgage loan is secured by the
borrower's fee simple interest in Park Meadows, a 1,590,424 sf
(767,424 collateral sf) retail, entertainment and dining
destination in Lone Tree, Colorado.
Senior trust notes comprising $302.8 million and junior trust notes
comprising $167.2 million are being contributed to the BPR
2024-PMDW trust. Companion loans comprising $160.0 million and
pari-passu to the senior trust notes will be securitized in one or
more future transactions. This transaction is expected to be the
controlling transaction for the mortgage loan.
The mortgage loan proceeds, $70.0 million of mezzanine debt, and
$5.0 million of sponsor equity were used to refinance $700.0
million of existing debt and fund closing costs.
The loan is being co-originated by Morgan Stanley Mortgage Capital
Holdings LLC, Barclays Capital Real Estate Inc. and Wells Fargo
Bank, National Association. Wells Fargo Bank, National Association.
will act as master servicer with Situs Holdings, LLC as special
servicer. Computershare Trust Company, National Association will
serve as the trustee and certificate administrator. TBD is the
operating advisor.
The certificates will follow a sequential-pay structure. The
transaction is expected to close on Nov. 13, 2024.
KEY RATING DRIVERS
Net Cash Flow: Fitch's net cash flow (NCF) for the property is
estimated at $53.0 million, 6.3% lower than the issuer's NCF and
7.0% lower than the TTM ended in August 2024 NCF. Fitch applied a
7.5% cap rate to derive a Fitch value of $747.1 million for the
property.
Low Fitch Leverage: The $630.0 million mortgage loan equates to
debt of approximately $821 per sf, with a Fitch stressed debt
service coverage ratio (DSCR), loan-to-value ratio (LTV) and debt
yield (DY) of 1.04x, 84.4% and 8.9%, respectively. Based on the
total rated debt and a blend of the Fitch and market cap rates, the
transaction's Fitch market LTV is 73.2%. Fitch does not expect its
market LTV for non-investment grade tranches to exceed 100%. The
Fitch DSCR, LTV and DY through class E (rated BB+sf, the lowest
Fitch-rated class) are 1.04x, 84.4% and 8.9%, respectively.
Strong Sales Performance and Low Occupancy Costs: The property
reported strong overall sales of approximately $668.2 million (or
$871 psf) as of the TTM ended in June 2024, with inline tenant
sales of $871 psf (or $835 psf excluding Tesla). Additionally, the
June 2024 TTM inline occupancy cost was 14.7% (15.3% excluding
Apple and Tesla).
High Quality Retail Asset in Strong Location: The property is a 1.6
million sf (767,424 collateral sf) super-regional mall with over
200 retail shops, restaurants and entertainment tenants. It is
located approximately 20 miles south of downtown Denver, near the
intersection of I-25 and Colorado Highway 470. The mall is notable
for its unique ski lodge-like interior design and features an
outdoor area known as The Vistas, which provides mountain views and
includes a koi-filled stream.
The property is anchored by Nordstrom (noncollateral), Macy's
(noncollateral), Dillard's (noncollateral), JCPenney
(noncollateral) and Dick's Sporting Goods. These five tenants
reportedly generated over $173.5 million in sales as of the TTM
ended in June 2024. Fitch assigned Park Meadows a property quality
grade of "A-".
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';
- 10% NCF Decline: 'AAsf' / 'A-sf' / 'BBB-sf' / 'BBsf' / 'BB-sf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB-sf' /
'BB+sf';
- 10% NCF Increase: 'AAAsf' / 'AA+sf' / 'A+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 Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to 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.
BRAVO RESIDENTIAL 2024-NQM7: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to BRAVO Residential
Funding Trust 2024-NQM7 (BRAVO 2024-NQM7).
Entity/Debt Rating
----------- ------
BRAVO 2024-NQM7
A-1A LT AAA(EXP)sf Expected Rating
A-1B 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
FB 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-NQM7 notes are supported by 672 loans with a total
balance of approximately $340 million as of the cutoff date.
Approximately 36.4% of the loans in the pool were originated by
Citadel (dba Acra Lending Citadel), 15.8% were originated by
Deephaven Mortgage, 14.1% were originated by Vista Point and the
remainder were by other originators. Approximately 36.4% of the
loans will be serviced by Citadel Servicing Corporation (Citadel),
primarily subserviced by ServiceMac, along with 47.8% by Shellpoint
Mortgage Servicing (Shellpoint), and 15.8% by Selene Finance LP.
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 10.5% above a long-term sustainable level, versus
11.5% on a national level as of 1Q24, up 0.4% qoq. Housing
affordability is at its worst levels in decades, driven by both
high interest rates and elevated home prices. Home prices have
increased 5.9% yoy nationally as of May 2024, notwithstanding
modest regional declines, but are still being supported by limited
inventory.
Nonqualified Mortgage Credit Quality (Mixed): The collateral
consists of 672 loans totaling approximately $340 million and
seasoned at approximately three months in aggregate, as calculated
by Fitch (one month per the transaction documents). The borrowers
have a moderate credit profile, a 737 model FICO, a 42%
debt-to-income ratio (DTI), accounting for Fitch's approach of
mapping debt service coverage ratio (DSCR) loans to DTI, and
moderate leverage of 80% for a sustainable loan-to-value ratio
(sLTV).
Of the pool, 67.3% of loans are treated as owner-occupied, while
32.7% are treated as an investor property or second home, including
loans to foreign nationals or loans where the residency status was
not confirmed. Additionally, 10.8% of the loans were originated
through a retail channel. Of the loans, 63.2% are nonqualified
mortgages (non-QMs), 5.9% are Safe Harbor QM (SHQM) and 1.7% are
higher priced QM (HPQM), while the Ability to Repay/Qualified
Mortgage Rule (ATR) is not applicable for the remaining portion.
Loan Documentation (Negative): Approximately 85.5% of the pool
loans were underwritten to less than full documentation, as
determined by Fitch, and 45.4% were underwritten to a 12-month or
24-month bank statement program for verifying income, which is not
consistent with Appendix Q standards and Fitch's view of a full
documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Financial Protections Bureau's (CFPB)
ATR, which reduces the risk of borrower default arising from lack
of affordability, misrepresentation or other operational quality
risks due to the rigors of the ATR mandates regarding underwriting
and documentation of a borrower's ability to repay.
Additionally, 18.9% of the loans are a DSCR product, while the
remainder comprise a mix of asset depletion, profit and loss (P&L),
12-month or 24-month tax returns and written verification of
employment products. Separately, 2.4% of the loans were originated
to foreign nationals and 0.1% 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
a 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
100bps, subject to the net weighted average coupon (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 re-emerges as a common form of loss
mitigation or if certain structures are overly dependent on excess
interest, Fitch may apply additional sensitivities to test the
structure.
On or after the November 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
delinquent P&I. 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 51bps as a
result of the diligence review.
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.
BRIDGECREST LENDING 2024-4: DBRS Finalizes BB(high) on E Notes
--------------------------------------------------------------
DBRS, Inc finalized its provisional credit ratings on the following
classes of notes issued by Bridgecrest Lending Auto Securitization
Trust 2024-4 (BLAST 2024-4 or the Issuer):
-- $81,600,000 Class A-1 Notes at R-1 (high) (sf)
-- $164,160,000 Class A-2 Notes at AAA (sf)
-- $109,440,000 Class A-3 Notes at AAA (sf)
-- $67,200,000 Class B Notes at AA (sf)
-- $110,800,000 Class C Notes at A (sf)
-- $105,600,000 Class D Notes at BBB (sf)
-- $49,200,000 Class E Notes at BB (high) (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The credit ratings are based on Morningstar DBRS's review of the
following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of OC, subordination, amounts
held in the reserve fund, and excess spread, if any. Credit
enhancement levels are sufficient to support the Morningstar
DBRS-projected cumulative net loss (CNL) assumption under various
stress scenarios.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date for each respective class.
(2) BLAST 2024-4 provides for the Notes' coverage multiples that
are slightly below the Morningstar DBRS range of multiples set
forth in the criteria for this asset class. Morningstar DBRS
believes that this is warranted, given the magnitude of expected
loss, company history, and structural features of the transaction.
(3) The Morningstar DBRS CNL assumption is 26.60% based on the
expected pool composition.
(4) The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary Baseline Macroeconomic Scenarios for Rated
Sovereigns September 2024 Update, published on September 25, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
(5) The transaction parties' capabilities with regard to
originations, underwriting, and servicing are as follows:
-- DriveTime has an experienced and stable management team and has
had relatively stable performance in varying economic environments
because of its expertise in the subprime auto market.
-- Morningstar DBRS has performed an operational review of
DriveTime and Bridgecrest and considers the entities acceptable
originators and servicers of subprime auto loans.
-- Morningstar DBRS did not perform an operational review of GoFi
given its relatively small contribution to the pool.
-- DriveTime has made substantial investments in technology and
infrastructure to continue to improve its ability to predict
borrower behavior, manage risk, and mitigate loss.
-- DriveTime has centrally developed and maintained underwriting
and loan servicing platforms. Underwriting is performed in the
DriveTime dealerships by specially trained DriveTime employees.
-- Computershare, an experienced auto-loan servicer, is the
standby servicer for the portfolio in this transaction.
(6) The quality and consistency of historical static pool data for
DriveTime originations and performance of the DriveTime auto loan
portfolio.
(7) The legal structure and presence of legal opinions that address
the true sale of the assets to the Issuer, the nonconsolidation of
the special-purpose vehicle with DriveTime, that the trust has a
valid first-priority security interest in the assets, and the
consistency with the Morningstar DBRS Legal Criteria for U.S.
Structured Finance.
The transaction represents a securitization of a portfolio of motor
vehicle installment sales contracts originated by DriveTime Car
Sales Company, LLC and GoFi, LLC. DriveTime Car Sales Company, LLC
is a wholly owned subsidiary of DriveTime, a leading used-vehicle
retailer in the United States that focuses primarily on the sale
and financing of vehicles to the subprime market. GoFi is an
AI-enabled, digital-first lending platform primarily focused on
franchise dealers.
The rating on the Class A Notes reflects 57.10% of initial hard
credit enhancement provided by the subordinated notes in the pool
(41.60%), the reserve account (1.50%), and OC (14.00%). The ratings
on the Class B, C, D, and E Notes reflect 48.70%, 34.85%, 21.65%,
and 15.50% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
Notes: All figures are in US Dollars unless otherwise noted.
BRYANT PARK 2021-17R: S&P Assigns Prelim B- (sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Bryant Park
Funding 2021-17R Ltd./Bryant Park Funding 2021-17R LLC's fixed- and
floating-rate debt. This is a proposed refinancing of its 2021
transaction, originally Marathon CLO 2021-17 Ltd., which 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 Marathon Asset Management L.P.
The preliminary ratings are based on information as of Oct. 29,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- 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
Bryant Park Funding 2021-17R Ltd./
Bryant Park Funding 2021-17R LLC
Class X-R, $2.000 million: AAA (sf)
Class A-1-R, $267.750 million: AAA (sf)
Class A-2-R, $10.500 million: AAA (sf)
Class B-R, $44.750 million: AA (sf)
Class C-R (deferrable), $25.500 million: A (sf)
Class D-1-R (deferrable), $23.375 million: BBB (sf)
Class D-2-R (deferrable), $6.375 million: BBB- (sf)
Class E-R (deferrable), $12.750 million: BB- (sf)
Class F-R (deferrable), $2.750 million: B- (sf)
Subordinated notes, $40.800 million: Not rated
BSPRT 2022-FL9: DBRS Confirms B(low) Rating on Class H Notes
------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by BSPRT 2022-FL9 Issuer, LLC (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (high) (sf)
-- Class G Notes at BB (low) (sf)
-- Class H Notes at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall credit support
to the transaction with an unrated, first-loss piece of $62.2
million as well as three below investment-grade bonds, i.e., Class
F, Class G, and Class H, totaling $70.3 million. There has also
been collateral reduction of 10.11% since issuance. The transaction
benefits from a favorable collateral composition as the majority of
loan collateral consists of multifamily properties (39 loans,
representing 75.3% of the pool). Historically, loans secured by
multifamily properties have exhibited lower default rates and the
ability to retain and increase asset value. In conjunction with
this press release, Morningstar DBRS has published a Surveillance
Performance Update report with in-depth analysis and credit metrics
for the transaction as well as business plan updates on select
loans. For access to this report, please click on the link under
Related Documents below or contact us at
info-DBRS@morningstar.com.
The initial collateral consisted of 24 floating-rate mortgage loans
and participation interests in mortgage loans secured by 48 mostly
transitional properties with a cut-off balance totaling $803.2
million. Most loans were in a period of transition with plans to
stabilize performance and improve values of the underlying assets.
As of the October 2024 remittance, the pool comprises 46 loans and
participation interests in mortgage loans secured by 48 properties
with a cumulative trust balance of $721.9 million. There are 16
loans, representing 72.2% of the current trust balance, that remain
in the transaction since closing.
Since the previous Morningstar DBRS credit rating action in October
2023,10 loans, representing 8.2% of the current pool balance, have
been added to the trust. Over the same period, 13 loans with a
former trust balance of $236.3 million were paid in full. Beyond
the multifamily concentration noted above, four loans (representing
14.1% of the current pool balance) are secured by hotel properties
while one loan (representing 7.6% of the current pool balance) is
secured by an industrial property.
Leverage across the pool has remained almost unchanged since
issuance as the current weighted-average (WA) As-Is appraised LTV
is 68.9% with a current WA stabilized appraised LTV of 58.5%. In
comparison, these figures were 69.4% and 62.6%, respectively, at
issuance. Morningstar DBRS recognizes these appraised values may be
inflated as the majority of the individual property appraisals were
completed in 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 22 loans, representing 85.3% of the current pool balance,
generally reflective of higher cap rate assumptions compared with
the implied cap rates based on the appraisals.
As of October 2024, two loans, representing 4.8% of the pool, are
in special servicing. The larger of the two loans, The Cedar Grove
Multifamily Portfolio loan (2.5% of the current pool balance),
transferred to special servicing 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 to the borrower for property renovations. 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.
To date, nine properties have been released, which has resulted in
a principal paydown of $71.4 million, of which $17.2 million of
pari passu debt was applied to the subject trust. As of October
2024, the A-note has a balance of $75.4 million with a $18.2
million piece held in the subject trust. While in special
servicing, the lender foreclosed on four of the remaining
properties including Mallard Green, Reserve Campbell Creek, Signal
Hill, and The Woodlands. According to the collateral manager, three
of the REO properties are under contract to be sold in the second
half of 2024 while Mallard Green has a Letter of Intent (LOI). The
two remaining non-REO properties, Bridgepoint and Cobb House, are
also expected to be released in the near future as Bridgepoint is
expected to be sold by Q1 2025 while Cobb House has a pending
purchase and sale agreement. 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.
Nine loans, representing 28.3% of the current trust balance, are on
the servicer's watchlist as of the October 2024 reporting. The
loans have been flagged for debt service coverage ratios (DSCRs)
below breakeven and occupancy concerns. The largest loan on the
servicer's watchlist, Proximity at ODU (Prospectus ID#3; 7.8% of
the current pool balance), is secured by a 909-bed, Class B student
housing property in Norfolk, Virginia. The loan is being monitored
because of low occupancy and a below-breakeven DSCR. According to
the July 2024 rent roll, the property was 26.5% occupancy (by bed
count) with an average rental rate of $829 per bed. According to
the trailing 12-month ended June 30, 2024 (T-12), reporting
provided by the collateral manager, property NCF was $0.8 million,
equating to a 0.21x DSCR and a 1.5% debt yield. In its current
analysis, Morningstar DBRS applied upward LTV adjustments as well
as an increased POD penalty to the loan, which resulted in a loan
expected loss in excess of the weighted-average expected loss for
the overall pool.
Through October 2024, the collateral manager had advanced
cumulative loan future funding of $120.1 million to 36 of the
outstanding individual borrowers, including $105.5 million since
the previous Morningstar DBRS credit rating action as borrowers
continued to make progress in their respective business plans. The
largest future funding advances have been released to the borrowers
of the aforementioned Cedar Grove Portfolio loan ($18.2 million)
and the Lake Village North loan (Prospectus ID#28, 0.2% of the
pool; $8.5 million). The Lake Village North loan is secured by a
848-unit garden-style multifamily property in Garland, Texas. The
borrower used the funds to complete its significant capital
expenditure (capex). Future funding of $2.7 million remains
available to the borrower.
An additional $38.9 million of future loan funding allocated to 23
of the outstanding individual borrowers remains available. The
largest portion of available funds ($6.8 million) is allocated to
the borrower of the Heather Ridge loan (Prospectus ID# 70, 0.1% of
the pool), which is secured by a 252-unit garden-style multifamily
property in Arlington, Texas. The sponsor's business plan is to
complete a $7.7 million capex plan to improve the property's
quality. As of the September 2024, the sponsor had only drawn 11.0%
of future funding.
Notes: All figures are in U.S. dollars unless otherwise noted.
BSPRT 2023-FL10: Fitch Affirms 'B-sf' Rating on Class H Debt
------------------------------------------------------------
Fitch Ratings has affirmed all classes of BSPRT 2023-FL10 Issuer,
LLC. The Rating Outlooks remain Stable for all classes.
Entity/Debt Rating Prior
----------- ------ -----
BSPRT 2023-FL10
A 05610VAA0 LT AAAsf Affirmed AAAsf
A-S 05610VAC6 LT AAAsf Affirmed AAAsf
B 05610VAE2 LT AA-sf Affirmed AA-sf
C 05610VAG7 LT A-sf Affirmed A-sf
D 05610VAJ1 LT BBBsf Affirmed BBBsf
E 05610VAL6 LT BBB-sf Affirmed BBB-sf
F 05610VAN2 LT BB+sf Affirmed BB+sf
G 05610VAQ5 LT BB-sf Affirmed BB-sf
H 05610VAS1 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Performance Remains Within Issuance Expectations: The affirmations
reflect that overall performance of the underlying collateral and
the progression of sponsors' business plans remain in line with
Fitch's analysis at issuance and at the last rating action.
In addition, the transaction has experienced no change in credit
enhancement (CE) since issuance. Fitch's current ratings
incorporate a 'Bsf' rating case loss of 7.29%.
Largest Loans: The Alexan Waterloo loan (8.8% of the pool) consists
of a 272-unit, 30-story, 2022-vintage, luxury high-rise multifamily
property located in downtown Austin, TX. The full loan amount is
$80,000,000 ($294,118/unit) which includes $2,000,000 ($7,353/unit)
in future funding. The total current funded loan amount of
$78,996,373 is included in this transaction. The loan is an
interest-only balloon with a two-year initial maturity (August
2025) and three one-year extension options. As of June 2024,
occupancy was 93.7%. Fitch's 'Bsf' rating case loss of 7% (prior to
a concentration adjustment) is based on a 7.5% cap rate and the
Fitch issuance net cash flow.
The Point at Caldwell Station loan (6.3% of the pool) consists of a
297-unit, garden-style, multifamily property located in
Huntersville, NC (18 miles north of Charlotte, NC). The current
funded loan amount is $57,158,996 ($192,455/unit) with a
$56,320,341 participation included in this transaction. The loan is
an interest-only balloon with an 18-month initial maturity (March
2024) and extension options totaling 42 months (September 2027).
The loan transferred to special servicing in May 2024 for maturity
default. The borrower subsequently failed to make the June, July
and September debt service payments, but made the August payment.
In October 2024 the mezzanine loan lender, Electra Capital, took
the title to the property after completing a UCC foreclosure and
paid all outstanding due amounts. The special servicer and Electra
Capital are now negotiating a loan modification.
Fitch's 'Bsf' rating case loss of 23.3% (prior to a concentration
adjustment) is based on an 8.75% cap rate and the Fitch issuance
net cash flow; the loss also factors a higher probability of
default given the recent transfer to special servicing. Fitch's
base case scenario assumes that the loan will return to the master
servicer as a corrected loan after the modification is executed. In
the event the modification is not completed, Fitch also performed a
stress scenario that assumes a higher rating case loss of 50%. The
affirmations and Stable Outlooks reflect this sensitivity
scenario.
The Banks at Bridgewater & Stepping Stone at Bridgewater loan (5.7%
of the pool) consists of a 252-unit garden-style multifamily
community (The Banks) and a 44-unit duplex community (Stepping
Stone), adjacent to The Banks. The full loan amount is $51,000,000
($172,297/unit) with no future funding component. The entire loan
is being contributed to this transaction. This loan is an
interest-only balloon with a two-year initial maturity (December
2024) and three one-year extension options. The properties were
95.3% occupied as of June 2024. Fitch's 'Bsf' rating case loss of
4.1% (prior to a concentration adjustment) is based on an 8.25% cap
rate and the Fitch issuance net cash flow.
Collateral Attributes: The pool is secured by properties that have
not yet completely stabilized, are in varying stages of lease-up or
are undergoing renovation. The associated risks, including cash
flow interruption during renovation, lease-up and completion, are
mitigated by experienced sponsorship, credible business plans and
loan structural features that include guaranties, reserves, cash
management and performance triggers, and additional funding
mechanisms.
Loan Structure: The loans in the pool are typically structured with
two-year initial terms, with three one-year extension options that
are subject to, in most cases, a minimum DSCR test and the purchase
of an interest rate cap for the term of the extension. Most loans
have interest rate caps that run to their initial maturity dates.
The pool consists of mainly full-term, interest-only loans.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to 'AAAsf' rated classes are not expected due to their
position in the capital structure, but could occur if interest
shortfalls affect these classes or if expected pool losses increase
significantly. Classes rated in the 'AAsf' through 'Asf' categories
may be downgraded should overall pool losses increase significantly
from performance deterioration, if sponsors' business plans are not
executed as expected, and one or more underperforming loans incur
an outsized loss, which would erode CE.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may
occur with significant improvement in CE due to loan payoffs or if
loans significantly outperform original business plans. However,
adverse selection and increased concentrations could cause this
trend to reverse. Classes would not be upgraded above 'AA+sf' if
there were any likelihood of interest shortfalls.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BX TRUST 2022-FOX2: Fitch Affirms 'B-sf' Rating on Class F Certs
----------------------------------------------------------------
Fitch Ratings has affirmed seven classes of BX Trust 2022-FOX2
commercial mortgage pass-through certificates series 2022-FOX2. The
Rating Outlooks were revised to Positive from Stable for two of the
affirmed classes. The Rating Outlook for all other classes remain
Stable.
Entity/Debt Rating Prior
----------- ------ -----
BX Trust 2022-FOX2
A-1 05610AAA6 LT AAAsf Affirmed AAAsf
A-2 05610AAW8 LT AAAsf Affirmed AAAsf
B 05610AAC2 LT AA-sf Affirmed AA-sf
C 05610AAE8 LT A-sf Affirmed A-sf
D 05610AAG3 LT BBB-sf Affirmed BBB-sf
E 05610AAJ7 LT BB-sf Affirmed BB-sf
F 05610AAL2 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Stable Performance; Loan Deleveraging from Collateral Releases: The
affirmations reflect the generally stable performance and
collateral releases from the portfolio, which has resulted in
principal paydown to the bonds since issuance.
The Positive Outlooks reflect the potential for upgrades with
continued sustainable increase in Fitch NCF and/or additional
paydown through property releases with stable to improved
performance of the remaining collateral.
Since issuance, 23 properties were released, resulting in principal
paydowns totaling $128.6 million (19.9% of the original loan
balance) that have been applied to the bond certificates on a pro
rata basis.
The bond certificates will pay on a pro rata basis from paydown in
connection with property releases for up to the first 30% of the
loan so long as the mortgage is not in default. The release prices
are subject to prepayment premiums, which are 105% of the allocated
loan amount until the outstanding loan amount has been reduced to
$451.9 million and 110% thereafter.
High Fitch Stressed Leverage: The $517.0 million mortgage loan,
originally $645.6 million, has a current Fitch stressed debt
service coverage ratio (DSCR) of 0.69x and loan-to-value (LTV) of
127.3% on the whole loan. At issuance, Fitch's DSCR and LTV on the
whole loan was 0.64x and 138.7%, respectively. In addition to the
whole loan, there are two mezzanine loans totaling $480 million,
which results in a total debt current Fitch DSCR and LTV of 0.52x
and 168.8%, respectively. At issuance, the Fitch total debt DSCR
and LTV were 50.x and 174.9%, respectively.
As of June 2024, the occupancy for the remaining 115 properties in
the portfolio was 93.8%. As of TTM June 2024, the servicer-reported
net cash flow (NCF) DSCR was 0.58x compared with the YE 2023 NCF
DSCR of 0.60x and Fitch's Issuance DSCR on the whole loan of 0.64x.
YE 2023 occupancy was 92.0%, which remains in line with 91.5% at
TTM September 2022. The decline in the TTM June 2024 DSCR is
primarily due to an increase in the total debt service, as the loan
is floating-rate.
Fitch Net Cash Flow (NCF): Fitch's sustainable NCF of $86.8 million
reflects leases-in-place and expenses reimbursements as of June
2024 for the remaining 115 property portfolio. Operating expenses,
with the exception of insurance, were inflated by 3% from TTM June
2024 figures. Insurance expense was inflated by 10%. Fitch applied
a management fee of 3% of EGI.
Fitch's NCF incorporates a higher vacancy adjustment of 10% to
factor the upcoming portfolio lease rollover across the remaining
portfolio, which includes 4.8% through YE 2024 and 17.8% in 2025.
Property and Tenant Diversity: The portfolio originally consisted
of 138 properties totaling 15.7 million sf located across nine
states. The portfolio also exhibits significant tenant diversity as
it features over 400 tenants, according to the June 2024 rent roll.
The largest tenant within the portfolio, Amazon (guaranteed by
parent Amazon.com, Inc. [AA-/Stable]) represents approximately
10.5% of the property NRA.
The properties are leased to tenants across a broad range of
industries, including internet retail, engineering, medical product
manufacturing, oil & gas equipment and services, shipping (FedEx),
manufacturing and aerospace material production.
After the collateral releases, 115 properties remain in the
portfolio totaling 13.1 million sf, with individual properties
ranging in size from 465 sf to 606,112 sf, located across eight
states, including California, Delaware, Florida, Illinois,
Maryland, New Jersey, Nevada, and Pennsylvania. No individual
property accounts for more than 3.3% of the portfolio's total NRA,
or 7.5% of the allocated loan amount. The tenancy is granular, with
no other tenant representing more than 4.6% of the portfolio NRA.
Experienced Sponsorship: The loan is sponsored by Blackstone Real
Estate Partners IX L.P., an affiliate of Blackstone Inc. It is the
largest owner of commercial real estate globally, and its portfolio
includes properties throughout the world with a mix of property
types.
Major Market Locations: Approximately 41.2% of the portfolio NRA is
located in Sacramento, CA (24.3% of NRA), Mira Loma, CA (8.6%),
Roseville, CA (5.4%), and other CA MSAs, and the remaining
properties are located across numerous large U.S. metro areas
including Tampa, FL (7.3%) and Northern New Jersey (3.8%). The
properties are predominately clustered around major interstates and
thoroughfares within each market and benefit from close proximity
to numerous transportation networks.
Maturity: The floating-rate loan has a maturity in April 2025. The
loan has two additional one-year extension options remaining. The
final extended maturity is in April 2027.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades are not expected, but may occur with a sustained
decline in portfolio occupancy and/or Fitch's NCF or with
significant adverse selection with additional property releases.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades are expected with additional loan deleveraging through
property releases and stable or increased Fitch sustainable NCF.
Upgrades are also possible with improvement in credit enhancement
from continued property releases above 30% of the original pool
balance and sequential paydown. However, upgrades may be limited
due to increasing concentration and adverse selection of the
remaining portfolio.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BX TRUST 2024-FNX: Fitch Assigns 'BB-(EXP)' Rating on Cl. HRR Certs
-------------------------------------------------------------------
Fitch Ratings has assigned the following expected ratings and
Ratings Outlooks to BX Trust 2024-FNX, Commercial Mortgage
Pass-Through Certificates, Series 2024-FNX.
- $520,600,000 class A 'AAAsf'; Outlook Stable;
- $156,730,000a class X-CP 'BBB-sf'; Outlook Stable;
- $223,900,000a class X-NCP 'BBB-sf'; Outlook Stable;
- $69,200,000 class B 'AA-sf'; Outlook Stable;
- $64,200,000 class C 'A-sf'; Outlook Stable;
- $90,500,000 class D 'BBB-sf'; Outlook Stable;
- $72,500,000 class E 'BBsf'; Outlook Stable;
- $43,000,000b class HRR 'BB-sf'; Outlook Stable.
(a) Notional amount and interest only.
(b) Horizontal risk retention interest representing at least 5.0%
of the estimated fair value of all classes.
Transaction Summary
The certificates represent the beneficial ownership interest in a
trust that will hold an $860 million, two-year, floating-rate,
interest-only mortgage loan with three, one-year extension options.
The mortgage will be secured by the borrower's fee simple interest
in a portfolio of 44 industrial facilities, comprising
approximately 7.5 million sf located in 10 states and nine
markets.
Loan proceeds will be used to refinance approximately $557.2
million of existing debt, pay $25.8 million in closing costs,
return approximately $135.7 million of equity to the sponsor and
recapitalize six unencumbered assets for approximately $141.3
million. The certificates will follow a pro-rata paydown for the
initial 30% of the loan amount and a standard senior-sequential
paydown thereafter. The borrower has a one-time right to obtain a
mezzanine loan. To the extent the mezzanine loan is outstanding and
no mortgage loan event of default is continuing, voluntary
prepayments would be applied pro rata between the mortgage and the
mezzanine loan.
The loan is expected to be originated by Morgan Stanley Mortgage
Capital Holdings LLC; Barclays Capital Real Estate Inc.; Bank of
America, National Association; Goldman Sachs Mortgage Company; and
JPMorgan Chase Bank, National Association. KeyBank National
Association is expected to be the servicer with Situs Holdings,
LLC. as special servicer. Deutsche Bank National Trust company will
act as the Trustee and Computershare Trust Company, N.A. as the
certificate administrator. Park Bridge Lender Services LLC will act
as operating advisor.
The transaction is scheduled to close on Nov. 15, 2024
KEY RATING DRIVERS
Net Cash Flow: Fitch's stressed net cash flow (NCF) for the
portfolio at $63.5 million. This is 5.8% lower than the issuer's
NCF and 0.9% lower than trailing 12 months (TTM) ended August 2024
NCF. Fitch applied a 7.25% cap rate to derive a Fitch value of
$875.9 billion.
High Fitch Leverage: The $860 million whole loan equates to debt of
approximately $114 psf with a Fitch stressed debt service coverage
ratio (DSCR), loan-to-value ratio (LTV) and debt yield (DY) of
0.90x, 98.2% and 7.4%, respectively.
The loan represents approximately 67.4% of the appraised value of
approximately $1.275. Fitch increased the LTV hurdles by 1.25% to
reflect the higher in-place leverage.
Geographic and Tenant Diversity: The portfolio exhibits strong
geographic diversity, with 44 industrial properties (7.5 million
sf) located across 10 states and 10 markets, per CoStar. The three
largest state concentrations are Minnesota (2.8 million sf; 22
properties), Georgia (1.5 million sf; five properties) and Colorado
(1.5 million sf; four properties).
The three largest MSAs are Minneapolis, MN (37.7% of NRA; 28.3% of
allocated loan amount [ALA]); Atlanta, GA (20.1% of NRA; 15.3% of
ALA); and Denver, CO (20.1% of NRA; 15.6% of ALA). The Fitch
effective geographic count for the pool is 5.6. The portfolio also
exhibits significant tenant diversity, as it features 143 distinct
tenants.
Institutional Sponsorship and Management: The loan is sponsored by
Blackstone Real Estate Partners, an affiliate of Blackstone Inc.
The Blackstone Real Estate segment had approximately $332 billion
of assets under management as of Sept. 30, 2023, per its quarterly
reports. It is the largest owner of commercial real estate globally
and has acquired over 600 million sf of industrial space globally
since 2010, including the subject. The portfolio in this
transaction is managed by Link Logistics Real Estate Management
LLC, an affiliate of the borrowers. Link Logistics operates the
largest industrial-only real estate portfolio (at 538 million sf)
in the U.S.
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'/'BB-+sf';
- 10% NCF Decline: 'AA-sf'/'BBB+sf '/'BBB-sf'/'BBsf'/'B+sf'/'Bsf'.
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'/'BB-+sf';
- 10% NCF Increase: 'AAAsf'/'AA+sf
'/'A+sf'/'BBBsf'/'BBB-sf'/'BB+sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young 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 loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BX TRUST 2024-FNX: Moody's Assigns (P)Ba3 Rating to Cl. HRR Certs
-----------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to eight classes
of CMBS securities, to be issued by BX Trust 2024-FNX Commercial
Mortgage Pass-Through Certificates Series 2024-FNX.
Cl. A, Assigned (P)Aaa (sf)
Cl. X-CP*, Assigned (P)Baa2 (sf)
Cl. X-NCP*, Assigned (P)Baa2 (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba2 (sf)
Cl. HRR, Assigned (P)Ba3 (sf)
* Reflects Interest-Only Classes
RATING RATIONALE
The certificates are collateralized by a single loan backed by a
first lien mortgage on the borrower's fee simple interests in a
portfolio of 44 industrial properties encompassing 7,547,839 SF.
Moody's ratings are based on the credit quality of the loan and the
strength of the securitization structure.
The collateral portfolio consists of 44 industrial properties
located across nine distinct markets in ten states. The largest
metropolitan statistical area ("MSA") concentration is Minneapolis
and the largest state concentration is in Minnesota (37.7% of NRA
and 31.8% of UW NOI). The Portfolio's property-level Herfindahl
score is 29.54 based on ALA.
The collateral properties contain a total of 7,547,839 SF of NRA
across the following three industrial subtypes: Warehouse/
Distribution (85.1% of NRA, 77.4% of base rent), R&D/Flex (17.7%,
18.9%), and parking (0.2%, 3.8%). Property size ranges between
16,200 SF and 875,666 SF, and averages approximately 221,399 SF.
Maximum clear heights for properties range between 14 feet and 36
feet, and average approximately 26.6 feet. Construction dates for
properties in the portfolio range between 1955 and 2023, with a
weighted average year built of 1999. Details regarding past
renovations were not provided for review however the properties are
generally well maintained and show little signs of deferred
maintenance.
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 Approach to Rating Structured Finance Interest-Only (IO)
Securities. The rating approach for securities backed by single
loans compares the credit risk inherent in the underlying
collateral with the credit protection offered by the structure. The
structure's credit enhancement is quantified by the maximum
deterioration in property value that the securities are able to
withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In
assigning single borrower ratings, Moody's also consider a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile.
The Moody's first mortgage actual DSCR is 1.02X and Moody's first
mortgage actual stressed DSCR is 0.76X. Moody's DSCR is based on
Moody's stabilized net cash flow.
The loan first mortgage balance of $860,000,000 represents a
Moody's LTV ratio of 110.8% based on Moody's Value. Adjusted
Moody's LTV ratio for the first mortgage balance is 101.4% based on
Moody's Value using a cap rate adjusted for the current interest
rate environment.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The portfolio's
property quality grade is 0.75.
Notable strengths of the transaction include: proximity to global
gateway markets, infill locations, geographic diversity, strong
occupancy rate with granular and economically diverse tenant
roster, strong leasing activity with positive leasing spreads,
multiple property pooling and experienced sponsorship.
Notable concerns of the transaction include: rollover risk, high
percentage of office use, cash out, floating-rate interest-only
loan profile, non-sequential prepayment provision, and credit
negative legal features.
Moody's rating approach considers sequential pay in connection with
a collateral release as a credit neutral benchmark. Although the
loans' release premium mitigates the risk of a ratings downgrade
due to adverse selection, the pro rata payment structure limits
ratings upgrade potential as mezzanine classes are prevented from
building enhancement. The benefit received from pooling through
cross-collateralization is also reduced.
The principal methodology used in 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.
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.
CBAM LTD 2017-4: Moody's Affirms Ba3 Rating on $45MM Class E Notes
------------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by CBAM 2017-4, Ltd.:
US$54,473,684 Class B-1 Floating Rate Notes, Upgraded to Aaa (sf);
previously on Feb 17, 2023 Upgraded to Aa1 (sf)
US$60,526,316 Class B-2 Floating Rate Notes, Upgraded to Aaa (sf);
previously on Feb 17, 2023 Upgraded to Aa1 (sf)
US$55,000,000 Class C Deferrable Floating Rate Notes, Upgraded to
Aa1 (sf); previously on Feb 17, 2023 Upgraded to A1 (sf)
US$65,000,000 Class D Deferrable Floating Rate Notes, Upgraded to
Baa2 (sf); previously on Sep 23, 2020 Confirmed at Baa3 (sf)
Moody's have also affirmed the ratings on the following notes:
US$640,000,000 (Current outstanding amount US$275,059,795) Class A
Floating Rate Notes, Affirmed Aaa (sf); previously on Dec 6, 2017
Assigned Aaa (sf)
US$45,000,000 Class E Deferrable Floating Rate Notes, Affirmed Ba3
(sf); previously on Sep 23, 2020 Confirmed at Ba3 (sf)
CBAM 2017-4, Ltd., issued in December 2017, is a collateralised
loan obligation (CLO) backed by a portfolio of mostly high-yield
senior secured US loans. The portfolio is managed by CBAM CLO
Management LLC. The transaction's reinvestment period ended in
January 2023.
RATINGS RATIONALE
The rating upgrades on the Class B-1, B-2, C and D notes are
primarily a result of the significant deleveraging of the Class A
notes following amortisation of the underlying portfolio since the
last rating action in February 2023.
The affirmations on the ratings on the Class A and E notes are
primarily a result of the expected losses on the notes remaining
consistent with their current rating levels, after taking into
account the CLO's latest portfolio, its relevant structural
features and its actual over-collateralisation ratios.
The Class A notes have paid down by approximately USD311.3 million
(48.6%) in the last 12 months and USD364.9 million (57.0%) since
closing. As a result of the deleveraging, over-collateralisation
(OC) has increased across the capital structure. According to the
trustee report dated September 2024 [1] the Class A/B, Class C,
Class D and Class E OC ratios are reported at 143.59%, 128.43%,
114.19% and 106.04% compared to September 2023 [2] levels of
129.16%, 120.16%, 111.02% and 105.46%, respectively. Moody's note
that the October 2024 principal payments are not reflected in the
reported OC ratios.
The key model inputs Moody's use in Moody's analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on Moody's published methodology
and could differ from the trustee's reported numbers.
In Moody's base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: USD599.9 million
Defaulted Securities: USD1.3 million
Diversity Score: 61
Weighted Average Rating Factor (WARF): 3120
Weighted Average Life (WAL): 3.46 years
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.29%
Weighted Average Recovery Rate (WARR): 47.1%
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.
Moody's note that the October 2024 payment date report was
published at the time Moody's were completing Moody's analysis of
the September 2024 data. Key portfolio metrics such as WARF,
diversity score, weighted average spread and life, and OC ratios
exhibit little or no change between these dates. Moody's have,
however, incorporated the USD 75.9 million principal payment to the
Class A notes reported in the October 2024 in Moody's analysis.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties using the methodology "Moody's Approach to
Assessing Counterparty Risks in Structured Finance" published in
October 2024. Moody's concluded the ratings of the notes are not
constrained by these risks.
Factors that would lead to an upgrade or downgrade of the ratings:
The rated notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The collateral manager's investment decisions and
management of the transaction will also affect the notes'
performance.
Additional uncertainty about performance is due to the following:
-- Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
-- Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assume have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's analysed
defaulted recoveries assuming the lower of the market price or the
recovery rate to account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a positive
impact on the notes' ratings.
-- Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assume that, at transaction maturity, the
liquidation value of such an asset will depend on the nature of the
asset as well as the extent to which the asset's maturity lags that
of the liabilities. Liquidation values higher than Moody's
expectations would have a positive impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
Moody's other analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
CD 2017-CD4: DBRS Cuts Class E Certs Rating to B
------------------------------------------------
DBRS Limited downgraded its credit ratings on 11 classes of the
Commercial Mortgage Pass-Through Certificates, Series 2017-CD4
issued by CD 2017-CD4 Mortgage Trust as follows:
-- Class B to AA (sf) from AA (high) (sf)
-- Class C to A (low) (sf) from A (high) (sf)
-- Class D to BB (high) (sf) from BBB (low) (sf)
-- Class E to B (sf) from BB (sf)
-- Class F to CCC (sf) from B (high) (sf)
-- Class X-B to A (sf) from AA (low) (sf)
-- Class X-D to BBB (low) (sf) from BBB (sf)
-- Class X-E to B (high) (sf) from BB (high) (sf)
-- Class X-F to CCC (sf) from BB (low) (sf)
-- Class V-BC to A (low) (sf) from A (high) (sf)
-- Class V-D to BB (high) (sf) from BBB (low) (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 A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class V-A at AAA (sf)
Morningstar DBRS changed the trends on Classes X-B, C, V-BC, X-D,
D, V-D, X-E, and E to Stable from Negative. The trends on all
remaining Classes are Stable, with the exception of Classes F and
X-F, which have credit ratings that do not typically carry a trend
in commercial mortgage-backed securities (CMBS) credit ratings.
During the prior credit rating action in October 2023, Morningstar
DBRS placed Negative trends on Classes C through F because of
concerns related to the high concentration of loans secured by
office properties (which represent 35.9% of the pool balance as of
the most recent reporting), most of which are located in noncore
suburban markets. Since that time, the performance of the
underlying collateral securing several of those loans has remained
stagnant, or in some cases, has further deteriorated. There are now
five loans in special servicing, representing 10.0% of the pool
balance, two of which were liquidated from the trust as part of the
analysis for this review, resulting in implied loss over $8.0
million. Otherwise, Morningstar DBRS analyzed loans exhibiting
increased credit risks with elevated probability of default (POD)
penalties and/or stressed loan-to-value ratios (LTVs), resulting in
expected losses (ELs) that were between 1.5 times (x) and 3.1x
greater than the pool average EL. As a result, the pool's overall
adjusted EL has increased since the previous credit rating action,
while Morningstar DBRS' expected credit support toward the bottom
of the capital stack has moderately deteriorated given the analyzed
liquidations as part of this review and realized losses to date
totaling $6.0 million. This resulted in downward pressure implied
by the model results, supporting the credit rating downgrades with
this review.
Morningstar DBRS changed the trends on the certificates noted above
to Stable from Negative, as the analysis considered stressed
scenarios for those loans exhibiting increased risks from issuance.
As such, the resulting credit rating downgrades reflect the general
outlook for those affected classes. Should there be unforeseen
circumstances, which further increase the risks for the underlying
loans in question, Morningstar DBRS notes that trends could change
and/or credit ratings could be subject to further downgrades.
Overall, the pool continues to exhibit healthy credit metrics, as
evidenced by the weighted-average (WA) debt service coverage ratio
(DSCR) approaching 2.0x, based on the most recent financial
reporting. In addition, the capital stack includes a sizable $101.1
million balance insulating the investment-grade credit-rated
classes, further supporting the credit rating confirmations higher
in the capital stack with this review. As of the October 2024
remittance, 45 of the original 47 loans remained in the pool with a
trust balance of $725.5 million, representing a collateral
reduction of 19.3% since issuance. Since last review, one
additional loan has been defeased, with seven loans now
representing 9.1% of the pool secured by defeasance. There are five
loans in special servicing, representing 10.0% of the pool:
however, the two largest, Key Center (Prospectus ID#7, 3.6% of the
pool) and Hamilton Crossing (Prospectus ID#12, 2.4% of the pool),
are performing and have only been late on payments to date. There
are also 15 loans on the servicer's watchlist, representing 45.0%
of the pool; however, only seven of the loans, representing 21.0%
of the pool, are being monitored for credit-related reasons.
The Los Angeles Corporate Centre (Prospectus ID#4, 7.5% of the
pool), is secured by four individual office properties, roughly
five miles southeast of the Los Angeles central business district.
Prior to March 2023, the portfolio was performing well but the loss
of the largest tenant, State Compensation Insurance Fund (21.0% of
the net rentable area (NRA)), in March 2023 drove occupancy and
cash flows down, and performance has yet to recover. The loan is
currently being monitored on the servicer's watchlist for an active
lockbox and although the borrower has access to approximately $2.0
million in reserves to cover leasing costs, no leasing momentum has
been realized. Additionally, it has not been confirmed if
Department of Social Sciences (8.7% of NRA; lease expiration in
September 2024) or Southwest Regional Council of Carpenters (4.4%
of NRA; lease expiration in December 2024), will renew, which could
bring occupancy to less than 50.0%. According to Reis, office
properties located in the West San Gabriel Valley submarket
reported a Q2 2024 average vacancy rate of 16.9% with an average
asking rental rate of $30.64 per square foot (psf), compared with
the subject's average rental rate of $35.70 psf. Given the decline
in performance and upcoming tenant roll-over, Morningstar DBRS
applied stressed LTV ratio and POD assumptions in its analysis for
this review, resulting in an EL that was nearly 2.5x pool WA
figure.
Key Center is secured by a mixed-use property in Cleveland,
comprising a 400-key hotel, two Class A office buildings, and an
underground parking garage. The loan was transferred to special
servicing at the borrower's request in November 2020 because of
imminent default as a result of the coronavirus pandemic and while
the borrower continues to make payments, they have regularly been
late. Servicer commentary indicates the borrower has requested for
a payment deferral to help fund capital expenditures, which is
likely tied to the franchise agreement with Marriott in order to
align with brand standards. The borrower also submitted another
request to change the hotel management company and for a lease
amendment, according to servicer commentary. Discussions are
reportedly ongoing between the borrower and mezzanine lender.
Despite the transfer to special servicing, the YE2023 net cash flow
(NCF) was reported at $21.2 million (a DSCR of 1.33x), in line with
historical figures. Per the May 2023 STR report (the most recent on
file), the hotel portion of the subject reported a
trailing-12-month (T-12) RevPAR of $123, exceeding the issuance
figure of $108. According to the August 2024 financial reporting,
occupancy for the office portion of the collateral had improved to
87.6%, an improvement from 81.2% at YE2022, but below the issuance
figure of 92.9%. The largest tenant, KeyBank (31.8% of the NRA,
lease expiring in June 2030), downsized by 44,000 square feet (sf;
3.2% of the NRA) in July 2020 after providing the required 12-month
notice and paying a $2.1 million fee. Although KeyBank's lease has
a three-year lockout period before the tenant can contract its
footprint further, the tenant has two options remaining to further
downsize a total of 103,000 sf. Rollover risk is rather limited in
the next 12 months with none of the top five largest tenants
scheduled to roll. According to Reis, the Downtown submarket
reported a Q2 2024 vacancy rate of 21.6%. Given the loan's
prolonged stay in special servicing since 2020, Morningstar DBRS
maintained a stressed POD and applied a stressed LTV ratio
assumption, resulting in an EL that was nearly 2.0x the pool WA
figure.
Notes: All figures are in U.S. dollars unless otherwise noted.
CD 2019-CD8: DBRS Confirms CCC Rating on Class H-RR Certs
---------------------------------------------------------
DBRS Inc. downgraded one class of Commercial Mortgage Pass-Through
Certificates, Series 2019-CD8 issued by CD 2019-CD8 Mortgage Trust
as follows:
-- Class G-RR to B (low) (sf) from B (high) (sf)
Morningstar DBRS confirmed the credit ratings on the remaining
classes:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AAA (sf)
-- Class X-B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class X-D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class H-RR at CCC (sf)
Morningstar DBRS also changed the trends on Classes E, F, G-RR,
X-D, and X-F to Stable from Negative. The trends on all remaining
Classes are Stable with the exception of Class H-RR, which has a
credit rating that does not typically carry a trend in commercial
mortgage-backed securities (CMBS) ratings.
At the prior credit rating action in October 2023, Morningstar DBRS
placed Negative trends on Classes E through GRR, driven by a value
decline for the only specially serviced loan in the pool, 63 Spring
Street (Prospectus ID#17, 2.3% of the pool balance), and
performance declines for select office loans in the pool. The
credit rating downgrade reflects the increased certainty of credit
deterioration stemming from a lack of resolution for the 63 Spring
Street loan, as further discussed below, which remains in special
servicing with the borrower and lender tied up in foreclosure
hearings.
The credit rating confirmations and trend changes to Stable from
Negative reflect the overall stable performance of a majority of
the loans in the pool as well as the improving performance for
several office-backed loans that previously exhibited increased
credit risk, including the 1440 N Dayton loan (Prospectus ID#16,
2.4% of the pool balance), which was modeled with a high expected
loss (EL) at Morningstar DBRS' last rating action and has since
been fully defeased. The remaining office loans have generally
exhibited stable or improving performance. Morningstar DBRS
maintains a cautious outlook on the office asset type as sustained
upward pressure on vacancy rates in the broader office market may
challenge landlords' efforts to backfill vacant space, and, in
certain instances, contribute to value declines, particularly for
assets in noncore markets and/or with disadvantages in location,
building quality, or amenities offered. As such, upward
loan-to-value ratio (LTV) adjustments were made to three loans
secured by office properties. The weighted average (WA) EL for the
loans was more than 1.1 times (x) the pool average. While the
stressed analysis for these loans and a few other loans resulted in
an increased pool EL beyond the issuance level, Morningstar DBRS
notes that there remains significant cushion against loss in the
unrated and below-investment grade rated certificates in the
capital stack, supporting the credit rating actions with this
review.
As of the September 2024 remittance, 32 of the original 33 loans
remain in the pool balance, representing a collateral reduction of
2.4%. One loan, representing 2.3% of the pool balance is in special
servicing and 3.2% of the pool has been fully defeased. In
addition, 17 loans representing 50.8% of the pool balance are on
the servicer's watchlist; however, only seven loans, representing
25.0% of the pool balance are being monitored for
performance-related concerns.
The 63 Spring Street loan is secured by a 5,540-square-foot (sf)
mixed-use building consisting of four high-end residential units
(4,400 sf) and 1,100 sf of ground-floor retail space in New York's
Soho neighborhood. The loan transferred to special servicing in
June 2020 as a result of payment default and the special
servicer-initiated foreclosure proceedings, and after a Court
process to address the borrower's objections, a receiver was
appointed in June. The borrower continues to contest the
foreclosure, and litigation remains ongoing. According to the March
2024 rent roll, the subject is now 100% occupied with all four
residential units and all three retail spaces leased and occupied.
The building was re-appraised in January 2024 for $13.7 million, up
from the March 2023 value of $12.0 million, but below the $29.8
million appraised value at issuance. Based on this significant
value decline since issuance, Morningstar DBRS analyzed the loan
with a liquidation scenario that results in a loss severity in
excess of 60.0%.
505 Fulton Street (Prospectus ID#7, 5.1% of the pool) is secured by
a 114,209-sf anchored retail property in Brooklyn. The loan is
currently on the servicer's watchlist because of significant
declines in occupancy following former major tenants Nordstrom Rack
(35.5% of the net rentable area (NRA)) and TJ Maxx (25.9% of NRA)
vacating upon their respective lease expiration in April 2024. In
addition, the property faces additional concentrated tenant
rollover risk given Old Navy (19.7% of NRA), has a lease scheduled
to expire in January 2025. Based on the YE2023 financials, the loan
reported an occupancy rate and DSCR of 100% and 2.61x,
respectively, but DSCR is expected to drop to below 2.0x given the
decline in the occupancy rate to just below 40% as of June 2024. In
the event Old Navy also vacates, DSCR will drop further to about
1.0x. Considering the increased vacancy and near-term tenant
rollover risk, Morningstar DBRS analyzed this loan with an elevated
probability of default (POD) penalty, resulting in an expected loss
more than three times the pool average.
At issuance, Morningstar DBRS assigned investment-grade shadow
ratings to three loans, representing a combined 16.3% of the pool,
including Woodlands Mall (Prospectus ID#2, 8.8% of the pool),
Moffett Towers II Buildings 3 & 4 (Prospectus ID#10, 4.3% of the
pool), and Crescent Club (Prospectus ID#12, 3.5% of the pool). With
this review, Morningstar DBRS maintains that the performance of
these loans remains consistent with investment-grade loan
characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
CFMT 2024-R1: DBRS Finalizes BB(low) Rating on Class M-2 Notes
--------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
Mortgage-Backed Notes, Series 2024-R1 (the Notes) to be issued by
CFMT 2024-R1, LLC (CFMT 2024-R1 or the Issuer):
-- $118.7 million Class A-1 at AAA (sf)
-- $17.9 million Class A-2 at AA (high) (sf)
-- $17.9 million Class A-3 at A (high) (sf)
-- $15.4 million Class M-1 at BBB (high) (sf)
-- $29.9 million Class M-2 at BB (low) (sf)
The AAA (sf) credit rating on the Class A-1 Notes reflects 48.65%
of credit enhancement provided by the subordinated notes. The AA
(high) (sf), A (high) (sf), BBB (high) (sf), and BB (low) (sf)
credit ratings reflect 40.90%, 33.15%, 26.50%, and 13.55% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
CFMT 2024-R1 is a securitization of a portfolio of newly originated
and seasoned, performing and reperforming, first-lien and
second-lien residential mortgages to be funded by the issuance of
the Notes. The Notes are backed by 1,040 loans with a total
principal balance of $231,135,598 as of the cut-off date (August
31, 2024).
Morningstar DBRS calculated the portfolio to be approximately 67
months seasoned on average, though the age of the loans is
dispersed, ranging from seven months to 372 months. Approximately
69.7% of the loans had origination guideline or document
deficiencies, which prevented them 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.
In the portfolio, 19.7% of the loans are modified, 73.2% of which
were modified more than two years ago. Within the portfolio, 151
mortgages have noninterest-bearing deferred amounts, equating to
1.5% of the total unpaid principal balance (UPB). Unless specified
otherwise, Morningstar DBRS based all statistics on the mortgage
loans on the current UPB, including the applicable
noninterest-bearing deferred amounts.
Based on Issuer-provided information, 24.2% of the loans in the
pool are not subject to or exempt from the Consumer Financial
Protection Bureau's (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) Rule because of seasoning or because they are
business-purpose loans. The loans subject to the ATR/QM Rule are
designated as QM Safe Harbor (44.3%), QM Rebuttable Presumption
(10.4%), and Non-Qualified Mortgage (21.0%) by UPB.
Cascade Funding, LP - Series 12 (the Sponsor) acquired the mortgage
loans prior to the upcoming closing date and, through a wholly
owned subsidiary, Cascade Funding Mortgage Depositor, LLC, will
contribute the loans to CFMT 2024-R1. As the Sponsor, Cascade
Funding, LP - Series 12 or one of its majority-owned affiliates
will retain the membership certificate representing the initial
overcollateralization amount and, if required, a portion of the
Class B Notes to satisfy the credit risk retention requirements.
CFMT 2024-R1 is the Issuer's first scratch-and-dent rated
securitization. The Sponsor has securitized many rated and unrated
transactions under the CFMT shelf, most of which have been reverse
mortgage and other residential mortgage transactions.
Carrington Mortgage Services, LLC (the Servicer) will service all
of the mortgage loans.
The Servicer will not advance any delinquent principal and interest
(P&I) on the mortgages; however, it is 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 incurred by the transaction parties, including any
unreimbursed servicing advances. Optional redemption may be
exercised on or after the payment date in October 2026.
Additionally, failure to pay the Notes in full by the payment date
in October 2029 will trigger a mandatory auction of the underlying
certificates by the Asset Manager or an agent it appoints on the
payment date of November 2029. If the auction fails to elicit
sufficient proceeds to make the Notes whole, 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, holders of the most junior class of Notes
(other than any rated Notes retained and held by the Sponsor or its
affiliates holding more than 50% of such class of 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 (the payment date in October 2028). The
Issuer will first use the P&I collections 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 an event of default (EOD), 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 October 2028, the Class
A-1 and the other offered Notes will be entitled to their 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 October 2030 or an EOD occurs and is continuing, this
constitutes a credit event. Upon the occurrence of a credit event,
accrued interest on Class A-2 and the other offered Notes will be
paid as principal to Class A-1 or the succeeding senior Notes until
it has been paid in full. The redirected amounts will accrue on the
balances of the respective Notes and will later be paid as
principal payments.
Notes: All figures are in US dollars unless otherwise noted.
CHASE HOME 2024-9: DBRS Gives Prov. B(low) Rating on B-5 Certs
--------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the Mortgage
Pass-Through Certificates, Series 2024-9 (the Certificates) to be
issued by Chase Home Lending Mortgage Trust 2024-9 (CHASE 2024-9)
as follows:
-- $386.3 million Class A-2 at (P) AAA (sf)
-- $386.3 million Class A-3 at (P) AAA (sf)
-- $386.3 million Class A-3-X at (P) AAA (sf)
-- $289.7 million Class A-4 at (P) AAA (sf)
-- $289.7 million Class A-4-A at (P) AAA (sf)
-- $289.7 million Class A-4-X at (P) AAA (sf)
-- $96.6 million Class A-5 at (P) AAA (sf)
-- $96.6 million Class A-5-A at (P) AAA (sf)
-- $96.6 million Class A-5-X at (P) AAA (sf)
-- $231.8 million Class A-6 at (P) AAA (sf)
-- $231.8 million Class A-6-A at (P) AAA (sf)
-- $231.8 million Class A-6-X at (P) AAA (sf)
-- $154.5 million Class A-7 at (P) AAA (sf)
-- $154.5 million Class A-7-A at (P) AAA (sf)
-- $154.5 million Class A-7-X at (P) AAA (sf)
-- $57.9 million Class A-8 at (P) AAA (sf)
-- $57.9 million Class A-8-A at (P) AAA (sf)
-- $57.9 million Class A-8-X at (P) AAA (sf)
-- $56.7 million Class A-9 at (P) AAA (sf)
-- $56.7 million Class A-9-A at (P) AAA (sf)
-- $56.7 million Class A-9-X at (P) AAA (sf)
-- $128.8 million Class A-11 at (P) AAA (sf)
-- $128.8 million Class A-11-X at (P) AAA (sf)
-- $128.8 million Class A-12 at (P) AAA (sf)
-- $128.8 million Class A-13 at (P) AAA (sf)
-- $128.8 million Class A-13-X at (P) AAA (sf)
-- $128.8 million Class A-14 at (P) AAA (sf)
-- $128.8 million Class A-14-X at (P) AAA (sf)
-- $128.8 million Class A-14-X2 at (P) AAA (sf)
-- $128.8 million Class A-14-X3 at (P) AAA (sf)
-- $128.8 million Class A-14-X4 at (P) AAA (sf)
-- $571.7 million Class A-X-1 at (P) AAA (sf)
-- $571.7 million Class A-X-2 at (P) AAA (sf)
-- $571.7 million Class A-X-3 at (P) AAA (sf)
-- $14.2 million Class B-1 at (P) AA (low) (sf)
-- $14.2 million Class B-1-A at (P) AA (low) (sf)
-- $14.2 million Class B-1-X at (P) AA (low) (sf)
-- $7.6 million Class B-2 at (P) A (low) (sf)
-- $7.6 million Class B-2-A at (P) A (low) (sf)
-- $7.6 million Class B-2-X at (P) A (low) (sf)
-- $6.1 million Class B-3 at (P) BBB (low) (sf)
-- $2.7 million Class B-4 at (P) BB (low) (sf)
-- $1.5 million Class B-5 at (P) B (low) (sf)
Classes A-3-X, A-4-X, A-5-X, A-6-X, A-8-X, A-9-X, A-11-X, A-13-X,
A-14-X, A-14-X2, A-14-X3, A-14-X4, A-X-1, A-X-2, A-X-3, B-1-X, and
B-2-X are interest-only (IO) certificates. The class balances
represent notional amounts.
Classes A-2, A-3, A-3-X, A-4, A-4-A, A-4-X, A-5, A-6, A-7, A-7-A,
A-7-X, A-8, A-9, A-11, A-11-X, A-12, A-13, A-13-X, A-X-1, B-1, and
B-2 are exchangeable certificates. These classes can be exchanged
for combinations of depositable certificates as specified in the
offering documents.
Classes A-2, A-3, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A,
A-8, A-8-A, A-11, A-12, A-13, and A-14 are super senior
certificates. These classes benefit from additional protection from
the senior support certificate (Classes A-9 and A-9-A) with respect
to loss allocation.
The AAA (sf) credit ratings on the Certificates reflect 5.65% of
credit enhancement provided by subordinated certificates. The AA
(low) (sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B
(low) (sf) credit ratings reflect 3.30%, 2.05%, 1.05%, 0.60%, and
0.35% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The transaction is a securitization of a portfolio of first-lien,
fixed-rate prime residential mortgages funded by the issuance of
the Mortgage Pass-Through Certificates, Series 2024-9 (the
Certificates). The Certificates are backed by 488 loans with a
total principal balance of $605,917,123 as of the Cut-Off Date
(October 1, 2024).
The pool consists of fully amortizing fixed-rate mortgages with
original terms to maturity from 10 to 30 years and a
weighted-average (WA) loan age of three 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.
JP Morgan Chase Bank, N.A. (JPMCB) is the Originator of 100% of the
pool and Servicer of 100.0% of the pool.
For this transaction, generally, the servicing fee payable for
mortgage loans is composed of three separate components: the base
servicing fee, the delinquent servicing fee, and the additional
servicing fee. These fees vary based on the delinquency status of
the related loan and will be paid from interest collections before
distribution to the securities.
U.S. Bank Trust Company, National Association, rated AA with a
Stable trend by Morningstar DBRS, will act as Securities
Administrator. U.S. Bank Trust National Association will act as
Delaware Trustee. JPMCB will act as Custodian. Pentalpha
Surveillance LLC (Pentalpha) will serve as the Representations and
Warranties (R&W) Reviewer.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that incorporates performance triggers and
credit enhancement floors.
Notes: All figures are in US dollars unless otherwise noted.
CHASE HOME 2024-9: Fitch Assigns 'B+sf' Rating on Class B-5 Certs
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings to Chase Home Lending
Mortgage Trust 2024-9 (Chase 2024-9).
Entity/Debt Rating Prior
----------- ------ -----
Chase 2024-9
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-X LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-A LT AAAsf New Rating AAA(EXP)sf
A-4-X LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-A LT AAAsf New Rating AAA(EXP)sf
A-5-X LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-A LT AAAsf New Rating AAA(EXP)sf
A-6-X LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-A LT AAAsf New Rating AAA(EXP)sf
A-7-X LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-A LT AAAsf New Rating AAA(EXP)sf
A-8-X LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-A LT AAAsf New Rating AAA(EXP)sf
A-9-X LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-11-X LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-13-X LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-14-X LT AAAsf New Rating AAA(EXP)sf
A-14-X2 LT AAAsf New Rating AAA(EXP)sf
A-14-X3 LT AAAsf New Rating AAA(EXP)sf
A-14-X4 LT AAAsf New Rating AAA(EXP)sf
A-X-1 LT AAAsf New Rating AAA(EXP)sf
A-X-2 LT AAAsf New Rating AAA(EXP)sf
A-X-3 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-1-A LT AA-sf New Rating AA-(EXP)sf
B-1-X LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-2-A LT A-sf New Rating A-(EXP)sf
B-2-X LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT B+sf New Rating B+(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
Transaction Summary
Fitch has rated the residential mortgage-backed certificates issued
by Chase Home Lending Mortgage Trust 2024-9 (Chase 2024-9), as
indicated above. The certificates are supported by 488 loans with a
total balance of approximately $606.28 million as of the cutoff
date. The scheduled balance as of the cutoff date is $605.92
million.
The pool consists of prime-quality fixed-rate mortgages (FRMs)
solely originated by JPMorgan Chase Bank, National Association
(JPMCB). The loan-level representations and warranties (R&Ws) are
provided by the originator, JPMCB. All mortgage loans in the pool
will be serviced by JPMCB. The pool's collateral quality is
extremely strong, with a large percentage of loans over $1.0
million.
Of the loans, 99.8% qualify as safe-harbor qualified mortgage
(SHQM) average prime offer rate (APOR) loans, with 0.2% qualifying
as rebuttable presumption (APOR) qualified mortgage loans. There is
no exposure to Libor in this transaction. The collateral comprises
100% fixed-rate loans. The certificates are either fixed rate and
capped at the net weighted average coupon (WAC), or
floating/inverse rate based on the SOFR index and capped at the net
WAC, or based on the net WAC. Consequently, the certificates have
no Libor exposure.
Based on the FEMA declared disaster zip codes for Hurricane Helene,
27 mortgage loans (5.2% based on UPB) in the pool are secured by
homes in FEMA declared disaster areas in GA, NC and SC. Post
Disaster Inspections have come back on some of the 27 loans and
indicated that there was no damage to the homes they received post
disaster property inspection reports on. Based on Fitch's review of
the zip codes associated with FEMA declared disaster areas due to
Hurricane Milton, there are no loans located in the impacted
areas.
The servicer is following standard servicing practices to assess
any property damage to the impacted homes, including ordering
post-disaster inspection reports and a call campaign to reach out
to borrowers in the impacted areas (to assess any damage and the
need of a modification). Fitch did not increase the loss severity
or the losses for the loans in the impacted areas, as the R&W
provider is rated investment grade and will repurchase the loan if
there is material damage, per the no damage R&W.
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 11.1% 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.
High Quality Prime Mortgage Pool (Positive): The pool consists of
488 high quality, fixed-rate, fully amortizing loans with
maturities of up to 30 years that total $605.92 million. In total,
99.8% of the loans qualify as SHQM; the remining 0.2% are
rebuttable presumption QM. 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 4.8 months, according to
Fitch. The pool has a WA FICO score of 770, 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 79.0% 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 weighted average (WA) combined
loan-to-value (CLTV) ratio is 76.3% (76.3% per the transaction
documents), which translates to a sustainable LTV (sLTV) ratio of
84.9%. This represents moderate borrower equity in the property and
reduced default risk compared with a borrower with a CLTV over
80%.
Of the pool, 100.0% of the loans are designated as QM loans.
Of the pool, 100% comprises loans where the borrower maintains a
primary or secondary residence. Single-family homes and planned
unit developments (PUDs) constitute 94.0% of the pool, and
condominiums make up 6.0%. Fitch views favorably the fact that
there are no investor loans in the pool.
The pool consists of loans with the following loan purposes, as
determined by Fitch: purchases (95.9%), cashout refinances (1.6%)
and rate-term refinances (2.5%). Fitch views favorably that no
loans are for
Of the pool loans, 23.0% are concentrated in California followed by
Washington and Massachusetts. The largest MSA concentration is in
the Seattle MSA (8.4%), followed by the Los Angeles MSA (6.5%) and
the Boston MSA (6.1%). The top three MSAs account for 21.1% of the
pool. As a result, no probability of default (PD) penalty was
applied for geographic concentration.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the
transaction. The applicable credit support percentage feature
redirects subordinate principal to classes of higher seniority if
specified credit enhancement (CE) levels are not maintained.
The servicer, JPMCB, is obligated to advance delinquent principal
and interest (P&I) until deemed nonrecoverable. Although full P&I
advancing will provide liquidity to the certificates, it will also
increase the loan-level loss severity (LS) since the servicer looks
to recoup P&I advances from liquidation proceeds, which results in
less recoveries.
There is no master servicer for this transaction. U.S. Bank Trust
National Association is the trustee that will advance as needed
until a replacement servicer can be found. The trustee is the
ultimate advancing party.
CE Floor (Positive): A CE or senior subordination floor of 1.20%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 0.70% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 42.2% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC. The third-party due diligence described in Form
15E focused on four areas: compliance review, credit review,
valuation review and data integrity. Fitch considered this
information in its analysis and, as a result, Fitch decreased its
loss expectations by 0.13% at the 'AAAsf' stress due to 53.7% due
diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 53.7% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria." AMC
and Digital Risk were engaged to perform the review. Loans reviewed
under this engagement were given compliance, credit and valuation
grades and assigned initial grades for each subcategory. Minimal
exceptions and waivers were noted in the due diligence reports.
Refer to the "Third-Party Due Diligence" section for more detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
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
Chase 2024-9 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk due to the strong transaction parties
and low operational risk present in the transaction as a result of
an above average originator and RPS1- rated servicer. The above
average originator and RPS1- servicer both have a positive impact
on the credit profile, and are relevant to the rating[s] in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CITIGROUP 2024-CMI1: DBRS Gives Prov. B(low) Rating on B5 Certs
---------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings on the
Mortgage Pass-Through Certificates, Series 2024-CMI1 (the
Certificates) to be issued by the Citigroup Mortgage Loan Trust
2024-CMI1 (CMLTI 2024-CMI1):
-- $231.8 million Class A-1 at (P) AAA (sf)
-- $231.8 million Class A-2 at (P) AAA (sf)
-- $231.8 million Class A-3 at (P) AAA (sf)
-- $139.1 million Class A-4 at (P) AAA (sf)
-- $139.1 million Class A-5 at (P) AAA (sf)
-- $139.1 million Class A-6 at (P) AAA (sf)
-- $92.7 million Class A-7 at (P) AAA (sf)
-- $92.7 million Class A-8 at (P) AAA (sf)
-- $92.7 million Class A-9 at (P) AAA (sf)
-- $173.9 million Class A-10 at (P) AAA (sf)
-- $173.9 million Class A-11 at (P) AAA (sf)
-- $173.9 million Class A-12 at (P) AAA (sf)
-- $58.0 million Class A-13 at (P) AAA (sf)
-- $58.0 million Class A-14 at (P) AAA (sf)
-- $58.0 million Class A-15 at (P) AAA (sf)
-- $34.8 million Class A-16 at (P) AAA (sf)
-- $34.8 million Class A-17 at (P) AAA (sf)
-- $34.8 million Class A-18 at (P) AAA (sf)
-- $20.0 million Class A-19 at (P) AAA (sf)
-- $20.0 million Class A-20 at (P) AAA (sf)
-- $20.0 million Class A-21 at (P) AAA (sf)
-- $251.9 million Class A-X at (P) AAA (sf)
-- $251.9 million Class A-X-1 at (P) AAA (sf)
-- $251.9 million Class A-I-1 at (P) AAA (sf)
-- $251.9 million Class A-I-2 at (P) AAA (sf)
-- $251.9 million Class A-I-3 at (P) AAA (sf)
-- $231.8 million Class A-I-4 at (P) AAA (sf)
-- $231.8 million Class A-I-5 at (P) AAA (sf)
-- $231.8 million Class A-I-6 at (P) AAA (sf)
-- $139.1 million Class A-I-7 at (P) AAA (sf)
-- $139.1 million Class A-I-8 at (P) AAA (sf)
-- $139.1 million Class A-I-9 at (P) AAA (sf)
-- $92.7 million Class A-I-10 at (P) AAA (sf)
-- $173.9 million Class A-I-11 at (P) AAA (sf)
-- $58.0 million Class A-I-12 at (P) AAA (sf)
-- $58.0 million Class A-I-13 at (P) AAA (sf)
-- $58.0 million Class A-I-14 at (P) AAA (sf)
-- $34.8 million Class A-I-15 at (P) AAA (sf)
-- $34.8 million Class A-I-16 at (P) AAA (sf)
-- $34.8 million Class A-I-17 at (P) AAA (sf)
-- $20.0 million Class A-I-18 at (P) AAA (sf)
-- $20.0 million Class A-I-19 at (P) AAA (sf)
-- $20.0 million Class A-I-20 at (P) AAA (sf)
-- $12.5 million Class B-1 at (P) AA (low) (sf)
-- $12.5 million Class B-1-A at (P) AA (low) (sf)
-- $12.5 million Class B-1-IO at (P) AA (low) (sf)
-- $16.0 million Class B-1-2IO at (P) A (low) (sf)
-- $18.4 million Class B-1-3IO at (P) BBB (low) (sf)
-- $3.4 million Class B-2 at (P) A (low) (sf)
-- $3.4 million Class B-2-A at (P) A (low) (sf)
-- $3.4 million Class B-2-IO at (P) A (low) (sf)
-- $2.5 million Class B-3 at (P) BBB (low) (sf)
-- $2.5 million Class B-3-A at (P) BBB (low) (sf)
-- $2.5 million Class B-3-IO at (P) BBB (low) (sf)
-- $945.0 thousand Class B-4 at (P) BB (low) (sf)
-- $682.0 thousand Class B-5 at (P) B (low) (sf)
Classes A-X, A-X-1, A-I-1, A-I-2, A-I-3, A-I-4, A-I-5, A-I-6,
A-I-7, A-I-8, A-I-9, A-I-10, A-I-11, A-I-12, A-I-13, A-I-14,
A-I-15, A-I-16, A-I-17, A-I-18, A-I-19, A-I-20, B-1-IO, B-1-2IO,
B-1-3IO, B-2-IO, and B-3-IO are interest-only (IO) certificates.
The class balances represent notional amounts.
Classes A-1, A-2, A-3, A-4, A-5, A-7, A-8, A-9, A-10, A-11, A-12,
A-13, A-14, A-16, A-17, A-19, A-20, A-X, A-I-1, A-I-2, A-I-3,
A-I-4, A-I-5, A-I-6, A-I-8, A-I-10, A-I-11, A-I-13, A-I-16, A-I-19,
B-1, B-1-2IO, B-1-3IO, B-2, and B-3 are exchangeable certificates.
These classes can be exchanged for combinations of exchange
certificates as specified in the offering documents.
Classes A-6, A-15, and A-18 are super-senior certificates. These
classes benefit from additional protection from the senior support
certificate (Class A-23) with respect to loss allocation.
The (P) AAA (sf) ratings on the Certificates reflect 7.65% of
credit enhancement provided by subordinated certificates. The (P)
AA (low) (sf), (P) A (low) (sf), (P) BBB (low) (sf), (P) BB (low)
(sf), and (P) B (low) (sf) ratings reflect 3.05%, 1.80%, 0.90%,
0.55%, and 0.30% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The transaction is a securitization of a portfolio of first-lien,
fixed-rate, prime residential mortgages funded by the issuance of
the Mortgage Pass-Through Certificates, Series 2024-CMI1 (the
Certificates). The Certificates are backed by 281 loans with a
total principal balance of $272,763,078 as of the Cut-Off Date
(October 1, 2024).
This transaction is sponsored by Citigroup Global Markets Realty
Corp. (CGMRC). The pool consists of fully amortizing fixed-rate
mortgages with original terms to maturity of 30 years and a
weighted-average (WA) loan age of seven months. The pool is
composed of nonagency, prime jumbo mortgage loans that were
manually underwritten using the originator's guidelines.
CitiMortgage, Inc. (CMI) is the Servicer and CMI's affiliate is the
Originator of all of the mortgage loans. Cenlar FSB (Cenlar) will
act as subservicer. For this transaction, the servicing fee rate is
0.500%.
CGMRC is the Mortgage Loan Seller and Sponsor of the transaction.
Citigroup Mortgage Loan Trust Inc. will act as Depositor of the
transaction. U.S. Bank Trust Company, National Association (U.S.
Bank; rated AA with a Stable trend by Morningstar DBRS) will act as
the Trust Administrator. U.S. Bank Trust National Association will
serve as Trustee, and U.S. Bank National Association will serve as
Custodian.
CMI as Servicer will be responsible for advancing delinquent
monthly scheduled payments of interest and principal (Scheduled
Payments), to the extent such payments are recoverable by the
Servicer. The Servicer, will be required to make all customary,
reasonable and necessary servicing advances with respect to
preservation, inspection, restoration, protection, and repair of a
mortgaged property.
Notes: All figures are in US dollars unless otherwise noted.
CITIGROUP 2024-CMI1: Moody's Assigns B1 Rating to Cl. B-5 Certs
---------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to 56 classes of
residential mortgage-backed securities (RMBS) issued by Citigroup
Mortgage Loan Trust 2024-CMI1, and sponsored by Citigroup Global
Markets Realty Corp.
The securities are backed by a pool of prime jumbo (100.0% by
balance) residential mortgages originated by CitiMortgage, Inc.'s
affiliate (100.0% by balance) and serviced by CitiMortgage, Inc.
(100.0% by balance).
The complete rating actions are as follows:
Issuer: Citigroup Mortgage Loan Trust 2024-CMI1
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aaa (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aaa (sf)
Cl. A-20, Definitive Rating Assigned Aaa (sf)
Cl. A-21, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aaa (sf)
Cl. A-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-1*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-2*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-3*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-4*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-5*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-6*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-7*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-8*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-9*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-10*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-11*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-12*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-13*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-14*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-15*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-16*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-17*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-18*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-19*, Definitive Rating Assigned Aaa (sf)
Cl. A-I-20*, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-IO*, Definitive Rating Assigned Aa3 (sf)
Cl. B-1-2IO*, Definitive Rating Assigned A1 (sf)
Cl. B-1-3IO*, Definitive Rating Assigned A3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-2-A, Definitive Rating Assigned A3 (sf)
Cl. B-2-IO*, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-3-A, Definitive Rating Assigned Baa3 (sf)
Cl. B-3-IO*, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B1 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.29%, in a baseline scenario-median is 0.12% and reaches 4.44% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
COMM 2014-UBS4: DBRS Cuts Class X-B Certs Rating to B
-----------------------------------------------------
DBRS Inc. downgraded its credit ratings on seven classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-UBS4
issued by COMM 2014-UBS4 Mortgage Trust as follows:
-- Class B to BBB (sf) from A (sf)
-- Class X-B to B (sf) from BBB (sf)
-- Class C to B (low) (sf) from BBB (low) (sf)
-- Class PEZ to B (low) (sf) from BBB (low) (sf)
-- Class D to C (sf) from BB (low) (sf)
-- Class E to C (sf) from CCC (sf)
-- Class X-C to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-5 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-M at AAA (sf)
-- Class F at C (sf)
-- Class X-D at C (sf)
The trends on Classes A-M, and X-A were changed to Negative from
Stable. The trends on Classes B, C, X-B, and PEZ remain Negative.
Classes D, E, F, X-C, and X-D no longer carry trends as those
classes have credit ratings which typically do not carry trends in
Commercial Mortgage-Backed Securities (CMBS) credit ratings. The
trend on Class A-5 remains Stable.
The credit rating downgrades reflect Morningstar DBRS' increased
loss projections as the pool enters wind-down following the
repayment of the bulk of the original pool. Since the last credit
rating action, 64 loans have left the trust, contributing to
significant deleveraging and concentration of largely higher credit
risk collateral as performing loans reached maturity and ultimately
repaid from the pool. There are 14 loans remaining in the pool as
of the October 2024 remittance, 11 of which are in special
servicing. Given the adverse selection and high concentration of
defaulted assets, Morningstar DBRS considered liquidation scenarios
for most of the remaining loans to determine recoverability for the
remaining classes.
In addition to concerns with increased projected losses, there is
also ongoing shorted interest to credit rated bonds, which has
already exceeded or will soon exceed Morningstar DBRS' tolerance
relative to the current credit rating. Class C has not received
full interest since the August 2024 remittance and Class D has not
received full interest since the February 2024 remittance.
Morningstar DBRS' tolerance for unpaid interest is limited to three
to four remittance periods at the BBB (sf) credit rating category
and six remittance periods at the BB (sf) and B (sf) credit rating
categories. Most of the outstanding classes carry Negative trends,
reflective of the increased propensity for interest shortfalls, as
well as the potential for Morningstar DBRS' loss expectations to
further increase should the underlying collateral values further
deteriorate or the workout periods extend beyond the near to
moderate term, exposing the trust to increased property protection
and other expenses accruing over the workout periods.
The largest contributors to Morningstar DBRS' loss expectations are
the two largest loans remaining in the pool, both of which are in
special servicing. The State Farm Portfolio (Prospectus ID#1, 31.6%
of the pool) is pari passu with pieces of the loan held in the COMM
2014-UBS3 and COMM 2014-UBS5 transactions, both of which are credit
rated by Morningstar DBRS, and the non-Morningstar DBRS credit
rated MSBAM 2014-C16 transaction and is secured by a portfolio of
14 cross-collateralized, cross-defaulted office properties in 11
different states. The loan transferred to the special servicer in
September 2023 and remains delinquent. Although the workout
strategy has been noted as full payoff for the past year, there has
been limited progress in the loan's resolution since the last
credit rating action. Morningstar DBRS remains cautious about the
refinance prospects given the underlying assets are leased but not
occupied by State Farm Mutual Automobile Insurance Company (State
Farm), with all but two of the leases running through 2028. While
State Farm continues to make rent payments, it has physically
vacated every property. The loan had an anticipated repayment date
in April 2024, and is now hyper amortizing until April 2029 with
annual resets of the interest rate. Recent servicer commentary
indicates that one property is expected to be released in the near
term. Although the continued rent payments are expected to continue
to amortize the outstanding debt, Morningstar DBRS believes the
current value deficiency to be significant given the dark status of
the properties and the tertiary locations that will likely mean low
investor demand. As such, a liquidation scenario was considered
based on a stressed value analysis, which resulted in a loss
severity of nearly 40%.
597 Fifth Avenue (Prospectus ID #2, 25.9% of the pool) is secured
by two adjacent mixed-use properties in Manhattan's Midtown
neighborhood. The property consists of 80,032 square feet (sf) of
Class B office and ground-floor retail space. The loan transferred
to the special servicer in October 2020 and foreclosure is in
process. Sephora vacated the ground-floor retail space in 2017 and
Club Monaco has since taken over the space, with a lease that
ultimately ran through January 2024. The servicer confirmed an
extension is currently being negotiated, though Morningstar DBRS
expects the rental rate will be well below Sephora's rental rate.
According to the November 2023 appraisal, the property's value has
declined to $84.3 million, from the issuance appraised value of
$180.0 million, reflecting a loan-to-value (LTV) ratio of nearly
140% based on the total exposure. Per the appraisal, the property
had a leased rate of 43.9% at the time, and according to servicer
commentary, that rate has fallen further to 26% as of May 2024.
Morningstar DBRS' liquidation scenario considered a haircut to the
appraised value, with a resulting loss severity of 42%.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSAIL 2018-CX11: DBRS Cuts F-RR Certs Rating to B(low)
------------------------------------------------------
DBRS, Inc. downgraded its credit ratings on five classes of
Commercial Mortgage Pass-Through Certificates, Series 2018-CX11
issued by CSAIL 2018-CX11 Commercial Mortgage Trust as follows:
-- Class X-D to BBB (sf) from BBB (high) (sf)
-- Class D to BBB (low) (sf) from BBB (sf)
-- Class E-RR to BB (high) (sf) from BBB (low) (sf)
-- Class F-RR to B (low) (sf) from B (high) (sf)
-- Class G-RR to CCC (low) (sf) from B (low) (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
Morningstar DBRS also changed the trends on Classes E-RR and F-RR
to Stable from Negative. The trends on all remaining classes are
Stable with the exception of Class G-RR, which has a credit rating
that does not typically carry trends in commercial mortgage-backed
securities (CMBS) credit ratings.
The credit rating downgrades reflect the increased risks to the
pool since Morningstar DBRS' last credit rating action in October
2023, primarily driven by further credit deterioration stemming
from value declines and/or a lack of resolution for the four
collateral properties backing the loans in special servicing, which
represent 6.7% of the pool balance. The largest increase in
projected liquidated losses stems from two office loans with
updated appraisal values that have declined by approximately 40%
each since the last credit rating action -- Penn Center West
(Prospectus ID#14; 2.5% of the pool) and 111 West Jackson
(Prospectus ID#30; 1.4% of the pool). Morningstar DBRS analyzed
each of the specially serviced loans with a liquidation scenario
resulting in loss severities ranging from 17% to 67% and an
aggregate liquidated loss forecast of $26.7 million. In addition,
several performing loans continue to exhibit increased risks
resulting in a stressed analysis and increased expected losses
(ELs) that were generally above the pool average.
Morningstar DBRS changed the trends on the Classes noted above to
Stable from Negative, as the credit rating downgrades reflected the
stressed analysis considered in light of the increased risks as
described above. Should there be unforeseen circumstances that
further increase the risks for the underlying loans in question,
Morningstar DBRS notes that trends could change and/or credit
ratings could be subject to further downgrades.
The credit rating confirmations reflect that overall, the pool
continues to exhibit healthy credit metrics, as evidenced by the
weighted-average (WA) debt service coverage ratio (DSCR) of 2.26x,
based on the most recent financial reporting. The transaction also
benefits from several large loans that are shadow-rated investment
grade by Morningstar DBRS with overall stable performance since
issuance. In addition, the unrated first-loss Class N-RR balance of
$34.7 million, as well as the substantial balance of $52.4 million
held across Classes E-RR, F-RR, and G-RR, all of which have been
assigned below investment grade credit ratings by Morningstar DBRS,
provides significant cushion against realized losses for the top
and middle of the capital stack.
As of the September 2024 remittance, 47 of the original 56 loans
remain in the pool. The initial pool balance of $952.87 million has
been reduced by 17.2%, to $789.25 million, which includes $8.16
million of losses from loan liquidations. Eight loans, representing
7.6% of the pool, are backed by collateral that is fully defeased.
Loans representing 20.5% of the pool balance are on the servicer's
watchlist; however, two larger loans (9.3% of the pool) are being
monitored for nonperformance-related concerns that would likely
have minimal credit-risk impact. As previously mentioned, four
loans, representing 6.7% of the pool, are in special servicing.
Outside of the specially serviced loans, Morningstar DBRS notes the
moderate concentration of nine loans secured by office collateral,
representing a little more than 25.0% of the pool. In general,
these loans backed by office collateral are performing as expected
with healthy credit metrics as evidenced by the WA DSCR of 2.23x
and no loans reporting a DSCR of less than 1.20x as of YE2023.
The largest specially serviced loan, Penn Center West, which is
secured by a three-building office complex outside of Pittsburg,
transferred to special servicing in November 2022 for imminent
default and did not repay at its February 2023 maturity. An updated
appraisal as of July 2024 reflects an as-is value of $12.1 million,
down significantly from both the March 2023 and issuance appraisal
values of $20.1 million and $29.5 million, respectively.
Morningstar DBRS analyzed the loan with a liquidation scenario
based on a haircut to the July 2024 appraisal value, resulting in a
loss severity in excess of 65.0%.
Morningstar DBRS' expected losses have also increased substantially
for the third-largest specially serviced loan, 111 West Jackson,
which is secured by a Class B office property in downtown Chicago
that transferred to special servicing in March 2023 for imminent
monetary default after a sharp drop in the occupancy rate. An
updated appraisal as of July 2024 reflects an as-is value of $43.0
million, down from the June 2023 and issuance appraisal values of
$66.0 million and $163.0 million, respectively. Morningstar DBRS
analyzed the loan with a liquidation scenario based on a haircut to
the July 2024 appraisal value, resulting in a loss severity of
about 50.0%.
At issuance, Morningstar DBRS assigned investment-grade shadow
ratings to three loans in One State Street (Prospectus ID#3; 6.3%
of the pool), Moffett Towers II Building 2 (Prospectus ID #9; 3.6%
of the pool); and Lehigh Valley Mall (Prospectus ID #12; 3.0% of
the pool). With this review, the shadow ratings for Moffett Towers
II Building 2 and Lehigh Valley Mall were maintained as performance
remains in line with issuance expectations. However, the shadow
rating for One State Street, which is part of a pari passu loan
secured by an office property in New York City and has shown some
performance declines from issuance, was removed. Given the extended
vacancy and lack of traction on the borrower's efforts to re-lease
the space, a soft submarket, and exposure to concentrated tenant
rollover in advance of the loan's maturity, the removal of the
shadow rating was merited.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSAIL 2019-C15: DBRS Cuts Class F-RR Certs Rating to B(low)
-----------------------------------------------------------
DBRS, Inc. downgraded its credit ratings on five classes of the
Commercial Mortgage Pass-Through Certificates, Series 2019-C15
issued by CSAIL 2019-C15 Commercial Mortgage Trust as follows:
-- Class C to A (low) (sf) from A (sf)
-- Class X-D to BBB (sf) from BBB (high) (sf)
-- Class D to BBB (low) (sf) from BBB (sf)
-- Class E-RR to BB (high) (sf) from BBB (low) (sf)
-- Class F-RR to B (low) (sf) from B (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 A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class G-RR at CCC (sf)
Morningstar DBRS also changed the trends on Classes A-S, X-A, X-B,
B, C, X-D, D, E-RR, and F-RR to Stable from Negative. The trends on
all remaining classes are Stable with the exception of Class G-RR,
which has a credit rating that does not typically carry a trend in
commercial mortgage-backed securities (CMBS) credit ratings.
At the prior credit rating action in October 2023, Morningstar DBRS
changed the trends on nine classes to Negative from Stable to
reflect ongoing concerns for underperforming loans in the pool.
Since that time, the performance of the underlying collateral
securing several of those loans has remained stagnant, or in some
cases has further deteriorated. Morningstar DBRS recognizes the
noteworthy remaining concentration of loans secured by office
collateral or collateral with an office component, which poses
increased credit risks for the transaction in general. Morningstar
DBRS is most concerned about the Continental Towers loan
(Prospectus ID#13, 3.3% of the pool), a specially serviced loan
secured by a Class A office property in the Chicago suburb of
Rolling Meadows, Illinois, with persisting declines in occupancy
and debt service coverage ratio (DSCR). The property most recently
reported an occupancy rate of 59% as of September 2023 and has been
performing below breakeven for some time. Given these risks,
Morningstar DBRS considered a liquidation scenario as part of this
review, based on a significant haircut to the issuance appraisal,
resulting in a loss severity of nearly 50%. The analysis for this
review also considered stressed scenarios for other loans secured
by office and other collateral types that were demonstrating
increased risks from issuance. As a result, the pool's overall
adjusted expected loss (EL) has increased since the previous credit
rating action, supporting the credit rating downgrades with this
review.
The One Lincoln Center loan (Prospectus ID#17, 2.9% of the pool) is
secured by an office building in Syracuse, New York, and is
currently on the servicer's watchlist for a low DSCR, which has
been below breakeven since YE2022 and was most recently reported at
0.69 times (x) as of March 2024. The occupancy rate continues to
hover around 70.0%, in line with the last few years, and tenants
representing more than half of the net rentable area have leases
scheduled to expire during the loan's term. The Town Point Center
loan (Prospectus ID#22, 2.0% of the pool) is secured by a 12-story,
132,583-square-foot (sf) Class A office property in downtown
Norfolk, Virginia, that is also reporting a below breakeven DSCR,
most recently reported at 0.81x as of March 2024. Occupancy at the
property declined to 74% as of March 2024 from 92% at issuance, and
the underlying collateral has exposure to concentrated tenant
rollover for three of the five largest tenants by YE2025. Both
loans were analyzed with stressed scenarios to increase the
loan-level ELs, which averaged about 2.6x the pool average EL.
Morningstar DBRS changed the trends on nine classes, as noted
above, to Stable from Negative, as the credit rating downgrades
were driven by analysis that considered stressed scenarios for
those loans exhibiting increased risks from issuance, and
Morningstar DBRS does not anticipate further deterioration in the
near to moderate term as the deal continues to season. Should there
be unforeseen circumstances that further increase the risks for the
underlying loans in question, Morningstar DBRS could change the
trends on the credit ratings and/or the credit ratings could be
subject to further downgrades.
The credit rating confirmations reflect the overall stable
performance of the majority of the loans in the pool. Since the
last credit rating action, Morningstar DBRS' outlook has improved
for the Nebraska Crossing loan (Prospectus ID#15, 3.1% of the
pool), which was specially serviced at the last credit rating
action but has since returned to the master servicer, following a
settlement agreement between the servicer and the borrower to
address the related covenant defaults identified during an audit of
the financial statements. The loan is secured by a 368,126-sf
retail property in Gretna, Nebraska, which most recently reported
an occupancy rate and DSCR of 96% and 1.74x, respectively, as of
September 2023, in line with the underlying collateral's historical
operating performance.
As of the September 2024 remittance, 34 of the original 36 loans
remained in the trust, with an aggregate trust balance of $750.0
million, representing a collateral reduction of about 9.6% since
issuance as a result of repayment and scheduled loan amortization.
One smaller loan, representing less than 1.0% of the pool, has been
fully defeased. As previously mentioned, there is one loan,
representing 3.3% of the pool, that is specially serviced. There
are an additional seven loans, representing 23.1% of the pool,
being monitored on the servicer's watchlist; however, only four of
these are being monitored for unresolved performance-related
concerns.
Outside of the specially serviced loans, the office loans in the
transaction most recently reported a weighted-average DSCR of
1.65x, illustrating that, overall, the office loans are performing
as expected, with a few exceptions described above. In addition,
the overall risk is somewhat mitigated by a few large loans in the
pool, representing 16.7% of the pool balance, that are secured by
office properties; these properties most recently reported DSCRs in
excess of 1.70x and have minimal exposure to major tenant rollover
prior to loan maturity. The largest of these is Darden Headquarters
(Prospectus ID#1, 10.7% of the pool), which is secured by a
suburban office property in Orlando that is fully occupied by
Darden Restaurants, Inc. and serves as the tenant's global
headquarters on a long-term lease through October 2035. The loan
has strong credit metrics, including a YE2023 DSCR of 1.71x.
The second-largest office loan in the pool, the 787 Eleventh Avenue
loan (Prospectus ID#4, 6.0% of the pool), which Morningstar DBRS
shadow-rated as investment grade at issuance, is secured by a Class
A mixed-use property in Manhattan's Midtown West neighborhood. The
loan most recently reported healthy credit metrics, evidenced by
the YE2023 DSCR of 1.89x. The first five floors consist of
automotive showroom space for luxury car brands, with the remaining
space configured for office use. In addition, several tenants have
benefited from rental abatements, the last of which burned off in
February 2024; this suggests that DSCR should continue to increase
by YE2024.
In addition to the 787 Eleventh Avenue loan, 2 North 6th Place
(Prospectus ID#8, 4.5% of the pool balance) was shadow-rated
investment grade at issuance. With this review, Morningstar DBRS
confirms that the performance trends for both loans remain
consistent with investment-grade loan characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
DEEPHAVEN 2024-1: S&P Assigns Prelim 'B+' Rating on Cl.B-2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Deephaven
Residential Mortgage Trust 2024-1's mortgage-backed pass-through
notes series 2024-1.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable-rate mortgage loans secured by single-family
residences, planned-unit developments, condominiums, two- to
four-family homes. The pool consists of 1,330 loans that are
non-qualified mortgage loans and ability-to-repay exempt loans.
The preliminary ratings are based on information as of Oct. 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 pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The mortgage originator and aggregator, Deephaven Mortgage
LLC;
-- The transaction's representation and warranty framework;
-- The geographic concentration;
-- The 100% due diligence results consistent with represented loan
characteristics; and
-- S&P said, "One key change in our baseline forecast since June,
which is an acceleration in the pace of monetary policy easing. We
anticipate the Federal Reserve will deliver two more rate cuts of
25 basis points (bps) this year and a total of 225 bps of rate cuts
by year-end 2025--an increase of 75 bps from our prior forecast. We
continue to expect real GDP growth to slow from above-trend growth
this year to below-trend growth in 2025, accompanied by a further
rise in the unemployment rate and lower inflation. However, our
probability of a recession starting over the next 12 months remains
unchanged at 25%. With personal consumption still healthy for now,
near-term recession fears appear overblown. Therefore, we maintain
our current market outlook as it relates to the 'B' projected
archetypal foreclosure frequency of 2.50%. This reflects our benign
view of the mortgage and housing markets, as demonstrated through
general national-level home price behavior, unemployment rates,
mortgage performance, and underwriting."
Preliminary Ratings Assigned
Deephaven Residential Mortgage Trust 2024-1
Class A-1, $335,505,000: AAA (sf)
Class A-1A, $284,047,000: AAA (sf)
Class A-1B, $51,458,000: AAA (sf)
Class A-2, $40,909,000: AA (sf)
Class A-3, $62,264,000: A (sf)
Class M-1, $25,729,000: BBB (sf)
Class B-1, $23,156,000: BB (sf)
Class B-2, $12,865,000: B+ (sf)
Class B-3, $14,151,000: NR
Class A-IO-S, Notional(i): NR
Class XS, Notional(i): NR
Class R: NR
(i)Notional amount equals the loans' aggregate stated principal
balance.
NR--Not rated.
DIAMETER CAPITAL 1: S&P Assigns BB- (sf) Rating on Cl. D-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the floating-rate class
A-1-R, A-2-R, B-R, C-R, and D-R replacement debt from Diameter
Capital CLO 1 Ltd./Diameter Capital CLO 1 LLC, a transaction
originally issued in July 2021 that S&P Global Ratings did not
rate. The original debt was redeemed with the proceeds from the
replacement 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 Diameter CLO Advisors 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
Diameter Capital CLO 1 Ltd./Diameter Capital CLO 1 LLC
Class A-1-R, $341.00 million: AAA (sf)
Class A-2-R, $77.00 million: AA (sf)
Class B-R (deferrable), $33.00 million: A (sf)
Class C-R (deferrable), $30.25 million: BBB- (sf)
Class D-R (deferrable), $22.00 million: BB- (sf)
Subordinated notes, $47.00 million: Not rated
DIAMETER CAPITAL 2: S&P Assigns BB- (sf) Rating on Cl. D-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
B-R, C-R, and D-R replacement debt from Diameter Capital CLO 2
Ltd./Diameter Capital CLO 2 LLC, a CLO originally issued in October
2021 that is managed by Diameter CLO Advisors LLC. At the same
time, S&P withdrew its ratings on the original class A-1, A-2, B,
C, and D debt following payment in full on the Oct. 24, 2024,
refinancing date.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period was extended to Oct. 23, 2026.
-- The reinvestment period was extended to Oct. 15, 2029.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) were extended by approximately one
year to Oct. 15, 2037.
-- The required minimum overcollateralization and interest
coverage ratios were amended.
-- An additional $9.5 million in subordinated notes were issued on
the refinancing date.
-- The transaction has adopted benchmark replacement language and
was updated to conform to current rating agency methodology.
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
Diameter Capital CLO 2 Ltd./Diameter Capital CLO 2 LLC
Class A-1-R, $341.00 million: AAA (sf)
Class A-2-R, $77.00 million: AA (sf)
Class B-R (deferrable), $33.00 million: A (sf)
Class C-R (deferrable), $30.25 million: BBB- (sf)
Class D-R (deferrable), $22.00 million: BB- (sf)
Ratings Withdrawn
Diameter Capital CLO 2 Ltd./Diameter Capital CLO 2 LLC
Class A-1 to NR from 'AAA (sf)'
Class A-2 to NR from 'AA (sf)'
Class B to NR from 'A (sf)'
Class C to NR from 'BBB- (sf)'
Class D to NR from 'BB- (sf)'
Other Debt
Diameter Capital CLO 2 Ltd./Diameter Capital CLO 2 LLC
Subordinated notes, $48.35 million: NR
NR--Not rated.
FIGRE TRUST 2024-HE5: DBRS Finalizes B(low) Rating on F Notes
-------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following Mortgage-Backed Notes, Series 2024-HE5 (the Notes) issued
by FIGRE Trust 2024-HE5 (FIGRE 2024-HE5 or the Trust):
-- $341.6 million Class A at AAA (sf)
-- $30.2 million Class B at AA (low) (sf)
-- $28.8 million Class C at A (low) (sf)
-- $14.2 million Class D at BBB (low) (sf)
-- $17.4 million Class E at BB (low) (sf)
-- $17.4 million Class F at B (low) (sf)
The AAA (sf) credit rating on the Class A Notes reflects 26.50% of
credit enhancement provided by subordinate notes. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf)
credit ratings reflect 20.00%, 13.80%, 10.75%, 7.00%, and 3.25% of
credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of recently originated first-
and junior-lien revolving home equity lines of credit (HELOCs)
funded by the issuance of the Notes. The Notes are backed by 6,675
loans (individual HELOC draws), which correspond to 6,192 HELOC
families (each consisting of an initial HELOC draw and subsequent
draws by the same borrower) with a total unpaid principal balance
(UPB) of $464,810,939 and a total current credit limit of
$496,951,709 as of the Cut-Off Date (September 30, 2024).
The portfolio, on average, is three months seasoned, though
seasoning ranges from one to 31 months. All of the HELOCs are
current and have been performing since origination. All of the
loans in the pool are exempt from the Consumer Financial Protection
Bureau Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules because
HELOCs are not subject to the ATR/QM rules.
Figure is a wholly owned, indirect subsidiary of Figure
Technologies, Inc. (Figure Technologies) that was formed in 2018.
Figure Technologies is a financial services and technology company
that leverages blockchain technology for the origination and
servicing of loans, loan payments, and loan sales. In addition to
the HELOC product, Figure has offered several different lending
products within the consumer lending space including student loan
refinance, unsecured consumer loans, and conforming first-lien
mortgage. In June 2023, the company launched a wholesale channel
for its HELOC product. Figure originates and services loans in 48
states and the District of Columbia. As of October 2024, Figure
originated, funded, and serviced more than 159,000 HELOCs totaling
approximately $11.9 billion.
Figure is the Originator of most and the Servicer of all HELOCs in
the pool. Other originators in the pool are Figure Wholesale and
certain other lenders (together, the White Label Partner
Originators). The White Label Partner Originators originated HELOCs
using Figure's online origination applications under Figure's
underwriting guidelines. Also, Figure is the Seller of all the
HELOCs. Morningstar DBRS performed a telephone operational risk
review of Figure's origination and servicing platform and believes
the Company is an acceptable HELOC originator and servicer with a
backup servicer that is acceptable to Morningstar DBRS.
Figure is the transaction's Sponsor. FIGRE 2024-HE5 is the ninth
rated securitization of HELOCs by the Sponsor. Also,
Figure-originated HELOCs are included in five securitizations
sponsored by Saluda Grade. These transactions' performances to date
are satisfactory.
The transaction includes mostly junior liens (primarily second
liens) and some first-lien HELOCs.
In this transaction, all loans except one are open HELOCs that have
a draw period of two, three, four, or five years during which
borrowers may make draws up to a credit limit, though such right to
make draws may be temporarily frozen, suspended, or terminated
under certain circumstances. At the end of the draw term, the HELOC
mortgagors have a repayment period ranging from three to 25 years.
During the repayment period, borrowers are no longer allowed to
draw, and their monthly principal payments will equal an amount
that allows the outstanding loan balance to evenly amortize down.
All HELOCs in this transaction are fixed-rate loans. The HELOCs
have no interest-only payment period, so borrowers are required to
make both interest and principal payments during the draw and
repayment periods. No loans require a balloon payment.
The loans are made mainly to borrowers with prime and near-prime
credit quality who seek to take equity cash out for various
purposes. These HELOCs are fully drawn at origination, as evidenced
by the weighted-average (WA) utilization rate by current line
amount of approximately 97.2% after three months of seasoning on
average. For each borrower, the HELOC, including the initial and
any subsequent draws, is defined as a loan family within which
every new credit line draw becomes a de facto new loan with a new
fixed interest rate determined at the time of the draw by adding
the margin determined at origination to the then-current prime
rate.
Relative to other HELOCs in Morningstar DBRS-rated deals, the loans
in the pool are all fixed rate, fully amortizing with a shorter
draw period, and may have terms significantly shorter than 30
years, including five- to 10-year maturities.
Certain Unique Factors in HELOC Origination Process
Figure seeks to originate HELOCs for borrowers of prime and
near-prime credit quality with ample home equity. It leverages
technology in underwriting, title searching, regulatory compliance,
and other lending processes to shorten the approval and funding
process and improve the borrower experience. Below are certain
aspects in the lending process that are unique to Figure's
origination platform:
-- To qualify a borrower for income, Figure seeks to confirm the
borrower's stated income using proprietary technology algorithms.
-- The lender uses the FICO 9 credit score model instead of the
classic FICO credit score model used by most mortgage originators.
-- Instead of title insurance, Figure uses an electronic lien
search algorithm to identify existing property liens.
-- Instead of a full property appraisal, Figure uses a property
valuation provided by an automatic valuation model (AVM), or in
some cases where an AVM is not available or is ineligible, a broker
price opinion (BPO) or a residential evaluation.
The credit impact of these factors is generally loan specific.
Although technologically advanced, the income, employment, and
asset verification methods used by Figure were treated as less than
full documentation in the RMBS Insight model. In addition,
Morningstar DBRS applied haircuts to the provided AVM and BPO
valuations, reduced the projected recoveries on junior-lien HELOCs,
and generally stepped up expected losses from the model to account
for a combined effect of these and other factors. Please see the
Documentation Type and Underwriting Guidelines sections of the
related report for details.
Transaction Counterparties
Figure will service all loans within the pool for a servicing fee
of 0.25% per year. Also, Newrez LLC doing business as Shellpoint
Mortgage Servicing (Shellpoint) will act as a Subservicer for loans
that default or become 60 or more days delinquent under the
Mortgage Bankers Association (MBA) method. In addition, Northpointe
Bank (Northpointe) will act as a Backup Servicer for all mortgage
loans in this transaction for a fee of 0.01% per year. If Figure
fails to remit the required payments, fails to observe or perform
the Servicer's duties, or experiences other unremedied events of
default described in detail in the transaction documents, servicing
will be transferred to Northpointe from Figure, under a successor
servicing agreement. Such servicing transfer will occur within 45
days of Figure's termination. In the event of a servicing transfer,
Shellpoint will retain servicing responsibilities on all loans that
were being special serviced by Shellpoint at the time of the
servicing transfer. Morningstar DBRS performed an operational risk
review of Northpointe's servicing platform and believes the company
is an acceptable loan servicer for Morningstar DBRS-rated
transactions.
The Bank of New York Mellon will serve as Indenture Trustee, Paying
Agent, Note Registrar, Certificate Registrar, and REMIC
Administrator. Wilmington Savings Fund Society, FSB will serve as
the Custodian and the Owner Trustee. DV01, Inc. will act as the
loan data agent.
The Sponsor or a majority-owned affiliate of the Sponsor will
acquire and intends to retain an eligible vertical interest
consisting of the required percentage of the Class A, B, C, D, E,
F, and CE Note amounts and Class FR Certificate to satisfy the
credit risk-retention requirements under Section 15G of the
Securities Exchange Act of 1934 and the regulations promulgated
thereunder. The Sponsor or a majority-owned affiliate of the
Sponsor will be required to hold the required credit risk until the
later of (1) the fifth anniversary of the Closing Date and (2) the
date on which the aggregate loan balance has been reduced to 25% of
the loan balance as of the Cut-Off Date, but in any event no longer
than the seventh anniversary of the Closing Date.
Similar to other transactions backed by junior-lien mortgage loans
or HELOCs, but different from certain Morningstar DBRS-rated FIGRE
transactions, the HELOCs that are 180 days delinquent under the MBA
delinquency method may not be charged off by the Servicer in its
discretion. In its analysis, Morningstar DBRS assumes all
junior-lien HELOCs that are 180 days delinquent under the MBA
delinquency method will be charged off.
Draw Funding Mechanism
This transaction uses a structural mechanism similar to other HELOC
transactions to fund future draw requests. The Servicer will be
required to fund draws and will be entitled to reimburse itself for
such draws from the principal collections prior to any payments on
the Notes and the Class FR Certificates.
If the aggregate draws exceed the principal collections (Net Draw),
the Servicer is entitled to reimburse itself for draws funded from
amounts on deposit in the Reserve Account (including amounts
deposited into the Reserve Account on behalf of the Class FR
Certificate holder after the Closing Date).
The Reserve Account is funded at closing initially with a rounded
balance of $1,626,838 (0.35% of the aggregate UPB as of the Cut-Off
Date). Prior to the payment date in November 2029, the Reserve
Account Required Amount will be 0.35% of the aggregate UPB as of
the Cut-Off Date. On and after the payment date in November 2029
(after the draw period ends for all HELOCs), the Reserve Account
Required Amount will become $0. If the Reserve Account is not at
target, the Paying Agent will use the available funds remaining
after paying transaction parties' fees and expenses, reimbursing
the Servicer for any unpaid fees or Net Draws, and paying the
accrued and unpaid interest on the bonds to build it to the target.
The top-up of the account occurs before making any principal
payments to the Class FR Certificateholder or the Notes. To the
extent the Reserve Account is not funded up to its required amount
from the principal and interest (P&I) collections, the Class FR
Certificateholder will be required to use its own funds to
reimburse the Servicer for any Net Draws.
Nevertheless, the Servicer is still obligated to fund draws even if
the principal collections and the Reserve Account are insufficient
in a given month for full reimbursement. In such cases, the
Servicer will be reimbursed on subsequent payment dates, first from
amounts on deposit in the Reserve Account (subject to the deposited
funds), and second from the principal collections in subsequent
collection periods. Figure, as a holder of the Trust
Certificate/Class FR Certificates, will have an ultimate
responsibility to ensure draws are funded by remitting funds to the
Reserve Account to reimburse the Servicer for the draws made on the
loans, as long as all borrower conditions are met to warrant draw
funding. The Class FR Certificates' balance will be increased by
the amount of any Net Draws funded by the Class FR
Certificateholder. The Reserve Account's required amount will
become $0 on the payment date in November 2029 (after the draw
period ends for all HELOCs), at which point the funds will be
released through the transaction waterfall.
In its analysis of the proposed transaction structure, Morningstar
DBRS does not rely on the creditworthiness of either the Servicer
or Figure. Rather, the analysis relies on the assets' ability to
generate sufficient cash flows, as well as the Reserve Account, to
fund draws and make interest and principal payments.
Additional Cash Flow Analytics for HELOCs
Morningstar DBRS performs a traditional cash flow analysis to
stress prepayments, loss timing, and interest rates. Generally, in
HELOC transactions, because prepayments (and scheduled principal
payments, if applicable) are primary sources from which to fund
draws, Morningstar DBRS also tests a combination of high draw and
low prepayment scenarios to stress the transaction.
Transaction Structure
The transaction employs a pro rata cash flow structure subject to a
Credit Event, which is based on certain performance triggers
related to cumulative losses and delinquencies. This transaction
differs from certain previous Morningstar DBRS-rated FIGRE
transactions where there is no performance trigger related to Net
WA Coupon (WAC) Rate.
Relative to a sequential pay structure, a pro rata structure
subject to sequential trigger (Credit Event) is more sensitive to
the timing of the projected defaults and losses as the losses may
be applied at a time when the amount of credit support is reduced
as the bonds' principal balances amortize over the life of the
transaction.
Excess cash flows can be used to cover any realized losses and are
then used to maintain overcollateralization (OC) at the target. The
excess interest can be released to the residual holder if the OC is
built to the OC Target so long as the Credit Event does not exist.
Please see the Cash Flow Structure and Features section of the
related report for more details.
Notable Structural Features
Similar to previous Morningstar DBRS-rated FIGRE transactions, this
deal employs a Delinquency Trigger and a Cumulative Loss Trigger.
The effective dates for the triggers may differ from prior rated
transactions. The Delinquency Trigger is applicable on or after the
12th payment date (October 2025) rather than being applicable
immediately after the Closing Date.
Unlike some of the prior FIGRE securitizations that employed a pro
rata pay structure among all rated notes, this transaction includes
rated classes (Class D, Class E, and Class F) that receive their
principal payments after the pro rata classes (Class A, Class B,
and Class C) are paid in full. The inclusion of sequential-pay
classes retains credit support that would otherwise be reduced in
the absence of a credit event.
The OC floor (1.50% of Cut-Off Date balance) is lower than in some
of the prior FIGRE securitizations. However, the Class CE Notes
support the (P) B (low) (sf)-rated Class F Notes, rather than
investment-grade classes in those prior deals, and the Class CE,
Class F, and Class E Notes support the investment-grade classes.
The Reserve Account Required Amount will be 0.35% of the aggregate
UPB as of the Cut-Off Date, lower than the prior FIGRE
securitizations.
Other Transaction Features
For this transaction, other than the Servicer's obligation to fund
any monthly Net Draws, described above, neither the Servicer nor
any other transaction party will fund any monthly advances of P&I
on any HELOC. However, the Servicer is required to make advances in
respect of taxes, insurance premiums, and reasonable costs incurred
in the course of servicing and disposing of properties (servicing
advances) to the extent such advances are deemed recoverable or as
directed by the Controlling Holder (the holder of more than a 50%
interest of the Class CE Notes). For the junior-lien HELOCs, the
Servicer will make servicing advances only if such advances are
deemed recoverable or if the associate first-lien mortgage has been
paid off and such HELOC has become a senior-lien mortgage loan.
The Depositor may, at its option, on or after the earlier of (1)
the payment date on which the balance of the Class A Notes is
reduced to zero, or (2) the date on which the total loans' and real
estate owned (REO) properties' balance falls to or below 25% of the
loan balance as of the Cut-Off Date (Optional Termination Date),
purchase all of the loans and REO properties at the optional
termination price described in the transaction documents.
The Depositor, at its option, may purchase any mortgage loan that
is 90 days or more delinquent under the MBA method at the
repurchase price (Optional Purchase) described in the transaction
documents. The total balance of such loans purchased by the
Depositor will not exceed 10% of the Cut-Off Date balance.
The Servicer, at a direction of the Controlling Holder, may direct
the Issuer to sell (and direct the Indenture Trustee to release its
lien on and relinquish its security interest in) eligible
nonperforming loans (NPLs) (those 120 days or more delinquent under
the MBA method) or REO properties (both eligible NPLs) to third
parties individually or in bulk sales. The Controlling Holder will
have sole authority over the decision to sell the eligible NPLs, as
described in the transaction documents.
Notes: All figures are in US dollars unless otherwise noted.
FINANCE OF AMERICA 2024-HB1: DBRS Finalizes BB(low) on 2 Classes
----------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following classes of Asset-Backed Notes, Series 2024-HB1 (the
Notes) issued by Finance of America HECM Buyout 2024-HB1(the
Issuer):
-- $383.7 million Class A1A at AAA (sf)
-- $115.1 million Class A1B at AAA (sf)
-- $63.2 million Class M1 at AA (low) (sf)
-- $45.4 million Class M2 at A (low) (sf)
-- $31.9 million Class M3 at BBB (sf)
-- $33.1 million Class M4 at BB (low) (sf)
-- $33.0 million Class M5 at BB (low) (sf)
The AAA (sf) credit rating reflects 28.5% of credit enhancement.
The AA (low) (sf), A (low) (sf), BBB (sf), and BB (low) (sf) credit
ratings reflect 19.4%, 12.9%, 8.4%, and -1.1% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes that may be issued in this transaction.
Lenders typically offer reverse mortgage loans to people who are at
least 62 years old. Through reverse mortgage loans, borrowers have
access to home equity through a lump sum amount or a stream of
payments without periodically repaying principal or interest,
allowing the loan balance to accumulate over a period of time until
a maturity event occurs. Loan repayment is required (1) if the
borrower dies, (2) if the borrower sells the related residence, (3)
if the borrower no longer occupies the related residence for a
period (usually a year), (4) if it is no longer the borrower's
primary residence, (5) if a tax or insurance default occurs, or (6)
if the borrower fails to properly maintain the related residence.
In addition, borrowers must be current on any homeowners
association (HOA) dues if applicable. Reverse mortgages are
typically nonrecourse; borrowers do not have to provide additional
assets in cases where the outstanding loan amount exceeds the
property's value (the crossover point). As a result, liquidation
proceeds will fall below the loan amount in cases where the
outstanding balance reaches the crossover point, contributing to
higher loss severities for these loans.
As of the August 31, 2024, Cut-Off Date, the collateral consists of
approximately $697.69 million in unpaid principal balance from
2,302 performing and nonperforming home equity conversion mortgage
(HECM) reverse mortgage loans secured by first liens typically on
single-family residential properties, condominiums, multifamily
(two- to four-family) properties, manufactured homes, and planned
unit developments. Of the total loans, 1,344 have a fixed-rate
interest (61.53% of the balance) with a weighted-average coupon
(WAC) of 5.028%. The remaining 958 loans are adjustable rate
(38.47% of the balance) with a WAC of 7.903%, bringing the entire
collateral pool to a WAC of 6.134%.
Transaction Structure: The transaction uses a sequential structure.
No subordinate note shall receive any principal payments until the
senior notes (Class A1A Notes) have been reduced to zero. This
structure provides credit enhancement in the form of subordinate
classes and reduces the effect of realized losses. These features
increase the likelihood that holders of the most senior class of
notes will receive regular distributions of interest and/or
principal. All note classes have available funds caps.
The Class A1B, M1, M2, M3, M4, and M5 Notes have principal lockout
terms as they are not entitled to principal payments until they are
in their applicable target amortization period, in which they are
entitled to receive fixed scheduled payments and must be paid in
full at the end of such target amortization period. Available cash
will be trapped until these dates at which stage the class of notes
in its target amortization period will start to receive principal
payments in their scheduled amounts. Specifically, Classes A1B, M1,
M2, M3, M4, and M5 are locked out until February 2026, May 2027,
October 2027, June 2028, April 2029, and February 2030,
respectively. Note that the Morningstar DBRS cash flow pertaining
to each note models the first payment being received after these
dates for each of the respective notes; hence, at the time of
issuance, Morningstar DBRS does not expect these rules to affect
the natural cash flow waterfall.
Notes: All figures are in U.S. dollars unless otherwise noted.
FLAGSHIP CREDIT 2024-3: DBRS Gives Prov. BB Rating on E Notes
-------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
notes to be issued by Flagship Credit Auto Trust 2024-3 (FCAT
2024-3 or the Issuer):
-- $84,640,000 Class A Notes at (P) AAA (sf)
-- $18,810,000 Class B Notes at (P) AA (sf)
-- $22,690,000 Class C Notes at (P) A (sf)
-- $15,670,000 Class D Notes at (P) BBB (sf)
-- $11,640,000 Class E Notes at (P) BB (SF)
CREDIT RATING RATIONALE/DESCRIPTION
Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve account, and
excess spread. Credit enhancement levels are sufficient to support
the Morningstar DBRS projected cumulative net loss (CNL) assumption
under various stress scenarios.
-- The DBRS Morningstar CNL assumption is 13.60%, based on the
expected Cut-Off Date pool composition.
-- The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary Baseline Macroeconomic Scenarios for Rated
Sovereigns: September 2024 Update, published on September 25, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse Coronavirus Disease (COVID-19) pandemic
scenarios, which were first published in April 2020.
-- The consistent operational history of Flagship Credit
Acceptance, LLC (Flagship or the Company) and the strength of the
overall Company and its management team.
-- The Flagship senior management team has considerable experience
and a successful track record within the auto finance industry.
-- The capabilities of Flagship with regard to originations,
underwriting, and servicing.
-- Morningstar DBRS performed an operational review of Flagship
and considers the entity an acceptable originator and servicer of
subprime and non-prime automobile loan contracts with an acceptable
backup servicer.
-- The Company indicated it may be subject to various consumer
claims and litigation seeking damages and statutory penalties. Some
litigation against Flagship could take the form of class-action
complaints by consumers; however, the Company indicated there is no
material pending or threatened litigation.
-- The legal structure and presence of legal opinions that will
address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Flagship, that
the trust has a valid first-priority security interest in the
assets, and the consistency with the Morningstar DBRS "Legal
Criteria for U.S. Structured Finance."
-- Flagship is an independent, full-service automotive financing
and servicing company that provides (1) financing to borrowers who
do not typically have access to prime credit-lending terms to
purchase late-model vehicles and (2) refinancing of existing
automotive financing.
Morningstar DBRS' credit rating on Class A, Class B, Class C, Class
D, and Class E Notes addresses the credit risk associated with the
identified financial obligations in accordance with the relevant
transaction documents. The associated financial obligations for
each of the rated notes are the related Accrued Note Interest and
the related Note Balance.
Notes: All figures are in US dollars unless otherwise noted.
FORTRESS CREDIT XXII: S&P Assigns BB- (sf) on Class E Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to Fortress Credit BSL XXII
Ltd./Fortress Credit BSL XXII 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 FC BSL CLO Manager V LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Fortress Credit BSL XXII Ltd./Fortress Credit BSL XXII LLC
Class A-1, $265.250 million: Not rated
Class A-2, $8.800 million: AAA (sf)
Class B, $56.550 million: AA (sf)
Class C (deferrable), $19.575 million: A (sf)
Class D-1 (deferrable), $26.100 million: BBB (sf)
Class D-2 (deferrable), $8.700 million: BBB- (sf)
Class E (deferrable), $10.875 million: BB- (sf)
Subordinated notes, $41.900 million: Not rated
FS RIALTO 2022-FL4: DBRS Confirms B(low) Rating on Class G Notes
----------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by FS Rialto 2022-FL4 Issuer, LLC (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (low) (sf)
-- Class G Notes at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the increased credit
enhancement to the bonds as a result of successful loan repayment
as there has been a collateral reduction of 15.2% since issuance.
Additionally, the transaction benefits from a favorable collateral
composition as the trust continues to be primarily secured by
multifamily collateral (18 loans, representing 70.1% of the current
trust balance). Historically, loans secured by multifamily
properties have exhibited lower default rates and the ability to
retain and increase asset value. In conjunction with this press
release, Morningstar DBRS has published a Surveillance Performance
Update report with in-depth analysis and credit metrics for the
transaction as well as business plan updates on select loans. For
access to this report, please click on the link under Related
Documents below or contact us at info-DBRS@morningstar.com.
The initial collateral consisted of 23 floating-rate mortgage loans
and participation interests in mortgage loans secured by 36 mostly
transitional properties with a cut-off balance totaling $1.1
billion. Most loans were in a period of transition with plans to
stabilize performances and improve values of the underlying assets.
The transaction was structured with a Replenishment Period that
expired with the April 2024 Payment Date.
As of the September 2024 remittance, the pool comprised 26 loans
secured by 30 properties with a cumulative trust balance of $917.5
million. Since issuance, six loans with a prior cumulative trust
balance of $376.3 million have been successfully repaid in full
from the pool. Additionally, four loans totaling $44.9 million have
been added to the pool since the previous Morningstar DBRS credit
rating action in October 2023.
Beyond the multifamily concentration noted above, four loans,
representing 17.7% of the current trust balance, are secured by
hotel properties; two loans, representing 6.5% of the current trust
balance, are secured by office properties; and two loans,
representing 5.8% of the current trust balance, are secured by
self-storage properties. In comparison with the pool as of October
2023, multifamily collateral represented 72.8% of the trust
balance, hotel collateral represented 13.9%, office collateral
represented 8.3%, and self- storage represented 4.9%.
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 69.2% with the current WA stabilized LTV of 61.9%.
In comparison, these figures were 65.6% and 60.1%, 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 11 loans,
representing 58.0% of the current trust balance, generally
reflective of higher cap rate assumptions compared with the implied
cap rates based on the appraisals.
As of September 2024, one loan, Nob Hill (Prospectus ID#18; 5.0% of
the current pool balance) is delinquent and specially serviced. The
loan, which is secured by a garden-style multifamily property
totaling 1,326 units in Houston, transferred to special servicing
in June 2024 for delinquency. As of the December 2023 rent roll,
the property was 83.9% occupied and generated net cash flow (NCF)
of $3.6 million, which equated to a debt service coverage ratio
(DSCR) of 0.51 times (x) and debt yield of 4.1%. According to the
Q2 2024 collateral manager report, the sponsor has paused its
business plan of completing unit renovations and is now focused on
evicting delinquent tenants. In its current analysis, Morningstar
DBRS applied a probability of default adjustment to the loan, which
resulted in a loan expected loss in excess of the WA expected loss
for the overall pool.
Thirteen loans, representing 52.6% of the current trust balance,
are on the servicer's watchlist as of the September 2024 reporting.
The loans have primarily been flagged for below-breakeven DSCRs and
upcoming loan maturities, The largest loan on the servicer's
watchlist, Marriott Uptown Dallas (Prospectus ID#4; 7.1% of the
current pool balance), is secured by a 255-key full-service hotel
in Dallas. The loan is being monitored for upcoming maturity risk;
however, according to the Q2 2024 collateral manager's report, the
borrower is likely to exercise its first 12-month extension option,
extending loan maturity to January 2026. The property has
maintained strong performance since issuance as NCF has exceeded
both the Morningstar DBRS and Issuer stabilized cash flow
projections. As of the trailing 12-months ended June 30, 2024, the
loan reported a debt yield of 13.4% and DSCR of 1.37x.
Through September 2024, the lender had advanced cumulative loan
future funding of $213.6 million to 20 of the 21 outstanding
individual borrowers to aid in property stabilization efforts. The
largest advance has been made to the borrower of the Ashcroft
Portfolio ($21.4 million) loan, which is secured by a portfolio of
five garden-style multifamily properties totaling 1,688 units
located throughout Georgia and Texas. The advanced funds have been
used by the borrower to fund the significant capital expenditure
(capex) project of $28.9 million to complete unit and property
renovations across the portfolio. According to the Q2 2024 update
from the collateral manager, the unit renovations are 71% complete
with renovated units achieving an average rental premium of $138
per unit. As of the August 2024 individual property rent rolls, the
portfolio was 93.0% occupied.
An additional $51.2 million of future loan funding allocated to 17
of the outstanding individual borrowers remains available. The
largest portion of available funds ($15.2 million) is allocated to
the borrower of the Buckhead Centre loan, which is secured by a
Class B office building totaling 168,856 square feet in Atlanta.
The sponsor's business plan is to complete a $16.0 million capex
plan to improve the property's quality and convert the building
into a boutique Class A office product. The property's performance
has been declining in recent years as the occupancy rate decreased
to 51.6% as of the August 2024 rent roll from 64.8% as of June 2023
and 66.9% as of January 2023. Based on the YE2023 financials, the
loan reported a DSCR of 0.21x and debt yield of 1.3%. In its
current analysis, Morningstar DBRS increased the LTV, resulting in
a loan expected loss in excess of the WA expected loss for the
overall pool.
Notes: All figures are in U.S. dollars unless otherwise noted.
FS RIALTO 2022-FL5: DBRS Confirms B(low) Rating on Class G Notes
----------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by FS Rialto 2022-FL5 Issuer, LLC (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (low) (sf)
-- Class G Notes at B (low) (sf)
The trends on the Class F and Class G Notes have been changed to
Negative from Stable. The trends on the remaining classes remain
Stable.
The trend changes are a result of the increased credit risk to the
transaction as five loans, representing 19.2% of the current pool
balance, are in special servicing. In its current analysis of these
five loans, Morningstar DBRS applied a stressed probability of
default (POD) penalty and/or stressed loan-to-value ratio (LTV) to
three loans: 3500 The Vine (Prospectus ID#7; 7.6% of the pool), 360
Huguenot (Prospectus ID#8; 6.5% of the pool), and Nob Hill
(Prospectus ID#15; 3.9% of the pool), which resulted in increased
loan-level expected losses. An additional loan, Washington Pointe
and The Landings at 56th (Prospectus ID#24; 1.7% of the pool), was
liquidated with a loss severity of approximately 30.0%. The final
loan, 1125 E. Campbell (Prospectus ID#27; 0.5% of the pool), is
expected to be resolved without a loss to the trust.
The credit rating confirmations reflect the overall credit support
to the transaction with an unrated, first-loss piece of $56.9
million as well as two below investment-grade bonds, Class F and
Class G, totaling $63.0 million. There has also been collateral
reduction of 8.0% since issuance. The transaction benefits from a
favorable collateral composition as the majority of loan collateral
consists of multifamily properties (13 loans, representing 57.3% of
the pool); however, it should be noted, four of these loans (18.7%
of the pool) are in special servicing. Historically, loans secured
by multifamily properties have exhibited lower default rates and
the ability to retain and increase asset value. In conjunction with
this press release, Morningstar DBRS has published a Surveillance
Performance Update report with in-depth analysis and credit metrics
for the transaction as well as business plan updates on select
loans. For access to this report, please click on the link under
Related Documents below or contact us at
info-DBRS@morningstar.com.
The initial collateral consisted of 23 floating-rate mortgage loans
secured by 52 mostly transitional properties with a cut-off balance
totaling $600 million. Most loans were in a period of transition
with plans to stabilize performance and improve values of the
underlying assets. The transaction had a maximum funded balance of
$690.0 million and a two-year Reinvestment Period that expired with
the June 2024 Payment Date. As of the September 2024 remittance,
the pool comprised 23 loans secured by 52 properties with a
cumulative trust balance of $637.9 million. Eighteen of the
original 23 loans, representing 88.5% of the current pool balance,
remain in the trust.
Since the previous Morningstar DBRS rating action in October 2023,
one loan, representing 8.5% of the current pool balance, has been
added to the trust. Over the same period, one loan with a former
trust balance of $52.1 million was paid in full while two
additional loans with a former cumulative trust balance of $57.0
million were purchased from the trust by the issuer as credit-risk
assets. Beyond the multifamily concentration noted above, four
loans (representing 18.1% of the current pool balance) are secured
by hotel properties, another four loans (representing 16.1% of the
current pool balance) are secured by office properties, and two
loans (representing 8.5% of the current pool balance) are secured
by industrial properties.
Leverage across the pool has remained similar since issuance as the
current weighted-average (WA) as-is appraised LTV is 66.7% with a
current WA stabilized appraised LTV of 61.3%. In comparison, these
figures were 68.4% and 61.7%, respectively, at issuance.
Morningstar DBRS recognizes these appraised values may be inflated
as the majority of the individual property appraisals were
completed in 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 13 loans, representing 69.2% of the current pool balance,
generally reflective of higher cap rate assumptions compared with
the implied cap rates based on the appraisals.
The 3500 The Vine loan is secured by a 508-unit multifamily
property in Atlanta. The loan transferred to special servicing in
June 2024 for payment default, with debt service last paid in May
2024. The loan has a current balance of $74.3 million with a $48.3
million piece in the trust. An additional loan piece is securitized
in the FS Rialto 2022-FL6 transaction, which is also rated by
Morningstar DBRS. As of the December 2023 rent roll, the property
was 83.9% occupied and generated net cash flow (NCF) of $3.6
million, which equated to a debt service coverage ratio (DSCR) of
0.51 times (x) and debt yield of 4.1%. Prior to the transfer, the
borrower had used $3.0 million of loan future funding to complete
100 unit renovations, exterior renovations, and the correction of
deferred maintenance. Renovated units reportedly achieve an average
monthly rental rate premium of $160 per unit. About $0.7 million of
available future funding renovation remain. According to the Q2
2024 collateral manager's report, the sponsor has paused its
business plan of completing unit renovations and is now focused on
evicting delinquent tenants. According to the servicer, the
borrower has signed a pre-negotiation letter with resolution
discussions ongoing between the lender and borrower; however, no
expected resolution timing was provided. In its current analysis,
Morningstar DBRS applied a POD adjustment to the loan, which
resulted in a loan expected loss in excess of the WA expected loss
for the overall pool.
The 360 Huguenot loan is secured by a 280-unit, high-rise apartment
property in New Rochelle, New York. The loan transferred to special
servicing in April 2024 for payment default, with debt service last
paid in February 2024. The loan has a current balance of $105.0
million with a $35.1 million piece in the trust. An additional loan
piece is securitized in the FS Rialto 2022-FL6 transaction. As of
Q2 2024, the property had an occupancy rate of 87.6%, down from
91.0% at Q1 2024. The property has continued to face leasing
challenges and difficulties reducing collection loss. The borrower
has completed 57 tenant evictions, including 13 evictions in 2024;
however, 18 tenants that are at least one month delinquent on
rental payments remain in occupancy, which has contributed to
declining NCF quarter over quarter. As of the trailing 12 months
(T-12) ended June 30, 2024, NCF was $3.0 million, equating to a
3.0% debt yield. According to the servicer, the borrower has signed
a pre-negotiation letter with resolution discussions ongoing
between the lender and borrower; however, the lender also plans to
dual track foreclosure as a receiver order was entered in August
2024. In its current analysis, Morningstar DBRS applied upward LTV
adjustments and an increased POD to the loan, which resulted in a
loan expected loss in excess of the WA expected loss for the
overall pool.
The Nob Hill loan is secured by a 150-building, 1,326-unit
multifamily property in Houston. The loan transferred to special
servicing in June 2024 for payment default, with debt service last
paid in March 2024. The loan has a current balance of $88.1 million
with a $25.0 million piece in the trust. Additional loan pieces are
securitized in the FS Rialto 2022-FL4 and FS Rialto 2022-FL6
transactions, which are both rated by Morningstar DBRS. As of Q2
2024, the property was 74.8% occupied, down from 84.0% at YE2023,
but up slightly from the previous quarter. Prior to the transfer,
the borrower had used $18.4 million of loan future funding to
complete 300 unit renovations, exterior renovations, and the
correction of deferred maintenance. Renovated units reportedly
achieved monthly rental rate premiums between $100 per unit and
$125 per unit. Future funding of $5.5 million for renovations
remains available; however, the sponsor has halted renovations and
shifted its focus to curing tenant delinquencies by removing
non-paying tenants. In addition, marketed rental rates have been
lowered in an effort to increase occupancy. According to the
servicer, the borrower has signed a pre-negotiation letter with
resolution discussions ongoing between the lender and borrower. In
its current analysis, Morningstar DBRS applied a POD adjustment to
the loan, which resulted in a loan expected loss in excess of the
WA expected loss for the overall pool.
Six loans, representing 34.2% of the current trust balance, are on
the servicer's watchlist as of the September 2024 reporting. The
loans have been flagged for debt service coverage ratios (DSCRs)
below breakeven and upcoming loan maturities. The largest loan on
the servicer's watchlist, Sage Canyon Apartments Homes (Prospectus
ID#1; 9.3% of the current pool balance), is secured by a 344-unit
multifamily property in Temecula, California. The loan is being
monitored for the upcoming February 2025 maturity date and the lack
of borrower-provided financials. According to the Q2 2024
collateral manager's report, the borrower has progressed with its
business plan to finish the renovation of 120 classic units leaving
only 39 units to be upgraded. NCF for the T-12 ended June 30, 2024,
was $5.8 million, equating to a DSCR of 0.93x and debt yield of
6.6%. Cash flow is approaching the Morningstar DBRS stabilized
conclusion of $5.9 million but trails the issuer's figure of $7.1
million. Based on the performance trajectory, the borrower will
likely be able to successfully execute its exit strategy on the
loan.
As a result of lagging business plans and loan exit strategies, the
borrowers of 13 loans, representing 49.8% of the current pool
balance, have received loan modifications. Terms of the
modifications vary from loan to loan; however, common terms include
waiving property performance tests to exercise maturity extensions,
loan interest deferrals, and the waiver or modification of
replacement interest rate cap agreement terms. The transaction
faces near-term maturity risk as 12 loans, representing 45.4% of
the current trust balance, will mature through Q1 2025. All loans
except the Sage Canyon Apartments Homes loan have extension options
available to the individual borrowers. Morningstar DBRS expects the
borrowers and lenders to agree to loan modifications if property
performance tests are not met. Potential modifications are expected
to require fresh equity from borrowers in the form of loan
curtailments, deposits into an interest reserve, and/or the
purchase of a new interest rate cap agreement.
Through September 2024, the collateral manager had advanced
cumulative loan future funding of $121.4 million to 17 of the
outstanding individual borrowers, including $105.5 million since
the previous Morningstar DBRS credit rating action as borrowers
continued to make progress in their respective business plans. The
largest cumulative advance ($23.4 million) has been made to the
borrower of the Spectrum Center loan, which is secured by a Class A
office property in Addison, Texas. The borrower has used the funds
to complete its significant capital expenditure (capex) and leasing
plan. Future funding of $15.1 million remains available to the
borrower.
An additional $57.5 million of future loan funding allocated to 12
of the outstanding individual borrowers remains available. The
largest portion of available funds ($15.2 million) is allocated to
the borrower of the Buckhead Centre loan, which is secured by a
Class B office building in Atlanta. The sponsor's business plan is
to complete a $16.0 million capex plan to improve the property's
quality and convert the building into a boutique Class A office
product. The property's performance has been declining in recent
years as the occupancy rate decreased to 51.6% as of the August
2024 rent roll from 64.8% as of June 2023 and 66.9% as of January
2023. Based on the YE2023 financials, the loan reported a DSCR of
0.21x and debt yield of 1.3%. To date, the lender has only advanced
$0.6 million of loan future funding to the borrower as the business
plan is behind schedule. In its current analysis, Morningstar DBRS
increased the LTV, resulting in a loan expected loss in excess of
the WA expected loss for the overall pool.
Notes: All figures are in U.S. dollars unless otherwise noted.
FS RIALTO 2022-FL6: DBRS Confirms B(low) Rating on Class G Notes
----------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by FS Rialto 2022-FL6 Issuer, LLC (FS RIAL 2022-FL6 or the
Issuer) as follows:
-- Class A at AAA (sf)
-- Class A-CS at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D-1 at BBB (high) (sf)
-- Class D-2 at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
Morningstar DBRS changed the trend on Class G to Negative from
Stable. The trends on all other classes are Stable.
The trend change for Class G reflects the increased credit risk to
the transaction as a result of higher loan-level loss expectations
for three loans that collectively represent 9.8% of the pool;
Huguenot (Prospectus ID#5; 6.5% of the pool); 3500 The Vine
(Prospectus ID# 21; 2.3% of the pool); and Nob Hill (Prospectus ID#
23; 1.0% of the pool)¿which recently transferred to special
servicing. The servicer has not obtained or has not reported
updated appraisals for any of the collateral properties backing
these loans. In the analysis for this review, Morningstar DBRS
analyzed all three loans with a stressed probability of default
(POD) and/or a stressed loan-to-value ratio (LTV) to increase the
expected losses (ELs) at the loan level. The resulting ELs are
between 7.0% and 70.0% above the pool's average EL.
The credit rating confirmations reflect the overall stable
performance of the transaction, which remains relatively in line
with Morningstar DBRS' expectations. The transaction benefits from
a high concentration of loans backed by multifamily collateral,
which has historically proven to better retain property value and
cash flow compared with other property types. Furthermore, the
unrated first-loss Class H note of $59.1 million, as well as the
substantial balance of $63.7 million held across Classes F and G,
both of which have been assigned below investment grade credit
ratings by Morningstar DBRS, provides significant cushion against
realized losses for the top and middle of the capital stack.
Outside the specially serviced loans, Morningstar DBRS analyzed 13
loans with increased LTVs and/or elevated PODs to increase the ELs,
as applicable, reflecting the widening of capitalization rates and
downward pressure on values since issuance.
Pending an update from the Issuer, Morningstar DBRS may publish a
Surveillance Performance Update report with in-depth analysis and
credit metrics for the transaction and with business plan updates
on select loans at a later date.
The subject transaction closed in August 2022 with a cut-off pool
balance totaling $750.0 million, excluding approximately $175.4
million of future funding commitments and $1.3 billion of pari
passu debt. At issuance, the pool consisted of 24 floating-rate
mortgage loans secured by 58 mostly transitional properties. Two
loans (NYC Multifamily Portfolio and NYC Midtown West Multifamily
Portfolio) are cross-collateralized loans but are treated as a
single loan in Morningstar DBRS' analysis, resulting in a modeled
loan count of 23. All figures below reflect this modeled loan
count. The transaction is now a static vehicle following the end of
the initial 24-month reinvestment period, which expired with the
August 2024 payment date.
As of the September 2024 remittance, the transaction had an
outstanding balance of $745.5 million with 23 floating-rate loans
remaining in the trust, representing nominal collateral reduction.
Of the original loans, 21 remain in the trust, representing 92.5%
of the current trust balance. Since Morningstar DBRS' previous
credit rating action in October 2023, two loans totaling $56.0
million (7.5% of the current trust balance) have been contributed
to the trust. Additionally, two loans with a former cumulative
trust balance of $55.8 million have been repaid from the trust. As
of the September 2024 reporting, 18 loans, representing 82.2% of
the current trust balance, were secured by the greatest property
type concentration in multifamily properties, followed by two
industrial properties, two hotel properties, and one office
property representing 9.3%, 6.9%, and 1.6% of the current trust
balance, respectively.
In general, borrowers are making progress toward completing their
stated business plans. Through September 2024, the collateral
manager had advanced cumulative loan future funding of $115.6
million to 13 of the outstanding individual borrowers. The two
loans with the largest future funding advances to date are the NYC
Multifamily Portfolio loan ($22.5 million) and Amazon Middletown
loan ($22.0 million). An additional $45.9 million of loan future
funding allocated to 12 individual borrowers remains outstanding.
The largest individual allocation of unadvanced future funding at
$13.6 million is to the borrower of the Northtown loan, which is
backed by a two-building industrial portfolio. At issuance, the
borrower's business plan contemplated leasing a portion of the
vacant space to a single tenant, increasing occupancy to a
stabilized rate of 88.0% from 74.6%. As of September 2024, the
property occupancy remains unchanged at 74.6%. The lone tenant in
place recently requested to downsize its space and will ultimately
execute an early termination option available ahead of the
scheduled lease expiration in October 2028. The collateral manager
noted that the borrower advised of strong industrial demand for the
submarket; however, leasing traction has been challenged as there
is relatively limited demand for large spaces over 100,000 square
feet.
As of September 2024, each of the three specially serviced loans
were reported to be more than 60 days delinquent. The largest of
these, the 360 Huguenot loan, is secured by a high-rise apartment
property in New Rochelle, New York, that transferred to special
servicing in April 2024 for payment default, with the last debt
service payment made in February 2024. As of Q2 2024, the property
had an occupancy rate of 87.6%, down from about 91.0% at Q1 2024.
The property has continued to face leasing challenges and
difficulties reducing collection loss. The borrower has completed
57 evictions, including 13 evictions in 2024; however, there are
currently 18 tenants remaining that are delinquent by at least one
month, which has contributed to the declining net cash flow quarter
over quarter.
There are two smaller specially serviced loans in Nob Hill and 3500
The Vine that are secured by garden apartment properties in Texas
and Georgia, respectively. The Nob Hill loan transferred to special
servicing in June 2024 for payment default, with the last debt
service payment made in March 2024. As of Q2 2024, the property was
74.8% occupied, up slightly from the previous quarter but down from
about 84% at YE2023. Prior to the transfer, the borrower had used
$18.4 million of future funding to complete 300 unit renovations
and exterior renovations, with renovated units reportedly achieving
monthly rental rate premiums of between $100 and $125 per unit.
There remains about $5.5 million of available future funding for
renovations; however, the sponsor has halted renovations and
shifted its focus to curing delinquencies by removing nonpaying
tenants and renting vacant units as they become available. In
addition, marketed rental rates have been lowered in an effort to
increase occupancy.
The 3500 The Vine loan transferred to special servicing in May 2024
and is paid through June 2024. As of Q2 2024, the property was
70.7% occupied, down from 76.6% in the previous quarter and from
81.0% at YE2023. Prior to the transfer, the borrower had used about
$3.0 million of loan future funding to complete 100 unit
renovations and exterior repairs, with the renovated units
reportedly achieving monthly rental rate premiums of $160 per unit.
There are currently no units under renovation and the loan has been
in a cash sweep period since August 2023. There remains about
$700,000 of available future funding to the borrower; however, it
appears no additional funds will be advanced given the pause on
unit renovations and the status of the loan.
There are five loans, representing 26.6% of the current pool
balance, on the servicer's watchlist largely because of upcoming
maturity dates and/or low debt service coverage ratios, driven
primarily by increases in debt service obligations on the
floating-rate debt. Since Morningstar DBRS' last credit rating
action, two loans; LBJ Station (Prospectus ID#17; 3.8% of the pool)
and Southwind Office Center (Prospectus ID#22; 1.6% of the
pool)¿have been modified to extend their loan terms to 24 months
and 12 months, respectively. Prior to Morningstar DBRS' last credit
rating action, the 2704 CDMX Apartments loan was modified to allow
the property to enter a Public Facility Corporation program, an
economic tool designed to promote the development of mixed-income
housing in Texas, and the Nob Hill and the La Mirada loans were
modified to offer borrowers the ability to purchase shorter-term
interest rate cap agreements.
There are 19 loans, accounting for more than 80% of the pool
balance, with scheduled maturity dates in the next 12 months, the
majority of which have extension options. In the event that
property performance does not qualify to exercise the related
options, Morningstar DBRS expects the borrowers and lenders to
negotiate mutually beneficial loan modifications to extend the
loans, some of which would likely include fresh sponsor equity to
fund principal curtailments, fund carry reserves, or purchase new
interest rate cap agreements.
Notes: All figures are in U.S. dollars unless otherwise noted.
GALAXY 34: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Galaxy 34
CLO Ltd./Galaxy 34 CLO LLC's fixed- and floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by PineBridge Investments LLC.
The preliminary ratings are based on information as of Oct. 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 notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Galaxy 34 CLO Ltd./Galaxy 34 CLO LLC
Class A, $178.90 million: AAA (sf)
Class A loan, $92.00 million: AAA (sf)
Class B, $55.90 million: AA (sf)
Class C (deferrable), $25.80 million: A (sf)
Class D-1 (deferrable), $25.80 million: BBB (sf)
Class D-2 (deferrable), $6.45 million: BBB- (sf)
Class E (deferrable), $10.75 million: BB- (sf)
Subordinated notes, $38.50 million: Not rated
GLS AUTO 2024-4: S&P Assigns Prelim BB (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GLS Auto
Receivables Issuer Trust 2024-4's automobile receivables-backed
notes.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of Oct. 24,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The availability of approximately 56.1%, 47.3%, 36.9%, 28.1%,
and 24.3% of credit support (hard credit enhancement and haircut to
excess spread) for the class A (A-1, A-2, and A-3, collectively),
B, C, D, and E notes, respectively, based on stressed cash flow
scenarios. These credit support levels provide at least 3.20x,
2.70x, 2.10x, 1.60x, and 1.38x of S&P's 17.50% expected cumulative
net loss (ECNL) for the class A, B, C, D, and E notes,
respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.60x S&P's expected loss level), all else being equal, its
preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB
(sf)' ratings on the class A, B, C, D, and E notes, respectively,
are within its credit stability limit.
-- The timely payment of interest and principal by the designated
legal final maturity dates under its stressed cash flow modeling
scenarios, which S&P believes are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the series' subprime
automobile loans, including the representation in the transaction
documents that all contracts in the pool have made at least one
payment, S&P's view of the collateral's credit risk, and its
updated macroeconomic forecast and forward-looking view of the auto
finance sector.
-- The series' bank accounts at UMB Bank N.A., which do not
constrain the preliminary ratings.
-- S&P's operational risk assessment of Global Lending Services
LLC, as servicer, and its view of the company's underwriting and
backup servicing arrangement with UMB Bank N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors that are in
line with its sector benchmark.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
GLS Auto Receivables Issuer Trust 2024-4
Class A-1, $64.50 million: A-1+ (sf)
Class A-2, $187.00 million: AAA (sf)
Class A-3, $75.83 million: AAA (sf)
Class B, $102.29 million: AA (sf)
Class C, $96.05 million: A (sf)
Class D, $90.85 million: BBB (sf)
Class E, $45.08 million: BB (sf)
GOLDENTREE LOAN 22: Fitch Assigns 'B-(EXP)sf' Rating on Cl. F Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
GoldenTree Loan Management US CLO 22, Ltd.
Entity/Debt Rating
----------- ------
GoldenTree Loan
Management US
CLO 22, Ltd.
X LT NR(EXP)sf Expected Rating
A LT NR(EXP)sf Expected Rating
A-J LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
D-J LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
F LT B-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
Transaction Summary
GoldenTree Loan Management US CLO 22, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that will
be managed by GLM III, LP. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $600 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.74, versus a maximum covenant, in accordance with
the initial expected matrix point of 25. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.74% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.4% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.5%.
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 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. This reduction in WAL does not apply
if it would reduce the WAL used for the Fitch's stress portfolio to
less than six years. 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-J, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, between
less than 'B-sf' and 'BB+sf' for class D-J, between less than
'B-sf' and 'BB-sf' for class E, and between less than 'B-sf' and
B+sf' for class F.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-J 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, 'A-sf' for class D-J, 'BBB+sf' for class E, and 'BB+sf'
for class F.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG DISCLOSURES
Fitch does not provide ESG relevance scores for GoldenTree Loan
Management US CLO 22, 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.
GOLUB CAPITAL 64(B)-R: Fitch Assigns 'BB-' Rating on Cl. E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the Golub
Capital Partners CLO 64(B)-R, Ltd. Reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Golub Capital
Partners CLO
64(B), Ltd.
A-R LT NRsf New Rating
B 381732AC0 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 381732AE6 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating
D 381732AG1 LT PIFsf Paid In Full BBB-sf
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E 38179HAA5 LT PIFsf Paid In Full BB-sf
E-R LT BB-sf New Rating
Transaction Summary
Golub Capital Partners CLO 64(B)-R, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that will
be managed by OPAL BSL LLC. The transaction originally closed in
October 2022, and this will be the first reset of the transaction.
The CLO's existing secured notes will be refinanced in whole on
Oct. 25, 2024 from proceeds of the new secured notes. Net proceeds
from the issuance of the secured notes, along with the existing
subordinated notes will provide financing on a portfolio of
approximately $425 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 24.87, 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
99.25% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 77.14% versus a
minimum covenant, in accordance with the initial expected matrix
point of 76.8%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 46% 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 'BB+sf' and 'A+sf' for class B-R, between 'Bsf'
and 'BBB+sf' for class C-R, between less than 'B-sf' and 'BB+sf'
for class D-1-R, between less than 'B-sf' and 'BB+sf' for class
D-2-R, and between less than 'B-sf' and 'BB-sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
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 Golub Capital
Partners CLO 64(B)-R, 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.
GS MORTGAGE 2013-GCJ14: DBRS Confirms C Rating on Class G Certs
---------------------------------------------------------------
DBRS, Inc. confirmed its credit rating on all classes of Commercial
Mortgage Pass-Through Certificates, Series 2013-GCJ14 issued by GS
Mortgage Securities Trust 2013-GCJ14 as follows:
-- Class E at BB (high) (sf)
-- Class F at B (low) (sf)
-- Class G at C (sf)
Classes E and F maintain Stable trends. Class G is assigned a
credit rating that typically does not carry a trend in commercial
mortgage-backed securities (CMBS) credit ratings.
Since the last credit rating action, three loans that were
previously in special servicing were disposed from the trust with
better-than-expected recoveries. As of the October 2024 remittance,
only three loans remain in the pool, two of which are still in
special servicing; however, Morningstar DBRS also remains cautious
about the ultimate recoverability of the one loan not in special
servicing, Mall St. Matthews (Prospectus ID#6; 34.9% of the pool).
Morningstar DBRS' loss projections are currently contained to the
unrated Class H, but given the concentration of defaulted or
previously defaulted loans, Morningstar DBRS' credit ratings remain
reflective of the high credit risk of the remaining assets.
Cranberry Woods Office Park (Prospectus ID#4; 55.6% of the pool) is
the largest loan in the pool and the largest asset in special
servicing. It is secured by a portfolio of three suburban office
properties located approximately 20 miles north of Pittsburgh. The
loan transferred to special servicing in August 2023 for maturity
default. As of June 2024, the combined collateral occupancy rate
was 86.5%, according to the servicer. The most recent appraisal,
dated November 2023, valued the property at $53.0 million, implying
a loan-to value-ratio (LTV) of 83.3% based on the full-loan
exposure. The resolution strategy is listed as foreclosure.
Morningstar DBRS' analysis, which is based on a stress to the most
recent appraised value, results in an implied loss severity under
20%.
The second-largest and only performing loan in the pool is Mall St.
Matthews, which is secured by a regional mall in Louisville,
Kentucky, owned and operated by Brookfield Property Group
(Brookfield). The loan failed to repay at the scheduled June 2020
maturity date and was transferred to special servicing. A
modification of the loan was executed in March 2022, the terms of
which included an extension of the maturity date to June 2025 as
well as a conversion to interest-only (IO) payments throughout the
extension period. The loan is also cash managed with all excess
cash being applied to pay down the principal balance. As of the
October 2024 remittance, the loan continues to perform in
accordance with the modification terms. The YE2023 debt service
coverage ratio was reported to be 1.51 times (x), slightly below
the preceding three figures. The collateral occupancy rate remains
steady at 95% as of June 2024, despite a concentration of leases
that were scheduled to roll over the past 12 months.
The loan is pari passu with a note securitized in the GSMS
2013-GCJ13 transaction, which is not rated by DBRS Morningstar.
According to the previous servicer's commentary, on the 2025
maturity date the loan will be subject to a capital event waterfall
that stipulates that a minimum of $75.0 million is to be repaid to
the trusts holding the pari passu debt on the property. Additional
proceeds reportedly may be split between the lender and sponsor.
Based on the August 2021 appraisal, the property was valued at
$83.0 million, a 70.4% decline from the issuance value of $280.0
million. Although the loan modification suggests a longer-term
commitment to the property by the sponsor, Morningstar DBRS
believes the steep value decline from issuance and the possibility
that the loan modification allows the sponsor partial recovery of
equity at repayment (even if the loan balance isn't repaid in full)
mean the potential of a significant loss at resolution remains
high.
The final asset remaining, Marketplace Shopping Center (Prospectus
ID#33; 9.6% of the pool), is a real-estate-owned anchored retail
property in the St. Louis, Missouri, metropolitan area. Occupancy
and cash flow continue to decline, and two of the three largest
tenants have notified that they will be vacating at their
respective lease expirations in early 2025. With these departures,
Morningstar DBRS expects the occupancy rate will drop to
approximately 40.0%. Morningstar DBRS also expects the appraised
value will continue to decline. The most recent appraisal, dated
November 2023, valued the property at $5.0 million, implying an LTV
approaching 150.0% based on the total loan exposure.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2024-INV1: Moody's Gives (P)B3 Rating to Cl. B-5 Certs
------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to 52 classes of
residential mortgage-backed securities (RMBS) to be issued by GS
Mortgage-Backed Securities Trust 2024-INV1, and sponsored by
Goldman Sachs Mortgage Company.
The securities are backed by a pool of GSE-eligible (64.5% by
balance) and prime jumbo (35.5% by balance) residential mortgages
aggregated by GSMC, including loans aggregated by MAXEX Clearing
LLC (MAXEX; 9.7% by loan balance) and Radian (8.3% by balance), and
originated by multiple entities and serviced by NewRez LLC d/b/a
Shellpoint Mortgage Servicing (Shellpoint) and United Wholesale
Mortgage, LLC (UWM).
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2024-INV1
Cl. A-1, Assigned (P)Aa1 (sf)
Cl. A-1-X*, Assigned (P)Aa1 (sf)
Cl. A-2, Assigned (P)Aa1 (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3A, Assigned (P)Aaa (sf)
Cl. A-3-X*, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4A, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-X*, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-X*, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-9-X*, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-X*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-13-X*, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aaa (sf)
Cl. A-15, Assigned (P)Aaa (sf)
Cl. A-15-X*, Assigned (P)Aaa (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-17-X*, Assigned (P)Aaa (sf)
Cl. A-18, Assigned (P)Aaa (sf)
Cl. A-19, Assigned (P)Aaa (sf)
Cl. A-19-X*, Assigned (P)Aaa (sf)
Cl. A-20, Assigned (P)Aaa (sf)
Cl. A-21, Assigned (P)Aaa (sf)
Cl. A-21-X*, Assigned (P)Aaa (sf)
Cl. A-22, Assigned (P)Aaa (sf)
Cl. A-23, Assigned (P)Aa1 (sf)
Cl. A-23-X*, Assigned (P)Aa1 (sf)
Cl. A-24, Assigned (P)Aa1 (sf)
Cl. A-X*, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-1-A, Assigned (P)Aa3 (sf)
Cl. B-1-X*, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-2-A, Assigned (P)A3 (sf)
Cl. B-2-X*, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-3-A, Assigned (P)Baa3 (sf)
Cl. B-3-X*, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
Cl. B, Assigned (P)Baa1 (sf)
Cl. B-X*, Assigned (P)Baa1 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
1.04%, in a baseline scenario-median is 0.71% and reaches 8.35% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
GS MORTGAGE 2024-PJ9: DBRS Gives Prov. B(low) Rating on B-5 Notes
-----------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings on the
Mortgage-Backed Notes, Series 2024-PJ9 (the Notes) to be issued by
the GS Mortgage-Backed Securities Trust 2024-PJ9 (GSMBS 2024-PJ9):
-- $284.3 million Class A-1 at (P) AAA (sf)
-- $284.3 million Class A-1-X at (P) AAA (sf)
-- $284.3 million Class A-2 at (P) AAA (sf)
-- $264.1 million Class A-3 at (P) AAA (sf)
-- $264.1 million Class A-3A at (P) AAA (sf)
-- $264.1 million Class A-3-X at (P) AAA (sf)
-- $264.1 million Class A-4 at (P) AAA (sf)
-- $264.1 million Class A-4A at (P) AAA (sf)
-- $132.0 million Class A-5 at (P) AAA (sf)
-- $132.0 million Class A-5-X at (P) AAA (sf)
-- $132.0 million Class A-6 at (P) AAA (sf)
-- $158.4 million Class A-7 at (P) AAA (sf)
-- $158.4 million Class A-7-X at (P) AAA (sf)
-- $158.4 million Class A-8 at (P) AAA (sf)
-- $26.4 million Class A-9 at (P) AAA (sf)
-- $26.4 million Class A-9-X at (P) AAA (sf)
-- $26.4 million Class A-10 at (P) AAA (sf)
-- $66.0 million Class A-11 at (P) AAA (sf)
-- $66.0 million Class A-11-X at (P) AAA (sf)
-- $66.0 million Class A-12 at (P) AAA (sf)
-- $39.6 million Class A-13 at (P) AAA (sf)
-- $39.6 million Class A-13-X at (P) AAA (sf)
-- $39.6 million Class A-14 at (P) AAA (sf)
-- $198.1 million Class A-15 at (P) AAA (sf)
-- $198.1 million Class A-15-X at (P) AAA (sf)
-- $198.1 million Class A-16 at (P) AAA (sf)
-- $132.0 million Class A-17 at (P) AAA (sf)
-- $132.0 million Class A-17-X at (P) AAA (sf)
-- $132.0 million Class A-18 at (P) AAA (sf)
-- $105.6 million Class A-19 at (P) AAA (sf)
-- $105.6 million Class A-19-X at (P) AAA (sf)
-- $105.6 million Class A-20 at (P) AAA (sf)
-- $66.0 million Class A-21 at (P) AAA (sf)
-- $66.0 million Class A-21-X at (P) AAA (sf)
-- $66.0 million Class A-22 at (P) AAA (sf)
-- $20.2 million Class A-23 at (P) AAA (sf)
-- $20.2 million Class A-23-X at (P) AAA (sf)
-- $20.2 million Class A-24 at (P) AAA (sf)
-- $284.3 million Class A-X at (P) AAA (sf)
-- $16.3 million Class B-1 at (P) AA (low) (sf)
-- $16.3 million Class B-1-A at (P) AA (low) (sf)
-- $16.3 million Class B-1-X at (P) AA (low) (sf)
-- $3.9 million Class B-2 at (P) A (low) (sf)
-- $3.9 million Class B-2-A at (P) A (low) (sf)
-- $3.9 million Class B-2-X at (P) A (low) (sf)
-- $2.8 million Class B-3 at (P) BBB (low) (sf)
-- $2.8 million Class B-3-A at (P) BBB (low) (sf)
-- $2.8 million Class B-3-X at (P) BBB (low) (sf)
-- $1.7 million Class B-4 at (P) BB (low) (sf)
-- $777.0 thousand Class B-5 at (P) B (low) (sf)
-- $23.0 million Class B at (P) BBB (low) (sf)
-- $23.0 million Class B-X at (P) BBB (low) (sf)
-- $264.1 million Class A-3L at (P) AAA (sf)
-- $264.1 million Class A-4L at (P) AAA (sf)
-- $198.1 million Class A-16L at (P) AAA (sf)
-- $66.0 million Class A-22L at (P) AAA (sf)
Classes A-1-X, A-3-X, A-5-X, A-7-X, A-9-X, A-11-X, A-13-X, A-15-X,
A-17-X, A-19-X, A-21-X, A-23-X, A-X, B-1-X, B-2-X, B-3-X, and B-X
are interest-only (IO) notes. The class balances represent notional
amounts.
Classes A-1, A-1-X, A-2, A-3, A-3A, A-3-X, A-4, A-4A, A-6, A-7,
A-7-X, A-8, A-10, A-11, A-11-X, A-12, A-14, A-15, A-15-X, A-16,
A-17, A-17-X, A-18, A-19, A-19-X, A-20, A-22, A-24, B, B-1, B-2,
B-3, and B-X are exchangeable notes. These classes can be exchanged
for combinations of exchange notes as specified in the offering
documents.
Classes A-3L, A-4L, A-16L, and A-22L are loans that may be funded
at the Closing Date as specified in the offering documents.
Classes A-3, A-3A, A-4, A-4A, A-5, A-6, A-7, A-8, A-9, A-10, A-11,
A-12, A-13, A-14, A-15, A-16, A-17, A-18, A-19, A-20, A-21, A-22,
A-3L, A-4L, A-16L, and A-22L are super senior notes. These classes
benefit from additional protection from the senior support note
(Class A-23) with respect to loss allocation.
The AAA (sf) credit ratings on the Notes reflect 8.50% 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 3.25%, 2.00%, 1.10%, 0.55%, and 0.30% credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This securitization is a portfolio of first-lien fixed-rate prime
residential mortgages funded by the issuance of the Mortgage-Backed
Notes, Series 2024-PJ9 (the Notes). The Notes are backed by 318
loans with a total principal balance of $310,686,0861 as of the
Cut-Off Date.
The pool consists of first-lien, fully amortizing fixed-rate
mortgages (FRMs) with original terms to maturity of 30 years. The
weighted-average (WA) original combined loan-to-value (CLTV) for
the portfolio is 68.7%. A small portion of the pool (3.0%)
comprises loans with Morningstar DBRS calculated current CLTV
ratios between 80.0% and 90.0%, while none of the pool falls above
90.0% current CLTV. In addition, 95.9% of the loans in the pool
were originated in accordance with the general Qualified Mortgage
(QM) rule subject to the average prime offer rate designation.
The mortgage loans are originated by United Wholesale Mortgage, LLC
(UWM; 54.9%), and various other originators, each comprising less
than 10.0% of the pool.
Computershare Trust Company, N.A. will act as the Master Servicer,
Paying Agent, and Custodian. U.S. Bank Trust National Association
(U.S. Bank; rated AA with a Stable trend by Morningstar DBRS) will
act as Delaware Trustee. U.S. Bank Trust Company, National
Association will act as Collateral Trustee. Pentalpha Surveillance
LLC (Pentalpha) will serve as the Representation and Warranty
Reviewer.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that incorporates performance triggers and
credit enhancement floors.
This transaction allows for the issuance of Classes A-3L, A-4L,
A-16L, and A-22L loans which are the equivalent of ownership of
Classes A-3, A-4, A-16, and A-22 Notes, respectively. These classes
are issued in the form of a loan made by the investor instead of a
note purchased by the investor. If these loans are funded at
closing, the holder may convert such class into an equal aggregate
debt amount of the corresponding Notes. There is no change to the
structure if these Classes are elected.
Notes: All figures are in US dollars unless otherwise noted.
GS MORTGAGE 2024-RPL5: DBRS Gives BB Rating on Class B-1 Notes
--------------------------------------------------------------
DBRS, Inc. assigned credit ratings to the Mortgage-Backed
Securities, Series 2024-RPL5 (the Notes) issued by GS
Mortgage-Backed Securities Trust 2024-RPL5 (GSMBS 2024-RPL5 or the
Trust) as follows:
-- $307.4 million Class A-1 at AAA (sf)
-- $28.4 million Class A-2 at AA (high) (sf)
-- $335.9 million Class A-3 at AA (high) (sf)
-- $361.7 million Class A-4 at A (high) (sf)
-- $380.6 million Class A-5 at BBB (sf)
-- $25.9 million Class M-1 at A (high) (sf)
-- $18.9 million Class M-2 at BBB (sf)
-- $11.5 million Class B-1 at BB (sf)
-- $7.9 million Class B-2 at B (high) (sf)
The Class A-3, Class A-4, and Class A-5 Notes are exchangeable.
These classes can be exchanged for combinations of initial
exchangeable notes as specified in the offering documents.
The AAA (sf) credit rating on the Notes reflects 27.55% of credit
enhancement provided by subordinated notes. The AA (high) (sf), A
(high) (sf), BBB (sf), BB (sf), and B (high) (sf) credit ratings
reflect 20.85%, 14.75%, 10.30%, 7.60%, and 5.75% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming, first-lien residential mortgages funded by the
issuance of the Notes. The Notes are backed by 2,174 loans with a
total principal balance of $446,662,258 as of the Cut-Off Date
(September 30, 2024).
The portfolio is approximately 108 months seasoned and contains
90.3% modified loans. The modifications happened more than two
years ago for 50.7% of the modified loans. Within the pool, 503
mortgages have non-interest-bearing deferred amounts, which equate
to approximately 3.8% of the total principal balance. There are no
Government-Sponsored Enterprise Home Affordable Modification
Program and proprietary principal forgiveness amounts included in
the deferred amounts.
As of the Cut-Off Date, 97.9% of the loans in the pool are current.
Approximately 0.7% of the loans are in bankruptcy (all bankruptcy
loans are performing) and 2.1% are 30 days delinquent.
Approximately 35.1% of the mortgage loans have been zero times 30
days delinquent (0x30) for at least the past 24 months under the
Mortgage Bankers Association (MBA) delinquency method and 92.1%
have been 0x30 for at least the past 12 months under the MBA
delinquency method.
Approximately 36.7% of the pool is exempt from the Consumer
Financial Protection Bureau (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because the loans were originated as investor
property loans or were originated prior to January 10, 2014, the
date on which the rules became applicable. The loans subject to the
ATR rules are designated as non-QM (7.3%).
The Mortgage Loan Sellers, Goldman Sachs Mortgage Company (GSMC)
and MCLP Asset Company, Inc. acquired the mortgage loans in various
transactions prior to the Closing Date from various mortgage loan
sellers or from an affiliate. GS Mortgage Securities Corp. (the
Depositor) will contribute the loans to the Trust. These loans were
originated and previously serviced by various entities through
purchases in the secondary market.
The Sponsor, GSMC, or a majority-owned affiliate, will retain an
eligible vertical interest in the transaction consisting of an
uncertificated interest (the Retained Interest) in the Trust
representing the right to receive at least 5.0% of the amounts
collected on the mortgage loans, net of the Trust's fees, expenses,
and reimbursements and paid on the Notes (other than the Class R
Notes) and the Retained Interest to satisfy the credit risk
retention requirements under Section 15G of the Securities Exchange
Act of 1934 and the regulations promulgated thereunder.
As of the related servicing transfer date (November 6, 2024), All
of the loans will be serviced by Select Portfolio Servicing, Inc.
(SPS). The SPS aggregate servicing fee rate for each payment date
is 0.04% per annum.
There will not be any advancing of delinquent principal or interest
on any mortgages by the related Servicer or any other party to the
transaction; however, the related Servicer is obligated to make
advances in respect to the preservation, inspection, restoration,
protection, and repair of a mortgaged property, which includes
delinquent tax and insurance payments, the enforcement of judicial
proceedings associated with a mortgage loan, and the management and
liquidation of properties (to the extent that the related Servicer
deems such advances recoverable).
On or after the Payment Date on which the aggregate Unpaid
Principal Balance of the Mortgage Loans is less than 25% of the
Aggregate Cut-Off Date Unpaid Principal Balance, the Controlling
Holder will have the option to purchase all remaining property of
the Issuer at the Minimum Price (Optional Clean-Up Call). The
Controlling Holder will be the beneficial owner of more than 50%
the Class B-5 Notes (if no longer outstanding, the next most
subordinate Class of Notes, other than Class X).
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on the Class
A-2 Notes and more subordinate bonds will not be paid from
principal proceeds until the more senior classes are retired.
Excess interest can be used to amortize the principal of the notes
after paying transaction parties fees, net weighted-average coupon
(WAC) shortfalls, and making deposits on to the breach reserve
account.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2024-UPTN: Moody's Assigns B3 Rating to Cl. F Certs
---------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to seven classes of
CMBS securities, issued by GS Mortgage Securities Corporation Trust
2024-UPTN, Commercial Mortgage Pass-Through Certificates, Series
2024-UPTN:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba3 (sf)
Cl. F, Definitive Rating Assigned B2 (sf)
Cl. HRR, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The certificates are collateralized by a single loan backed by a
first-lien mortgage secured by the borrower's fee simple interest
in The Union, a 21-story, 505,994 SF, Class A+ office/retail
building located in Dallas, Texas. Moody's ratings are based on the
credit quality of the loan and the strength of the securitization
structure.
The Union is a is a 21-story, Class A+, office/retail building
totaling 505,994 SF located at 2300 North Field Street in Dallas,
TX. The subject site is bounded by Field St., Akard St., Ashland
St., and Cedar Springs Rd. The Property was developed by RED
Development and was completed between 2018 and 2019 with
approximately 83% of the square footage designated for office
tenants and the remaining 17% designated for retail tenants.
The office component of the Property contains 418,625 SF of NRA
(excluding a 2,104 SF property management office) that is 98.6%
leased as of August 12, 2024 to 20 tenants. The five largest office
occupants each occupy over 43,500 SF and collectively total
approximately 57.9% of the Property's NRA. They are Salesforce
(11.6% of NRA, 14.7% of base rent), Invesco (11.6% of NRA, 14.4% of
base rent), Akin, Gump, Strauss, Hauer, & Feld (14.6% of NRA, 13.8%
of base rent), Weaver and Tidwell, LLP (11.6% of NRA, 11.1% of base
rent) and HBK Services (8.6% of NRA, 8.6% of base rent),
The retail component of the Property contains 85,265 SF of NRA that
is 96.0% leased as of August 12, 2024 to five tenants. The largest
retailer is Tom Thumb, a wholly-owned subsidiary of Albertson's,
and accounts for 58,890 SF, or 7.0% of total base rent. Other
retailers at the Property include The Henry, North Italia, Taco
Lingo, and TEN Sushi & Cocktails. The Henry opened in February 2019
and has reported sales of approximately $12.9 million ($1,310 PSF)
through the TTM ending June 2024. North Italia opened in May 2019
and has reported sales of approximately $6.1 million ($1,116 PSF)
for the same period.
The Property is part of a larger mixed use complex which includes
418,625 SF of office space, 85,265 SF of retail space, 2,104 SF of
management office space and The Christopher at The Union, a
309-unit multifamily development that was delivered in 2019.
Collateral for the mortgage loan will only include the office and
retail space and will exclude the multifamily space. The mixed use
project is subject to a condominium structure. The office unit and
two commercial units comprise 58.45% of the interests in the
condominium, and the Borrower has the right to appoint three of the
five directors on the condominium board. Collateral for the
Mortgage Loan will include 1,747 total parking spaces shared
between the office, retail and residential uses.
Moody's approach to rating this transaction involved the
application of Moody's Large Loan and Single Asset/Single Borrower
Commercial Mortgage-backed Securitizations methodology. The rating
approach for securities backed by a single loan compares the credit
risk inherent in the underlying collateral with the credit
protection offered by the structure. The structure's credit
enhancement is quantified by the maximum deterioration in property
value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss
for various rating levels. In assigning single borrower ratings,
Moody's also consider a range of qualitative issues as well as the
transaction's structural and legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, Moody's make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile.
Moody's first mortgage actual DSCR is 0.98x, compared to 1.00x at
Moody's provisional ratings due to an interest rate increase, which
is higher than Moody's first mortgage stressed DSCR (at a 9.25%
constant) of 0.89X. Moody's DSCR is based on Moody's stabilized net
cash flow.
The loan first mortgage balance of $227,000,000 represents a
Moody's LTV ratio of 113.3% based on Moody's Value. Adjusted
Moody's LTV ratio for the first mortgage balance is 103.6% 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 considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The property's blended
quality grade is 1.93.
Notable strengths of the transaction include: superior asset
quality, recent leasing activity, limited rollover and experienced
sponsorship. Notable concerns of the transaction include: soft
office market fundamentals, environmental concerns, interest-only
mortgage loan profile, and certain credit negative legal features.
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-backed
Securitizations" published in July 2024.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
GSF 2022-1: DBRS Confirms BB(low) Rating on Class E Notes
---------------------------------------------------------
DBRS Limited confirmed its credit ratings on the following classes
of notes issued by GSF 2022-1 Issuer LLC (the Issuer):
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
All trends are Stable.
The credit rating confirmations and Stable trends reflect the
consistent performance of the four contributed loans since
Morningstar DBRS' last review. As of the October 2024 remittance,
the pool consisted of four performing loans, secured by traditional
commercial real estate properties with a combined balance of nearly
$97.0 million. The transaction documents require Morningstar DBRS
to analyze newly funded loans when the pool reaches 25%, 50%, and
75% of funding to ensure the underlying collateral meets target
credit enhancement criteria. Since the last surveillance review in
October 2023, there have been no additional loans contributed to
the trust, with the pool remaining 19.4% funded.
As part of the analysis for this transaction, Morningstar DBRS
considered a pool funded to the $500 million maximum trust balance,
maintaining the issuance approach in constructing a worst-case
scenario as allowed by the eligibility requirements for loans to be
funded while also considering the credit quality of loans
contributed since issuance. The Issuer did not meet the initial
expectation of funding the trust to the maximum balance of $500.0
million within the first year of transaction closing and has not
funded any loans since October 2023. The funding period was
extended to November 5, 2024, with an additional six-month
extension beyond that date currently in progress, as permitted by
the loan documents. Given the slower-than-expected pace of loan
contributions, Morningstar DBRS is unable to project if or when the
transaction will be fully funded.
The pool composition remains unchanged from the last review. Two of
the four contributed loans are backed by multifamily properties,
comprising 61.9% of the funded balance, with the other two loans
backed by retail properties, comprising 38.1% of the funded
balance. The contributed loans reported a weighted-average (WA)
issuance loan-to-value ratio (LTV) of 56.3% and a WA balloon LTV of
55.3%. Three of the four loans, representing 84.3% of the funded
balance, have full-term interest-only (IO) payment structures,
while the fourth loan pays IO for the first two years of the loan
term, amortizing over a 30-year schedule thereafter. The loans are
also concentrated by market rank, as all of the contributed loans
are in markets designated with a Morningstar DBRS Market Rank 3 or
4, denoting suburban markets.
The largest loan funded into the trust to date, Embarcadero Club
Apartments (representing 7.0% of the maximum allowable trust
balance), is secured by a 404-unit, garden-style, multifamily
complex in College Park, Georgia, 11 miles south of downtown
Atlanta. As of the June 2024 rent roll, the property was 95.3%
occupied with an average rental rate of $1,184 per unit, as
compared with the Morningstar DBRS occupancy and average rental
rate of 91.2% and $1,249 per unit, respectively, derived as part of
its analysis when the loan was contributed to the pool. In order to
increase rental rates at the property, the sponsor has funded
capital improvements out of pocket, with recent renovations
totaling $938,000 ($656,000 for interior renovations and $282,000
for common area improvements) during the trailing 12-month period
(T-12) ended June 30, 2024. Completed renovations have not yet
resulted in the expected increase in rental rates as the property's
average rental rate remains below the Morningstar DBRS rental rate
and the South Fulton average effective rent of $1,302 per unit as
of Q2 2024. Property performance also remains below Morningstar
DBRS' expectations as the T-12 Q2 2024 net operating income (NOI)
was reported at $2.1 million (debt service coverage ratio of 1.09
times), approximately 18% below the Morningstar DBRS NOI of $2.6
million. In the analysis for this review, Morningstar DBRS
increased the loan's LTV to reflect the increase in market
capitalization rates and also applied a probability of default
penalty given the loan's underperformance relative to Morningstar
DBRS' expectations.
Notes: All figures are in U.S. dollars unless otherwise noted.
HOMES 2024-AFC2: S&P Assigns Prelim B (sf) Rating on Cl. B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to HOMES
2024-AFC2 Trust's mortgage-backed notes.
The note issuance is an RMBS securitization backed by a pool of
first- lien, fixed- and adjustable-rate, fully amortizing
residential mortgage loans (some with interest-only periods) to
both prime and nonprime borrowers. The loans are primarily secured
by single-family residential properties, planned unit developments,
condominiums, townhomes, and two- to four-family residential
properties. The pool consists of 709 loans, which are QM safe
harbor (average prime offer rate; APOR), QM rebuttable presumption
(APOR), ATR-exempt loans, and non-QM/ATR-compliant loans.
The preliminary ratings are based on information as of Oct. 29,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representation and warranty framework, and geographic
concentration;
-- The mortgage originator, AmWest Funding Corp.; and
-- S&P said, "One key change in our baseline forecast since June
is an acceleration in the pace of monetary policy easing. We
anticipate the Federal Reserve will deliver two more rate cuts of
25 basis points (bps) this year and a total of 225 bps of rate cuts
by year-end 2025--a 75 bps increase from our prior forecast. We
continue to expect real GDP growth to slow from above-trend growth
this year to below-trend growth in 2025, accompanied by a further
rise in the unemployment rate and lower inflation. However, our
probability of a recession starting over the next 12 months remains
unchanged at 25.00%. With personal consumption still healthy for
now, near-term recession fears appear overblown. Therefore, we
maintain our current market outlook as it relates to the 'B'
projected archetypal foreclosure frequency of 2.50%. This reflects
our benign view of the mortgage and housing markets, as
demonstrated through general national level home price behavior,
unemployment rates, mortgage performance, and underwriting."
Preliminary Ratings Assigned
HOMES 2024-AFC2 Trust(i)
Class A-1A, $197,188,000: AAA (sf)
Class A-1B, $30,082,000: AAA (sf)
Class A-1, $227,270,000: AAA (sf)
Class A-2, $16,395,000: AA (sf)
Class A-3, $29,330,000: A (sf)
Class M-1, $11,130,000: BBB (sf)
Class B-1, $7,671,000: BB (sf)
Class B-2, $5,264,000: B (sf)
Class B-3, $3,761,165: NR
Class A-IO-S, Notional(ii): NR
Class XS, Notional(ii): NR
Class R, N/A: NR
(i)The collateral and structural information reflect the term sheet
dated Oct. 24, 2024. 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 $300,821,165.
NR--Not rated.
N/A--Not applicable.
HPS LOAN 5-2015: S&P Affirms 'B- (sf)' Rating on Cl. F-RR Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A1-3R, B-1-3R,
C-3R, and D-3R replacement debt from HPS Loan Management 5-2015
Ltd./HPS Loan Management 5-2015 LLC, a CLO managed by HPS
Investment Partners LLC. that was originally issued in June 2017
and underwent a second refinancing in October 2018. At the same
time, S&P withdrew its ratings on the class A1-RR, B-1-RR, C-RR,
and D-RR debt following payment in full on the Oct. 24, 2024,
refinancing date. S&P also affirmed its ratings on the class
B-2-RR, E-RR, and F-RR debt, which were not refinanced. The class
A2-3R were also issued as part of the third refinancing but are not
rated by S&P Global Ratings.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period was extended to April 24, 2025.
-- No additional assets were purchased on the October 2024
refinancing date. The first payment date following the refinancing
is Jan. 15, 2025.
-- No additional subordinated notes were issued on the refinancing
date.
On a standalone basis, our cash flow analysis indicated a lower
rating on the class F-RR debt (which was not refinanced) than the
rating action on the debt reflects. However, we affirmed our 'B-
(sf)' rating on the class F-RR debt after considering the margin of
failure, the relatively stable overcollateralization ratio since
our last rating action on the transaction, and that the transaction
is in its amortization phase, which is paying down and helping the
overall deal. Based on the later, we expect the credit support
available to all rated classes to increase as principal is
collected and the senior debt is paid down. In addition, we believe
the payment of principal or interest on the class F-RR debt when
due does not depend on favorable business, financial, or economic
conditions. Therefore, this class does not fit our definition of
'CCC' risk in accordance with our guidance criteria.
Replacement And October 2024 Debt Issuances
Replacement debt
-- Class A1-3R, $178.59 million: Three-month CME term SOFR +
1.06%
-- Class A2-3R, $30.00 million: Three-month CME term SOFR + 1.30%
-- Class B-1-3R, $26.25 million: Three-month CME term SOFR +
1.53%
-- Class C-3R (deferrable), $33.75 million: Three-month CME term
SOFR + 1.90%
-- Class D-3R (deferrable), $27.50 million: Three-month CME term
SOFR + 3.00%
October 2018 debt
-- Class A1-RR, $178.59 million: Three-month CME term SOFR + 1.14%
+ CSA(i)
-- Class A2-RR, $30.00 million: Three-month CME term SOFR + 1.50%
+ CSA(i)
-- Class B-1-RR, $26.25 million: Three-month CME term SOFR + 2.01%
+ CSA(i)
-- Class C-RR (deferrable), $33.75 million: Three-month CME term
SOFR + 2.30% + CSA(i)
-- Class D-RR (deferrable), $27.50 million: Three-month CME term
SOFR + 3.20% + CSA(i)
(i)The CSA is 0.26161%.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
HPS Loan Management 5-2015 Ltd./HPS Loan Management 5-2015 LLC
Class A1-3R, $178.59 million: AAA (sf)
Class B-1-3R, $26.25 million: AA (sf)
Class C-3R (deferrable), $33.75 million: A (sf)
Class D-3R (deferrable), $27.50 million: BBB- (sf)
Ratings Withdrawn
HPS Loan Management 5-201, Ltd./HPS Loan Management 5-2015 LLC
Class A1-RR to NR from 'AAA (sf)'
Class B-1-RR to NR from 'AA (sf)'
Class C-RR to NR from 'A (sf)'
Class D-RR to NR from 'BBB- (sf)'
Ratings Affirmed
HPS Loan Management 5-2015 Ltd./HPS Loan Management 5-2015 LLC
Class B-2-RR: 'AA (sf)'
Class E-RR: 'B+ (sf)'
Class F-RR: 'B- (sf)'
Other Debt
HPS Loan Management 5-2015 Ltd./HPS Loan Management 5-2015 LLC
Class A2
JW TRUST 2024-BERY: DBRS Gives Prov. BB Rating on Class F Certs
---------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2024-BERY (the Certificates) to be issued by JW Trust 2024-BERY:
-- Class A at (P) AAA (sf)
-- Class B at (P) AA (sf)
-- Class C at (P) AA (low) (sf)
-- Class D at (P) A (low) (sf)
-- Class E at (P) BBB (low) (sf)
-- Class F at (P) BB (sf)
-- Class HRR at (P) BB (low) (sf)
All trends are Stable.
The JW 2024-BERY transaction is secured by the fee-simple interest
in the JW Marriott Turnberry Resort, a 685-key, full-service resort
and the private, members-only Turnberry Isle Country Club. The
270-acre resort is opportunely situated in Aventura, between Miami
and Fort Lauderdale, Florida, on the eastern side of the Florida
coast. The resort provides a host of amenities for club members,
hotel guests, and non-members alike, which Morningstar DBRS views
positively, in addition to its strong historical performance,
property quality, and experienced and dedicated sponsor.
The borrower sponsor for this transaction will be Fontainebleau
Developments, a real estate development and hospitality group with
a portfolio based on the premise of designing, owning, marketing,
and operating its assets throughout the entire development of each
project. The portfolio of hospitality assets includes the
Fontainebleau Miami Beach, Hilton Nashville Downtown, and the
Fontainebleau Las Vegas. Fontainebleau Developments is led by
Jeffrey Soffer, the loan guarantor, who is the chairman and chief
executive officer, and has been at the firm for 25 years, helping
to expand the company from a regional leader to a nationally
recognized organization. The resort is a Marriott Flag and is
managed by Fontainebleau Development LLC.
Following the two recent renovations at the property, occupancy has
seen a strong recovery with the occupancy rate for the T-12 ended
July 31, 2024, at 79.5%. During renovations in 2019, the property
achieved an occupancy rate of 57.6%, ADR of $283.86, and RevPAR of
$180.87. Occupancy dipped in 2020 following the pandemic but
recovered in 2022 amid further renovations. The resort achieved an
occupancy rate of 67.9%, ADR of $358.98, and RevPAR of $243.81 in
2022 and has since seen continued growth through July 2024. For the
T-12 ended July 31, 2024, the occupancy rate was 79.5% with an ADR
of $329.80 and a RevPAR of $262.29, displaying adequate recovery
after both the pandemic and the property renovations.
Notes: All figures are in U.S. dollars unless otherwise noted.
KREF 2022-FL3: DBRS Confirms B(low) Rating on 3 Classes
--------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of notes
issued by KREF 2022-FL3 Ltd. (the Issuer) as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class F-X at BB (low) (sf)
-- Class F-E at BB (low) (sf)
-- Class G at B (low) (sf)
-- Class G-X at B (low) (sf)
-- Class G-E at B (low) (sf)
All trends are Stable.
The credit rating confirmations and Stable trends reflect the
overall stable performance of the underlying loans, supported by
the 100% concentration of collateral in multifamily property types.
Morningstar DBRS notes multifamily properties have historically
exhibited lower default rates as compared with other property
types. The majority of individual borrowers are progressing in
their stated business plans to increase property cash flows.
Additionally, the transaction benefits from a sizeable nonrated
first loss PREF Class which has a balance of $67.5 million, with no
losses incurred to date. There are some loans in the transaction
for which the borrower's respective business plans have stalled or
there have been other signs of increased credit risks since
issuance. Where applicable, Morningstar DBRS considered stressed
scenarios for those loans to increase the loan-level expected
losses (ELs) and, while this approach resulted in an increased pool
EL, the overall analysis supported the credit rating
confirmations.
In conjunction with this press release, Morningstar DBRS has
published a Surveillance Performance Update report with in-depth
analysis and credit metrics for the transaction and with business
plan updates on select loans. To access this report, please click
on the link under Related Documents below or contact us at
info-DBRS@morningstar.com.
As of the September 2024 remittance, the pool comprised 16 loans
secured by 18 properties with a cumulative trust balance of $1
billion. The transaction is a managed vehicle and was structured
with a 24-month reinvestment period that expired with the February
2024 payment date, whereby the Issuer could acquire Companion
Participations in either the form of a mortgage loan, a combination
of a mortgage loan and a related mezzanine loan, or a fully funded
pari passu participation. In addition, the transaction is
structured with a Replenishment Period, which began on the first
day after the Reinvestment Period and ended with the August 2024
payment date, the sixth payment date after the Reinvestment Period.
Since issuance, three loans with a cumulative trust balance of
$140.0 million have been paid in full, one of which ($40.0 million)
repaid since Morningstar DBRS' previous credit rating action in
October 2023. Additionally, one loan, totaling $8.0 million, has
been added to the trust since October 2023.
As of September 2024, no loans were in special servicing, and two
loans, representing 11.2% of the current trust balance, were being
monitored on the servicer's watchlist for upcoming maturities.
While borrowers continue to make progress on their business plans
to stabilize the assets, the majority of loans report debt service
coverage ratios (DSCRs) below 1.0x based on the most recent
financials, largely as a result of the floating-rate nature of all
the loans in the pool, which has increased debt service payments.
To date, 14 loans have been modified; 12 of these loans were
modified to allow the transition of the floating-interest rate
benchmark from Libor to Term Secured Overnight Financing Rate.
Three loans, specifically Aven (11.4% of the current pool balance),
The Kendrick (Prospectus ID#12, 7.2% of the current pool balance),
and Orchards Portfolio (Prospectus ID#15, 4.3% of the current pool
balance), received an extension to the initial maturity dates.
Thirteen loans, representing 79.6% of the current trust balance,
are secured by properties in suburban markets, as defined by the
Morningstar DBRS Market Ranks of 3, 4, and 5. Two loans,
representing 15.4% of the pool, are secured by properties in
Morningstar DBRS Market Ranks of 6 and 7, denoting urban markets,
while one loan, representing 5.0% of the pool, is secured by a
property in a tertiary market, as defined by its Morningstar DBRS
Market Rank of 2. Leverage across the pool has remained relatively
unchanged since issuance as the current weighted-average (WA) as-is
appraised loan-to-value (LTV) ratio is 69.7% and the WA stabilized
LTV is 66.1%. In comparison, these figures were 70.5% and 66.4%,
respectively, at issuance. The majority of the individual property
appraisals were completed in 2022 and as such, the appraisers' cap
rates may not reflect the rise in interest rates (and corresponding
widening of cap rates) that began later that year. Morningstar DBRS
evaluated the appraised values and the implied cap rates on the
issuer's cash flows and, where applicable, made upward adjustments
to reflect the current valuation and lending environments. This
analysis impacted five loans, representing 34.4% of the current
trust balance.
Through August 2024, the lender had advanced a cumulative $57.4
million in loan future funding to 10 individual borrowers to aid in
property stabilization efforts. The largest advance of $19.9
million was made to the borrower of Crystal Towers and Flats, which
is secured by a portfolio of two multifamily properties in
Arlington, Virginia. The borrower's business plan is focused on
increasing rents to market levels by completing a comprehensive
renovation for both assets, with total costs estimated at
approximately $28.1 million. An additional $27.1 million of loan
future funding allocated to seven individual borrowers remains
available. The largest unadvanced portion of $8.1 million was
allocated to the borrower of the aforementioned Crystal Towers and
Flats. As discussed further in the accompanying Surveillance
Performance Update for this transaction, the business plan for that
loan has stalled and as such, Morningstar DBRS' analysis considered
a stressed scenario to increase the loan-level EL.
Notes: All figures are in U.S. dollars unless otherwise noted.
LAKE SHORE IV: S&P Assigns BB- (sf) Rating on Class E-R Notes
-------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-R, A-L, B-R, B-L, C-R, D-R, and E-R replacement debt from
Lake Shore MM CLO IV LLC, a CLO originally issued on Oct. 29, 2021,
that is managed by First Eagle Alternative Credit LLC.
On the Nov. 7, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. At that
time, we expect to withdraw our ratings on the original debt and
assign ratings to the replacement debt. However, if the refinancing
doesn't occur, S&P may affirm its ratings on the original debt and
withdraw our preliminary ratings on the replacement debt.
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The non-call period will be extended to Nov. 9, 2026.
-- The reinvestment period will be extended to Jan. 15, 2029.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) will be extended to Jan. 15,
2037.
-- The class X-R debt will be issued on the refinancing date and
is expected to be paid down using interest proceeds during the
first 16 payment dates in equal installments of $1,809,375,
beginning on the April 15, 2025, payment date.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- No additional subordinated notes will be issued on the
refinancing date.
-- The turbo feature of original class D and E debt will be
removed.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Lake Shore MM CLO IV LLC
Class X-R, $28.950 million: AAA (sf)
Class A-R, $241.625 million: AAA (sf)
Class A-L, $40.875 million: AAA (sf)
Class B-R, $46.320 million: AA (sf)
Class B-L, $6.000 million: AA (sf)
Class C-R (deferrable), $42.160 million: A (sf)
Class D-R (deferrable), $29.760 million: BBB- (sf)
Class E-R (deferrable), $29.760 million: BB- (sf)
Other Debt
Lake Shore MM CLO IV LLC
Subordinated notes, $62.500 million: Not rated
LCM LTD 39: Moody's Assigns B3 Rating to $1MM Class F-R Notes
-------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the "Refinancing Notes") issued by LCM 39 Ltd.
(the "Issuer").
US$276,750,000 Class A-1-R Senior Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$1,000,000 Class F-R Deferrable Mezzanine Floating Rate Notes due
2034, Assigned B3 (sf)
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans.
LCM EURO II LLC (the "Manager") will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's remaining
reinvestment period.
The Issuer previously issued six other classes of secured notes and
one class of subordinated notes, which will remain outstanding.
In addition to the issuance of the Refinancing Notes, other changes
to transaction features in connection with the refinancing include:
extension of the non-call period 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 "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: $449,926,099
Diversity Score: 80
Weighted Average Rating Factor (WARF): 3200
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.60%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 6.25 years
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
LEGENDS 2024-LEGENDS: DBRS Gives Prov. B(low) Rating on G Certs
---------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2024-LEGENDS (the Certificates) to be issued by Legends (Kansas
City, KS) SASB Pass-Through Trust (the Trust):
-- Class A at (P) AAA (sf)
-- Class B at (P) AA (low) (sf)
-- Class C at (P) A (low) (sf)
-- Class D at (P) BBB (low) (sf)
-- Class E at (P) BB (low) (sf)
-- Class G at (P) B (low) (sf)
The Legends (Kansas City, KS) SASB Pass-Through Trust Certificates,
Series 2024-LEGENDS transaction is collateralized by the borrower's
fee-simple interest in Legends Outlet, a 739,248-sf regional retail
outlet in Kansas City. Built in 2005, the property is anchored by
Dave & Buster's, H&M, T.J.Maxx, HomeGoods, and AMC Theatres, which
all serve as collateral for the transaction. Legends Outlets
features a variety of apparel and F&B tenants, providing a
family-oriented atmosphere within the Village West retail and
entertainment district. The village West retail and entertainment
district features venues such as Children's Mercy Park, Kansas
Speedway, Hollywood Casino, Nebraska Furniture Mart, and many more,
generating more than $1 billion in sales revenue on an annual
basis. Legends Outlets holds a dominant position in the market,
being the only designer outlet center in Kansas, and attracts
approximately 13.0 million visitors annually.
The property offers ample connectivity and accessibility via a
plethora of regional thoroughfares. Legends Outlets has maintained
consistent occupancy rates, achieving above 90% occupancy since the
sponsor's acquisition in 2016. The collateral achieved in-line
sales of $369 psf YE2023, excluding F&B tenants. Comparable in-line
sales have increased 9.6% from 2021 and 5.4% from 2022,
highlighting the collateral's consistent performance in the
market.
According to the appraisal, there are limited shopping center
competitors near the subject. The subject has an expansive trading
area, because the property is the only outlet center within 175
miles of Kansas City and the largest outlet center in the state of
Kansas.
The sponsor for this transaction is Walton Street Capital, LLC
(Walton Street), a private equity real estate investment firm based
in Chicago that sponsors equity and debt investment funds. Since
its founding in 1994, Walton Street's affiliates have received
total equity commitments of $12 billion and have committed to
invest in more than 350 separate transactions in the U.S. and
international real estate, including development and acquisition of
office, lodging, retail, industrial, multifamily, senior and
student housing, for-sale residential, gaming, and other assets.
Notes: All figures are in US dollars unless otherwise noted.
LHOME MORTGAGE 2024-RTL5: DBRS Finalizes B Rating on M2 Notes
-------------------------------------------------------------
DBRS, Inc. finalized provisional credit ratings on the
Mortgage-Backed Notes, Series 2024-RTL5 (the Notes) issued by LHOME
Mortgage Trust 2024-RTL5 (LHOME 2024-RTL5 or the Issuer) as
follows:
-- $331.4 million Class A1 at A (low) (sf)
-- $23.6 million Class A2 at BBB (low) (sf)
-- $27.2 million Class M1 at BB (low) (sf)
-- $17.9 million Class M2 at B (sf)
The A (low) (sf) credit rating reflects 21.30% of credit
enhancement (CE) provided by the subordinated notes and
overcollateralization. The BBB (low) (sf), BB (low) (sf), and B
(sf) credit ratings reflect 15.70%, 9.25%, and 5.00% of CE,
respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of a two-year revolving
portfolio of residential transition loans (RTLs) funded by the
issuance of the Mortgage-Backed Notes, Series 2024-RTL5 (the
Notes). As of the Initial Cut-Off Date, the Notes are backed by:
-- 780 mortgage loans with a total principal balance of
approximately $200,064,773
-- Approximately $190,987,859 in the Accumulation Account
-- Approximately $30,000,000 in the RP Accumulation Account
-- Approximately $3,500,000 in the Prefunding Interest Account.
Additional RTLs may be added to the revolving portfolio on future
additional transfer dates, subject to the transaction's eligibility
criteria.
LHOME 2024-RTL5 represents the 20th RTL securitization issued by
the Sponsor, Kiavi Funding, Inc. (Kiavi). Founded in 2013 as
LendingHome Funding Corporation and rebranded as Kiavi in November
2021, Kiavi is a privately held, technology-enabled lender that
provides business-purpose loans for real estate investors engaged
in acquiring, renovating, and either reselling or holding for
investment purposes single-family residential properties.
The revolving portfolio generally consists of first-lien,
fixed-rate, interest-only (IO) balloon RTL with original terms to
maturity of 12 to 24 months. The loans may include extension
options, which can lengthen maturities beyond the original terms.
The characteristics of the revolving pool will be subject to
eligibility criteria specified in the transaction documents and
include:
-- A minimum non-zero weighted-average (NZ WA) FICO score of 735.
-- A maximum NZ WA loan-to-cost ratio of 91.5%.
-- A maximum NZ WA as-repaired loan-to-value ratio 73.0%.
RTL FEATURES
RTLs, also known as fix-and-flip mortgage loans, are short-term
bridge, construction, or renovation loans designed to help real
estate investors purchase and renovate residential or multifamily
5+ properties (the latter is limited to 5.0% of the revolving
portfolio), generally within 12 to 36 months. RTLs are similar to
traditional mortgages in many aspects but may differ significantly
in terms of initial property condition, construction draws, and the
timing and incentives by which borrowers repay principal. For
traditional residential mortgages, borrowers are generally
incentivized to pay principal monthly, so they can occupy the
properties while building equity in their homes. In the RTL space,
borrowers repay their entire loan amount when they (1) sell the
property with the goal to generate a profit or (2) refinance to a
term loan and rent out the property to earn income.
In general, RTLs are short-term IO balloon loans with the full
amount of the principal (balloon payment) due at maturity. The
repayment of an RTL is mainly based on the ability to sell the
related mortgaged property or to convert it into a rental property.
In addition, many RTL lenders offer extension options, which
provide additional time for borrowers to repay their mortgage
beyond the original maturity date. For the loans in this
transaction, such extensions may be granted, subject to certain
conditions, at the direction of the Asset Manager.
In the LHOME 2024-RTL5 revolving portfolio, RTLs may be:
(1) Fully funded:
-- With no obligation of further advances to the borrower,
-- With a portion of the loan proceeds allocated to a
rehabilitation (rehab) escrow account for future disbursement to
fund construction draw requests upon the satisfaction of certain
conditions, or
-- With a portion of the loan proceeds held back by the Servicer
(Interest Reserve Holdback Amounts) for future disbursement to fund
interest draw requests upon the satisfaction of certain
conditions.
(2) Partially funded:
-- With a commitment to fund borrower-requested draws for approved
rehab, construction, or repairs of the property (Rehabilitation
Disbursement Requests) upon the satisfaction of certain
conditions.
After completing certain construction/repairs using their own
funds, the borrower usually seeks reimbursement by making draw
requests. Generally, construction draws are disbursed only upon the
completion of approved construction/repairs and after a
satisfactory construction progress inspection. Based on the LHOME
2024-RTL5 eligibility criteria, unfunded commitments are limited to
40.0% of the portfolio by aggregate principal limit.
CASH FLOW STRUCTURE AND DRAW FUNDING
The transaction employs a sequential-pay cash flow structure.
During the reinvestment period, the Notes will generally be IO.
After the reinvestment period, principal will be applied to pay
down the Notes sequentially. If the Issuer does not redeem the
Notes by the payment date in March 2027, the fixed rates on the
Class A1 and Class A2 Notes will step up by 1.000% the following
month.
There will be no advancing of delinquent (DQ) interest on any
mortgage by the Servicer or any other party to the transaction.
However, the Servicer is obligated to fund Servicing Advances,
which include taxes, insurance premiums, and reasonable costs
incurred in the course of servicing and disposing properties. The
Servicer will be entitled to reimburse itself for Servicing
Advances from available funds prior to any payments on the Notes.
The Servicer will satisfy Rehabilitation Disbursement Requests by
(1) for loans with funded commitments, directing the release of
funds from the Rehab Escrow Account to the applicable borrower; or
(2) for loans with unfunded commitments, (A) advancing funds on
behalf of the Issuer (Rehabilitation Advances) or (B) directing the
release of funds from the Accumulation Account. The Servicer will
be entitled to reimburse itself for Rehabilitation Disbursement
Requests from time to time from the Accumulation Account. The Asset
Manager may direct the Paying Agent to remit funds from the RP
Accumulation to the Accumulation Account in accordance with the
Indenture and the REMIC provisions.
The Accumulation Account is replenished from the transaction cash
flow waterfall, after payment of interest to the Notes, to maintain
a minimum required funding balance. During the reinvestment period,
amounts held in the Accumulation Account, along with the mortgage
collateral, must be sufficient to maintain a minimum CE of
approximately 5.00% to the most subordinate rated class. The
transaction incorporates a Minimum Credit Enhancement Test during
the reinvestment period, which if breached, redirects available
funds to pay down the Notes sequentially prior to replenishing the
Accumulation Account to maintain the minimum CE for the rated
Notes.
The transaction also employs the Expense Reserve Account, which
will be available to cover fees and expenses. The Expense Reserve
Account is replenished from the transaction cash flow waterfall
before payment of interest to the Notes to maintain a minimum
reserve balance.
A Prefunding Interest Account is in place to help cover three
months of interest payments to the Notes. Such account is funded
upfront in an amount equal to $3,500,000. On the payment dates
occurring in October, November, and December 2024, the Paying Agent
will withdraw a specified amount to be included in the available
funds.
Historically, Kiavi RTL originations have generated robust mortgage
repayments that have been able to cover unfunded commitments in
securitizations. In the RTL space, because of the lack of
amortization and the short-term nature of the loans, mortgage
repayments (paydowns and payoffs) tend to occur closer to or at the
related maturity dates when compared with traditional residential
mortgages. Morningstar DBRS considers paydowns to be unscheduled
voluntary balance reductions (generally repayments in full) that
occur prior to the maturity date of the loans, while payoffs are
scheduled balance reductions that occur on the maturity or extended
maturity date of the loans. In its cash flow analysis, Morningstar
DBRS evaluated Kiavi's historical mortgage repayments relative to
draw commitments and incorporated several stress scenarios where
paydowns may or may not sufficiently cover draw commitments. Please
see the Cash Flow Analysis section of the related presale report
for more details.
OTHER TRANSACTION FEATURES
Optional Redemption
On any date on or after the earlier of (1) the Payment Date
following the termination of the Reinvestment Period or (2) the
date on which the aggregate Note Amount falls to less than 25% of
the initial Closing Date Note Amount, the Issuer, at its option,
may purchase all of the outstanding Notes at the par plus interest
and fees.
Repurchase Option
The Depositor will have the option to repurchase any DQ or
defaulted mortgage loan at the Repurchase Price, which is equal to
par plus interest and fees. However, such voluntary repurchases may
not exceed 10.0% of the cumulative UPB of the mortgage loans.
During the reinvestment period, if the Depositor repurchases DQ or
defaulted loans, this could potentially delay the natural
occurrence of an early amortization event based on the DQ or
default trigger. Morningstar DBRS' revolving structure analysis
assumes the repayment of Notes is reliant on the amortization of an
adverse pool regardless of whether it occurs early or not.
Loan Sales
The Issuer may sell a mortgage loan under the following
circumstances:
-- The Seller is required to repurchase a loan because of a
material breach, a material document defect, or the loan is a
non-REMIC qualified mortgage;
-- The Depositor elects to exercise its Repurchase Option;
-- An automatic repurchase is triggered in connection with the
third-party due diligence review; or
-- An optional redemption occurs.
U.S. Credit Risk Retention
As the Sponsor, Kiavi, through a majority-owned affiliate, will
initially retain an eligible horizontal residual interest
comprising at least 5% of the aggregate fair value of the
securities (the Class XS Notes) to satisfy the credit risk
retention requirements.
NOTES: All figures are in U.S. dollars unless otherwise noted.
M&T EQUIPMENT 2023-LEAF1: Moody's Ups Rating on E Notes From Ba1
----------------------------------------------------------------
Moody's Ratings has upgraded four notes issued by M&T Equipment
(2023-LEAF1), LLC. The transaction is a securitization of small-
and mid-ticket equipment loans and leases originated by LEAF
Capital Funding, LLC, including light industrial and construction
equipment, computers, software, and other office equipment. LEAF
Commercial Capital, Inc. (LEAF) is the servicer of the assets
backing the transaction.
The complete rating actions are as follows:
Issuer: M&T Equipment (2023-LEAF1), LLC
Class B Notes, Upgraded to Aa1 (sf); previously on Aug 16, 2023
Definitive Rating Assigned Aa2 (sf)
Class C Notes, Upgraded to Aa2 (sf); previously on Aug 16, 2023
Definitive Rating Assigned A1 (sf)
Class D Notes, Upgraded to A2 (sf); previously on Aug 16, 2023
Definitive Rating Assigned Baa1 (sf)
Class E Notes, Upgraded to Baa2 (sf); previously on Aug 16, 2023
Definitive Rating Assigned Ba1 (sf)
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
RATINGS RATIONALE
The rating actions were primarily driven by the buildup in credit
enhancements owing to structural features including a sequential
pay structure, non-declining reserve account and
overcollateralization as well as collateral performance. Moody's
also considered the level of credit enhancement and the
subordinated nature of the junior notes.
The Cumulative Net Loss (CNL) expectation remained unchanged at
2.25% and the loss at a Aaa stress was increased to 20.25% from
19.00% at closing due to the increase in residual exposure.
No action was taken on the remaining rated tranches because there
were no material changes in collateral quality, and credit
enhancement remains commensurate with the current ratings.
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 notes if, given Moody's expectations of
portfolio losses, levels of credit enhancement are consistent with
higher ratings. In sequential pay structures, such as the one in
this transaction, credit enhancement grows 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 of enhancement. Moody's
expectation of pool losses could decline as a result of a lower
number of obligor defaults. Portfolio losses also depend greatly on
the US macroeconomy, the equipment markets, and changes in
servicing practices.
Down
Moody's could downgrade the notes if, given Moody's expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
equipment securing an obligor's promise of payment. Portfolio
losses also depend greatly on the US macroeconomy, the equipment
markets, and poor servicer performance. Other reasons for
worse-than-expected performance include error on the part of
transaction parties, inadequate transaction governance, and fraud.
MADISON PARK LIV: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
-----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the
Madison Park Funding LIV, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Madison Park
Funding LIV, Ltd.
A-1-R LT AAAsf New Rating AAA(EXP)sf
A-2-R LT AAAsf New Rating AAA(EXP)sf
B-R LT AAsf New Rating AA(EXP)sf
C-R LT A+sf New Rating A+(EXP)sf
D-1-R LT BBB+sf New Rating BBB-(EXP)sf
D-2-R LT BBB-sf New Rating BBB-(EXP)sf
E-R LT BB+sf New Rating BB+(EXP)sf
F-R LT NRsf New Rating NR(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
X LT AAAsf New Rating AAA(EXP)sf
Transaction Summary
Madison Park Funding LIV, Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) that is managed by UBS
Asset Management (Americas) LLC that originally closed in November
2022 and is being refinanced on Oct. 29, 2024. Net proceeds from
the issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $500 million of primarily
first lien senior secured leveraged loans.
The final rating of 'BBB+sf' on the class D-1-R notes is higher
than the expected rating of 'BBB-(EXP)sf' published on Oct. 3,
2024. The rating change is primarily due to higher credit
enhancement for the class, and to a lesser extent, a higher minimum
weighted average coupon since the expected rating analysis.
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
98.12% first-lien senior secured loans and has a weighted average
recovery assumption of 75.54%. 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 five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as 'AAAsf' for class X, between 'BBB+sf' and 'AA+sf' for
class A-1-R, between 'BBB+sf' and 'AA+sf' for class A-2-R, between
'BB+sf' and 'A+sf' for class B-R, between 'B+sf' and 'BBB+sf' for
class C-R, between less than 'B-sf' and 'BB+sf' for class D-1-R,
between less than 'B-sf' and 'BB+sf' for class D-2-R, and between
less than 'B-sf' and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X, class A-1-R
and class A-2-R notes as these notes are in the highest rating
category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AA+sf' for class C-R, 'A+sf'
for class D-1-R, 'A-sf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Madison Park
Funding LIV, 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 any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
MADISON PARK LIV: Moody's Assigns B3 Rating to $250,000 F-R Notes
-----------------------------------------------------------------
Moody's Ratings has assigned ratings to two classes of CLO
refinancing notes (the Refinancing Notes) issued by Madison Park
Funding LIV, Ltd. (the Issuer):
US$306,750,000 Class A-1-R Floating Rate Senior Notes due 2036,
Definitive Rating Assigned Aaa (sf)
US$250,000 Class F-R Deferrable Floating Rate Junior 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
96.0% of the portfolio must consist of first lien senior secured
loans and up to 4.0% of the portfolio may consist of non-senior
secured loans.
UBS Asset Management (Americas) LLC (the Manager) will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's 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: 60
Weighted Average Rating Factor (WARF): 2999
Weighted Average Spread (WAS): 3.15%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 46.0%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
MADISON PARK LX: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the
Madison Park Funding, LX Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Madison Park
Funding LX, Ltd.
A-1-R LT NRsf New Rating
A-2-R LT AAAsf New Rating
B-R LT AA+sf New Rating
C-R LT A+sf New Rating
D-1-R LT BBBsf New Rating
D-2-R LT BBB-sf New Rating
E-R LT BB+sf New Rating
F LT NRsf New Rating
Subordinated Notes LT NRsf New Rating
X LT NRsf New Rating
Transaction Summary
Madison Park Funding LX, Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) managed by UBS Asset
Management (Americas) LLC that originally closed in December 2022
and is being reset on Oct. 25,2024. Net proceeds from the issuance
of the new secured and 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'/'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
96.99% first-lien senior secured loans and has a weighted average
recovery assumption of 75.08%. 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 (Neutral): The largest three industries may
comprise up to 41% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The 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 'BB-sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2-R notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AA+sf' for class C-R, 'A+sf'
for class D-1-R, 'A+sf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, 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 Madison Park
Funding LX, 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.
MADISON PARK LX: Moody's Assigns B3 Rating to $250,000 Cl. F Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes (the Refinancing Notes) issued by Madison Park
Funding LX, Ltd. (the Issuer):
US$5,000,000 Class X Floating Rate Senior Notes, Assigned Aaa (sf)
US$320,000,000 Class A-1-R Floating Rate Senior Notes, Assigned Aaa
(sf)
US$250,000 Class F Deferrable Floating Rate Junior Notes, 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 loans that
are not senior secured.
UBS Asset Management (Americas) LLC (the Manager) will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's 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): 3023
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 45.50%
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.
MAGNETITE XXX: S&P Assigned Prelim BB- (sf) Rating on Cl. E-R Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-1-R, B-2-R, C-R, D-1-R, D-2-R, and E-R replacement debt and
proposed new class X debt from Magnetite XXX Ltd./Magnetite XXX
LLC, a CLO originally issued in November 2021 that is managed by
BlackRock Financial Management Inc.
The preliminary ratings are based on information as of Oct. 28,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 6, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. S&P
said, "At that time, we expect to withdraw our ratings on the
original debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The non-call period will be extended to Oct. 25, 2026.
-- The reinvestment period will be extended to Oct. 25, 2029.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) will be extended to Oct. 25,
2037.
-- The class X debt will be issued on the refinancing date and is
expected to be paid down using interest proceeds during the first
seven payment dates in equal installments of $300,000, beginning on
the April 25, 2025, payment date.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- $3 million in additional subordinated notes will be issued on
the refinancing date.
-- The transaction has adopted benchmark replacement language and
was updated to conform to current rating agency methodology.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Magnetite XXX Ltd./Magnetite XXX LLC
Class X, $2.10 million: AAA (sf)
Class A-R, $299.25 million: AAA (sf)
Class B-1-R, $51.75 million: AA (sf)
Class B-2-R, $10.00 million: AA (sf)
Class C-R (deferrable), $28.50 million: A (sf)
Class D-1-R (deferrable), $28.50 million: BBB- (sf)
Class D-2-R (deferrable), $2.375 million: BBB- (sf)
Class E-R (deferrable), $16.15 million: BB- (sf)
Other Debt
Magnetite XXX Ltd./Magnetite XXX LLC
Subordinated notes, $49.94 million: Not rated
MARINER FINANCE 2024-B: DBRS Finalizes BB Rating on E Notes
-----------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following classes of notes (collectively, the Notes) issued by
Mariner Finance Issuance Trust 2024-B (MFIT 2024-B):
-- $266,080,000 Class A Notes at AAA (sf)
-- $41,570,000 Class B Notes at AA (low) (sf)
-- $28,440,000 Class C Notes at A (sf)
-- $24,950,000 Class D Notes at BBB (sf)
-- $38,960,000 Class E Notes at BB (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The credit ratings are based on Morningstar DBRS' review of the
following analytical considerations:
(1) The transaction assumptions considered Morningstar DBRS'
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary Baseline Macroeconomic Scenarios For
Rated Sovereigns: September 2024 Update, published on September 25,
2024. These baseline macroeconomic scenarios replace Morningstar
DBRS' moderate and adverse COVID-19 pandemic scenarios, which were
first published in April 2020.
(2) Transaction capital structure and form and sufficiency of
available credit enhancement.
-- Credit enhancement is in the form of OC, subordination, amounts
held in the reserve fund, and excess spread. Credit enhancement
levels are sufficient to support Morningstar DBRS' stressed
assumptions under all stress scenarios.
(3) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the credit ratings
address the timely payment of interest on a monthly basis and
principal by the legal final maturity date.
(4) Mariner's capabilities with regard to originations,
underwriting, and servicing.
-- Morningstar DBRS performed an operational review of Mariner
and, as a result, considers the entity to be an acceptable
originator and servicer of personal loans.
-- Mariner's senior management team has considerable experience
and a successful track record within the consumer loan industry.
(5) The credit quality of the collateral and performance of
Mariner's consumer loan portfolio. Morningstar DBRS used a hybrid
approach in analyzing Mariner's portfolio that incorporates
elements of static pool analysis, employed for assets such as
consumer loans, and revolving loan analysis to account for renewal
loans. As of the Statistical Cut-Off Date:
-- The weighted-average (WA) remaining term of the collateral pool
is approximately 38 months.
-- The WA coupon (WAC) of the pool is 26.35% and the transaction
includes a reinvestment criteria event that the WAC is less than
24.50%. All loans going into the pool will have an APR less than
36.00%.
-- CPR rates for Mariners' portfolio, as estimated by Morningstar
DBRS, have generally averaged between 8.0% and 14.0% since 2014
depending on product type.
-- The Morningstar DBRS base-case assumption for CPR is 6.0%.
-- Charge-off rates on the Mariner portfolio have generally ranged
between 9.00% and 15.00% over the past several years.
-- The Morningstar DBRS base-case assumption for the charge-off
rate is 12.90% which is based on the MFIT 2024-B reinvestment
criteria and recent credit performance.
-- For this transaction, Morningstar DBRS assumed an overall
recovery rate of 5.75% which based on historical recovery
performance which varies by product type, with assumptions ranging
from 5.00% to 7.50%.
(6) Mariner is currently subject to a complaint filed against it by
eleven attorneys generals. The complaint initially filed by the
Eastern District of Pennsylvania by the attorneys general for
Pennsylvania, the District of Columbia, New Jersey, Oregon, Utah,
and Washington alleges certain unfair and deceptive acts and
practices by Mariner. Specifically, in relation to its sale of
optional loan products, refinancing practices and LBM products. On
October 17, 2022, the state of Utah voluntarily withdrew from the
matter. On March 22, 2024 six additional states joined the lawsuit
and did not add any additional claims to the litigation. The
attorneys generals seek to enjoin Mariner's conduct, and seek
penalties, restitution to borrowers and rescission and/or
reformation of borrower agreements. On January 12, 2024, the court
denied Mariner's motion to dismiss. On January 26, 2024, Mariner
filed its answer to the complaint, denying any and all allegations
of unlawful or deceptive business practices, or that it engaged in
any of the wrongdoing alleged in the complaint. The ongoing
litigation remains in the discovery phase. To the extent it is
determined that the Loans were not originated in accordance with
all applicable laws, the relevant Sellers may be obligated to
repurchase from the Issuer.
(7) The legal structure and presence of legal opinions address the
true sale of the assets from the Seller to the Depositor, the
non-consolidation of the special-purpose vehicle with the Seller,
that the Indenture Trustee has a valid first-priority security
interest in the assets, and the expected consistency with the
Morningstar DBRS Legal Criteria for U.S. Structured Finance.
Notes: All figures are in US Dollars unless otherwise noted.
MF1 2024-FL16: DBRS Gives Prov. B(low) Rating on 3 Classes
-----------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
classes of notes (the Notes) to be issued by MF1 2024-FL16 (the
Issuer).
-- Class A at (P) AAA (sf)
-- Class A-S at (P) AAA (sf)
-- Class B at (P) AAA (sf)
-- Class C at (P) A (sf)
-- Class D at (P) BBB (sf)
-- Class E at (P) BBB (low) (sf)
-- Class F at (P) BB (high) (sf)
-- Class F-E at (P) BB (high) (sf)
-- Class F-X at (P) BB (high) (sf)
-- Class G at (P) BB (low) (sf)
-- Class G-E at (P) BB (low) (sf)
-- Class G-X at (P) BB (low) (sf)
-- Class H at (P) B (low) (sf)
-- Class H-E at (P) B (low) (sf)
-- Class H-X at (P) B (low) (sf)
All trends are Stable.
The initial collateral consists of 27 floating-rate mortgage loans
(two loans are cross-collateralized as part of the Mandrake BTR
Roll-Up and treated as one loan) secured by 34 transitional
multifamily and three student housing properties. All commentary in
this report will refer to the pool as a 26-loan pool since
Morningstar DBRS treated the two cross-collateralized loans as one
loan. The collateral is encumbered by $2.47 billion of debt,
composed of $1.03 billion going into the trust, $135.2 million in
future funding, and $1.31 billion of funded pari passu debt. Eight
loans in the pool, representing 29.0% of the initial pool balance,
are delayed-close mortgage assets, which are identified in the data
tape and included in the Morningstar DBRS analysis. The Issuer has
45 days after closing to acquire the delayed-close assets.
The transaction is a managed vehicle, which includes a 30-month
reinvestment period. As part of the reinvestment period, the
transaction includes a 120-day ramp-up acquisition period during
which the Issuer is expected to increase the trust balance by $13.8
million to a total target collateral principal balance of $1.04
billion. Morningstar DBRS assessed the ramp loans using a
conservative pool construct and, as a result, the ramp loans have
expected losses above the pool's weighted average (WA) expected
loss. All tables, charts, and metrics referenced in this presale
report reflect the $1.03 billion target pool balance, exclusive of
$13.8 million of hypothetical ramp loans. Reinvestment of principal
proceeds during the reinvestment period is subject to eligibility
criteria, which, among other criteria, include a rating agency
no-downgrade confirmation (RAC) by Morningstar DBRS for all new
mortgage assets and funded companion participations. If a
delayed-close asset is not expected to close or fund prior to the
purchase termination date, then the Issuer may acquire any delayed
close collateral interest at any time during the ramp-up
acquisition period. The eligibility criteria indicate that only
multifamily, manufactured housing, student housing, and senior
housing properties can be brought into the pool during the stated
ramp-up acquisition period. Additionally, the eligibility criteria
establish minimum, debt service coverage ratio (DSCR),
loan-to-value ratio (LTV), and Herfindahl requirements.
Furthermore, certain events within the transaction require the
Issuer to obtain rating agency confirmation (RAC). Morningstar DBRS
will confirm that a proposed action or failure to act or other
specified event will not, in and of itself, result in the downgrade
or withdrawal of the current rating. The Issuer is required to
obtain RAC for all acquisitions of companion participations.
The loans are secured by properties that are in a period of
transition with plans to stabilize and improve the asset value. In
total, 18 loans, representing 72.1% of the pool, have remaining
future funding participations totaling $135.2 million, which the
Issuer may acquire in the future. Please see the chart below for
the participations that the Issuer will be able to acquire.
All of the loans in the pool have floating rates, and Morningstar
DBRS incorporates an interest rate stress that is based on the
lower of a Morningstar DBRS stressed rate that corresponds to the
remaining fully extended term of the loans or the strike price of
an interest rate cap with the respective contractual loan spread
added to determine a stressed interest rate over the loan term.
When the debt service payments were measured against the
Morningstar DBRS As-Is NCF, all 26 loans had a Morningstar DBRS
As-Is DSCR of 1.00 times (x) or below, a threshold indicative of
default risk. Additionally, the Morningstar DBRS Stabilized NCF for
all 26 loans was below 1.00x, which is indicative of elevated
refinance risk. The properties are often transitioning with
potential upside in cash flow; however, Morningstar DBRS does not
give full credit to the stabilization if there are no holdbacks or
if other structural features in place are insufficient to support
such treatment. Furthermore, even with the structure provided,
Morningstar DBRS generally does not assume the assets will
stabilize above market levels.
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 the related principal amounts, the
interest distribution amounts, and the deferred interest amounts
for the rated classes.
Notes: All figures are in U.S. dollars unless otherwise noted.
MFA TRUST 2024-RTL3: DBRS Gives Prov. BB(low) Rating on M Notes
---------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to Mortgage-Backed
Notes, Series 2024-RTL3 (the Notes) to be issued by MFA 2024-RTL3
Trust (MFA 2024-RTL3 or the Issuer) as follows:
-- $183.3 million Class A1 at (P) A (low) (sf)
-- $19.1 million Class A2 at (P) BBB (low) (sf)
-- $19.1 million Class M at (P) BB (low) (sf)
The (P) A (low) (sf) credit rating reflects 26.70% of credit
enhancement provided by the subordinated notes and
overcollateralization. The (P) BBB (low) (sf), and (P) BB (low)
(sf) credit ratings reflect 19.05%, and 11.40% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of a two-year revolving
portfolio of residential transition loans (RTLs) funded by the
issuance of the Mortgage-Backed Notes, Series 2024-RTL3 (the
Notes). As of the Initial Cut-Off Date, the Notes are backed by:
-- 552 mortgage loans with a total principal balance of
approximately $214,686,248,
-- Approximately $35,313,752 in the Accumulation Account, and
-- Approximately $300,000 in the Pre-funding Interest Account.
Additional RTLs may be added to the revolving portfolio on future
additional transfer dates, subject to the transaction's eligibility
criteria.
MFA 2024-RTL3 represents the sixth RTL securitization issued by the
Sponsor and Trust Manager, MFA Financial, Inc. Formed in 1997, MFA
is a hybrid mortgage real estate investment trust (REIT) primarily
engaged in the business of investing, on a leveraged basis, in
residential mortgage assets. Lima One Capital, LLC is the
Originator, Asset Manager, and Servicer for the transaction. Formed
in 2010, acquired by MFA in 2021, and headquartered in Greenville,
South Carolina, Lima One is a specialty finance company that
originates and services first-lien residential mortgages to real
estate investors on nonowner occupied investment properties
nationwide.
The revolving portfolio generally consists of first-lien,
fixed-rate, interest-only (IO) balloon RTL with original terms to
maturity of 12 to 36 months. The loans may also include extension
options, which may lengthen maturities beyond the original terms.
The characteristics of the revolving pool will be subject to
eligibility criteria specified in the transaction documents and
include:
-- A minimum non-zero weighted-average (NZ WA) FICO score of 720.
-- A maximum NZ WA Loan-to-Cost (LTC) ratio of 75.0%.
-- A maximum NZ WA As Repaired Loan-to-Value (ARV LTV) ratio of
70.0%.
RTL Features
RTLs, also known as fix-and-flip mortgage loans, are short-term
bridge, construction, or renovation loans designed to help real
estate investors purchase and renovate residential or small balance
commercial properties (the latter is limited to 5.0% of the
revolving portfolio), generally within 12 to 36 months. RTLs are
similar to traditional mortgages in many aspects but may differ
significantly in terms of initial property condition, construction
draws, and the timing and incentives by which borrowers repay
principal. For traditional residential mortgages, borrowers are
generally incentivized to pay principal monthly, so they can occupy
the properties while building equity in their homes. In the RTL
space, borrowers repay their entire loan amount when they (1) sell
the property with the goal to generate a profit or (2) refinance to
a term loan and rent out the property to earn income.
In general, RTLs are short-term IO balloon loans with the full
amount of principal (balloon payment) due at maturity. The
repayment of an RTL is mainly based on the ability to sell the
related mortgaged property or to convert it into a rental property.
In addition, many RTL lenders offer extension options, which
provide additional time for borrowers to repay their mortgage
beyond the original maturity date. For the loans in this
transaction, such extensions may be granted, subject to certain
conditions, at the direction of the Asset Manager.
In the revolving portfolio, RTLs may be:
Fully funded:
-- With no obligation of further advances to the borrower,
-- With a portion of the loan proceeds allocated to a
rehabilitation (rehab) escrow account for future disbursement to
fund construction draw requests upon the satisfaction of certain
conditions, or
-- With a portion of the loan proceeds allocated to an interest
reserve escrow account for future disbursement to fund interest
reserve requests upon the satisfaction of certain conditions.
Partially funded:
-- With a commitment to fund borrower-requested draws for approved
rehab, construction, or repairs of the property (Rehabilitation
Disbursement Requests) upon the satisfaction of certain
conditions.
After completing certain construction/repairs using their own
funds, the borrower usually seeks reimbursement by making draw
requests. Generally, construction draws are disbursed only upon the
completion of approved construction/repairs and after a
satisfactory construction progress inspection. Based on the MFA
2024-RTL3 eligibility criteria, unfunded commitments are limited to
55.0% of the portfolio by unpaid principal balance (UPB).
Cash Flow Structure and Draw Funding
The transaction employs a sequential-pay cash flow structure with
bullet pay features to Class A2 and M Notes on their respective
mandatory redemption dates. During the reinvestment period, the
Notes will generally be IO. During and after the reinvestment
period, principal and interest collections will be used to pay
interest to the Notes, sequentially. After the reinvestment period,
available funds will be applied as principal to pay down Class A1,
until reduced to zero. Class A2 and M are not entitled to any
payments of principal until the earliest of the optional redemption
date, the related note mandatory redemption date, or the occurrence
of an Event of Default (EOD). Prior to any related redemption date
or an EOD, any available funds remaining after Class A1 is paid in
full will be deposited into the Redemption Account. If the Issuer
does not redeem the Class A Notes by the payment date in April
2027, the note rates for each class will step up by 1.000%.
This transaction incorporates a debt for tax structure and the
interest rates on the Notes are set at fixed rates, which are not
capped by the net weighted-average coupon (Net WAC) or available
funds. This feature, along with the bullet feature, causes the
structure to have elevated subordination levels relative to a
comparable structure with fixed-capped interest rates and no bullet
feature because interest entitlements are generally higher, and
more principal may be needed to cover interest shortfalls.
Morningstar DBRS considered such nuanced features and incorporated
them in its cash flow analysis. The cash flow structure is
discussed in more detail in the Cash Flow Structure and Features
section of the related presale report.
There will be no advancing of delinquent (DQ) principal or interest
on any mortgage by the Servicer or any other party to the
transaction. However, the Servicer is obligated to fund Servicing
Advances which include taxes, insurance premiums, and reasonable
costs incurred in the course of servicing and disposing properties.
Such Servicing Advances will be reimbursable from collections and
other recoveries prior to any payments on the Notes.
The Servicer will satisfy Rehabilitation Disbursement Requests by,
(1) for loans with funded commitments, releasing funds from the
Rehab Escrow Account to the applicable borrower; or (2) for loans
with unfunded commitments, (a) advancing funds on behalf of the
Issuer (Rehabilitation Advances), (b) releasing funds from
principal collections on deposit in the collection account, or (c)
directing the release of funds from the Accumulation Account. The
Servicer will be entitled to reimburse itself for Rehabilitation
Disbursement Requests from time to time from the Accumulation
Account.
The Accumulation Account is replenished from the transaction cash
flow waterfall, after payment of interest to the Notes, to maintain
a minimum required funding balance. During the reinvestment period,
amounts held in the Accumulation Account, along with the mortgage
collateral, must be sufficient to maintain a minimum credit
enhancement (CE) of approximately 11.40% to the most subordinate
rated class. The transaction incorporates a Minimum Credit
Enhancement Test during the reinvestment period, which if breached,
redirects available funds to pay down the Notes, sequentially,
prior to replenishing the Accumulation Account, to maintain the
minimum CE for the rated Notes.
The transaction also employs the Expense Reserve Account, which
will be available to cover fees and expenses. The Expense Reserve
Account is replenished from the transaction cash flow waterfall,
before payment of interest to the Notes, to maintain a minimum
reserve balance.
Historically, Lima One RTL originations have generated robust
mortgage repayments, which have been able to cover unfunded
commitments in securitizations. In the RTL space, because of the
lack of amortization and the short term nature of the loans,
mortgage repayments (paydowns and payoffs) tend to occur closer to
or at the related maturity dates when compared with traditional
residential mortgages. Morningstar DBRS considers paydowns to be
unscheduled voluntary balance reductions (generally repayments in
full) that occur prior to the maturity date of the loans, while
payoffs are scheduled balance reductions that occur on the maturity
or extended maturity date of the loans. In its cash flow analysis,
Morningstar DBRS evaluated historical mortgage repayments relative
to draw commitments and incorporated several stress scenarios where
paydowns may or may not sufficiently cover draw commitments. Please
see the Cash Flow Analysis section of the related presale report
for more details.
Other Transaction Features
Optional Redemption
On any date after the earlier of (1) the Payment Date following the
termination of the Reinvestment Period or (2) the date on which the
aggregate Note Amount falls to 25% or less of the initial Closing
Date Note Amount, the Issuer, at its option, may purchase all of
the outstanding Notes at the Redemption Price (par plus interest
and fees).
Repurchase Option
The Depositor will have the option to repurchase mortgage loans at
the Repurchase Price (par plus interest and fees) if (1) amounts in
the Accumulation Account are insufficient to fund such loan's
unfunded commitments, (2) such mortgage loan becomes DQ or
defaulted, or (3) the maturity date of such mortgage loan extends
by more than six months beyond its original maturity date. Such
voluntary repurchases may not exceed 10.0% of the cumulative UPB of
the mortgage loans. During the reinvestment period, if the Sponsor
repurchases DQ or defaulted loans, this could potentially delay the
natural occurrence of an early amortization event based on the DQ
or default trigger. Morningstar DBRS' revolving structure analysis
assumes the repayment of Notes is reliant on the amortization of an
adverse pool regardless of whether it occurs early or not.
Sales of Mortgage Loans
The Issuer may sell a mortgage loan under the following
circumstances:
-- The Representation Provider is required to repurchase a loan
because of a material breach or a material document defect,
-- The Depositor elects to exercise its Repurchase Option subject
to the repurchase limit,
-- An optional redemption occurs, or
-- The Issuer sells a mortgage loan to an affiliate at fair market
value but such price must be at least par plus interest.
U.S. Credit Risk Retention
The Depositor, a majority-owned affiliate of the Sponsor, will
initially retain an eligible horizontal residual interest
comprising at least 5% of the aggregate fair value of the
securities to satisfy the credit risk retention requirements.
Notes: All figures are in U.S. dollars unless otherwise noted.
MJX VENTURE II: Moody's Cuts Rating on Series A/Cl. E Notes to Ba3
------------------------------------------------------------------
Moody's Ratings has downgraded the rating on the following notes
issued by MJX Venture Management II LLC (the "Issuer" or "MJX VM
II") and collateralized by notes issued by Venture XXVII CLO,
Limited:
US$1,475,000 Series A/Class E Notes due 2030, Downgraded to Ba3
(sf); previously on October 30, 2020 Confirmed at Ba1 (sf)
The Series A/Class E Notes, together with the other notes issued by
the Issuer (the "Rated Notes"), are collateralized primarily by 5%
of certain rated notes (the "Underlying CLO Notes") issued by
Venture XXVII CLO, Limited (the "Underlying CLO"). The Rated Notes
were issued in May 2017 in order to comply with the retention
requirements of both the US and EU Risk Retention Rules.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
RATINGS RATIONALE
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's September 2024 report, the OC ratio for the
Underlying CLO Class E notes are reported at 103.37% [1] versus
October 2023 level of 104.33% [2], respectively. Furthermore,
based on Moody's calculation, the current weighted average rating
factor (WARF) has increased to 2969 from 2592 in August 2023,
which Moody's attribute in part to increased exposure to unrated
obligors or instruments.
No actions were taken on the Series A/Class A, Series A/Class B,
Series A/Class C and Series A/Class D notes because their expected
losses remain commensurate with their current ratings, after taking
into account the Underlying 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: $445,530,453
Defaulted par: $5,160,908
Diversity Score: 77
Weighted Average Rating Factor (WARF): 2969
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.39%
Weighted Average Coupon (WAC): 8.00%
Weighted Average Recovery Rate (WARR): 47.06%
Weighted Average Life (WAL): 3.15 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, and, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
MORGAN STANLEY 2019-L2: DBRS Cuts Class E Certs Rating to B
-----------------------------------------------------------
DBRS Limited downgraded the credit ratings on eight classes of
Commercial Mortgage Pass-Through Certificates, Series 2019-L2
issued by Morgan Stanley Capital I Trust 2019-L2 as follows:
-- Class A-S to AA (sf) from AAA (sf)
-- Class X-B to A (high) (sf) from AA (high) (sf)
-- Class B to A (sf) from AA (sf)
-- Class C to BBB (sf) from A (sf)
-- Class D to BB (sf) from BBB (high) (sf)
-- Class X-D to B (high) (sf) from BBB (sf)
-- Class E to B (sf) from BBB (low) (sf)
-- Class F-RR to CCC (sf) from B (low) (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 G-RR at CCC (sf)
Morningstar DBRS changed the trends on Classes A-S, B, C, D, E,
X-B, and X-D to Stable from Negative. There are no trends on
Classes F-RR and G-RR, which have credit ratings that do not
typically carry trends in commercial mortgage-backed securities
(CMBS) credit ratings. All other classes have Stable trends.
The credit rating downgrades are reflective of the increased loss
projections for three of the loans in special servicing. According
to the October 2024 remittance, there are six specially serviced
loans, representing 13.8% of the pool balance. Morningstar DBRS'
analysis included a liquidation scenario for three of these loans,
resulting in implied losses of approximately $30 million, an
increase from the $20.0 million in modelled implied losses at the
time of the last credit rating action in October 2023. The primary
contributor to the increase in Morningstar DBRS' loss projections
is the liquidation scenario for the State of Kentucky Portfolio
(Prospectus ID#16; 2.5% of the current pool balance), which
received an updated appraisal in December 2023, valuing the
property approximately 10% below the previous valuation, and 60%
below the issuance appraisal. The loan is secured by five
government-occupied office buildings throughout Frankfort,
Kentucky. The portfolio reported a consolidated occupancy rate of
51.1% as of the September 2023 rent roll, with leases representing
38.6% of the net rentable area (NRA) scheduled to roll in the next
12 months. Morningstar DBRS liquidated the loan as part of the
analysis, resulting in implied losses of approximately $15.0
million. The total implied losses from the liquidation scenarios
are contained to the nonrated Class H-RR, but reduce credit
enhancement to the junior bonds, supporting the credit rating
downgrades on Classes E, X-D, and F-RR.
Morningstar DBRS' expected loss (EL) for the remaining loans in the
pool has continued to increase from the last credit rating action.
Outside of the liquidated loans in special servicing, Morningstar
DBRS has identified an additional nine loans, representing 23.1% of
the pool balance, primarily backed by office properties, that
continue to exhibit performance declines. Excluding the defeased
loans, the pool is most concentrated by office properties, which
represent approximately 40.0% of the pool balance. Eight office
loans (22.6% of the pool) are secured by properties with
concentrated tenancy, where either a single tenant or the two
largest tenants collectively represent more than 50.0% of the net
rentable area (NRA). While most of the leases in place at these
properties extend beyond the respective loan maturity dates,
Morningstar DBRS notes specific concern about CompuCom World
Headquarters (Prospectus ID#11; 2.7% of the pool), which is secured
by an office property in Fort Mill, South Carolina. The subject is
fully leased to CompuCom on a lease through October 2032, but the
tenant is actively advertising the entirety of its space for
sublease on Loopnet. The tenant has no termination options, and a
cash trap will be triggered in the event that the tenant goes dark.
Morningstar DBRS inquired about the tenant's status at the subject
but has not received a response as of this commentary. The issuance
appraisal noted a dark value of $25.4 million, which results in a
loan-to-value ratio (LTV) approaching 100%. Though the borrower has
been trapping excess cash since 2021 and CompuCom is obligated to
uphold its contractual payments until lease maturity, given the
generally challenged suburban office submarket and the concentrated
tenancy at the subject, Morningstar DBRS analyzed this loan with a
stressed LTV and applied a probability of default (POD) penalty,
resulting in an EL that is double the pool average.
Where applicable, Morningstar DBRS increased PODs, and, in certain
cases, applied stressed LTVs for loans that have exhibited
increased risks from issuance. The resulting weighted-average (WA)
EL for these loans is 60% higher than the pool's average and
suggests negative pressure toward the top of the capital stack,
supporting the credit rating downgrades on Classes A-S, B, C, D,
and X-B. Morningstar DBRS notes that the credit deterioration and
increased term default risk in the pool, mainly attributable to
loans noted above, has increased the overall credit risk of the
pool from issuance; thus, the current credit ratings are now
reflective of the updated credit profile of the transaction. As a
result, Morningstar DBRS has changed the trends on all classes to
Stable from Negative with this credit rating action as the modelled
risk in the transaction is reflective of any near to medium term
risk.
As of the October 2024 remittance, 48 of the original 50 loans
remain in the trust with an aggregate balance of $892.5 million,
representing a collateral reduction of 4.5% since issuance. The
pool also benefits from four fully defeased loans, representing
9.3% of the current pool balance. Eight loans, representing 11.8%
of the pool, are on the servicer's watchlist being monitored
primarily for performance-related concerns.
The largest loan in special servicing is Le Meridian Hotel Dallas
(Prospectus ID#4; 4.6% of the current pool balance), which is
secured by a 258-key full-service hotel in Dallas, approximately
12.0 miles north of the central business district. The loan
transferred to the special servicer at the onset of the pandemic as
per the borrower's request. The borrower filed for bankruptcy in
April 2022 and, according to the servicer, the borrower appears to
be in compliance with the payment plan structured in the bankruptcy
proceedings. However, Morningstar DBRS notes that the loan is
delinquent on its September 2024 payment, which could pose
foreclosure risk for the asset and breach the borrower's payment
plan. According to the provided STR report, the subject reported an
occupancy rate, average daily rate, and revenue per available room
(RevPAR) of 63.5%, $150.75, and $95.70, respectively, for the
trailing 12 months ended March 31, 2024. Though the loan has been
reporting below breakeven DSCRs for the past few years, the
property is outperforming its competitive set with a RevPAR
penetration of 167.5%. The property was reappraised in December
2023 at $62.0 million, which is in line with the issuance appraised
value of $61.2 million. Morningstar DBRS adjusted the LTV to
reflect the most recent appraisal, resulting in an EL that is in
line with the pool's average EL.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2022-18: Fitch Assigns BB-(EXP) Rating on E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Morgan Stanley Eaton Vance CLO 2022-18, Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Morgan Stanley
Eaton Vance CLO
2022-18, 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
Morgan Stanley Eaton Vance CLO 2022-18, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that is
managed by Morgan Stanley Eaton Vance CLO Manager LLC. The
transaction originally closed in October 2022 and is being
refinanced. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $397 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 23.59, versus a maximum covenant, in accordance with
the initial expected matrix point of 24.5. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.23% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.51% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.7%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 42.5% 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 weighted average life (WAL) used for the transaction stress
portfolio and matrices analysis is 12 months less than the WAL
covenant to account for structural and reinvestment conditions
after the reinvestment period. In Fitch's opinion, these conditions
would reduce the effective risk horizon of the portfolio during
stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1-R; between
'BBB+sf' and 'AA+sf' for class A-2-R; between 'BB+sf' and 'A+sf'
for class B-R; between 'B+sf' and 'BBB+sf' for class C-R; between
less than 'B-sf' and 'BB+sf' for class D-1-R; between less than
'B-sf' and 'BB+sf' for class D-2-R; and between less than 'B-sf'
and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R and class
A-2-R notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AA+sf' for class C-R, 'A+sf'
for class D-1-R, 'A-sf' for class D-2-R, and 'BBB+sf' for class
E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Morgan Stanley
Eaton Vance CLO 2022-18, 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.
NEUBERGER BERMAN 52: Fitch Assigns 'BB-sf' Rating on Cl. E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Neuberger
Berman Loan Advisers NBLA CLO 52, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Neuberger Berman
Loan Advisers NBLA
CLO 52, Ltd.
A-2 64135FAC4 LT PIFsf Paid In Full AAAsf
A-R LT NRsf New Rating NR(EXP)sf
B 64135FAE0 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating AA(EXP)sf
C 64135FAJ9 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating A(EXP)sf
D 64135FAG5 LT PIFsf Paid In Full BBB-sf
D-1R LT BBB-sf New Rating BBB-(EXP)sf
D-2R LT BBB-sf New Rating BBB-(EXP)sf
E 64135EAA1 LT PIFsf Paid In Full BB+sf
E-R LT BB-sf New Rating BB-(EXP)sf
Transaction Summary
Neuberger Berman Loan Advisers NBLA CLO 52, Ltd. (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) managed by
Neuberger Berman Loan Advisers II LLC that originally closed
December 2022. On Oct. 24, 2024 (the reset date), the CLO's
existing secured notes will be redeemed in full with refinancing
proceeds. The secured and subordinated notes will provide financing
on a portfolio of approximately $485 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 25.23, versus a maximum covenant, in
accordance with the initial expected matrix point of 25.5. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
94.77% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.26% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.4%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40.75% 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 '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-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
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-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 Neuberger Berman
Loan Advisers NBLA CLO 52, 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 any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
OAKTREE CLO 2022-2: 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
Oaktree CLO 2022-2 Ltd./Oaktree CLO 2022-2 LLC, a CLO managed by
Oaktree Capital Management L.P. that was originally issued in June
2022 and refinanced in January 2024. At the same time, S&P withdrew
its ratings on the class A-1-R, A-2-R, B-R, C-R, D-R, and E-R debt
following payment in full on the Oct. 30, 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 debt was issued at a lower weighted average
cost of debt than the previous debt.
-- Class D-R was split into replacement classes D-1-R2 and D-2-R2,
which are sequential in payment.
-- The non-call period was extended to Oct. 30, 2026.
-- The reinvestment period was extended to Oct. 15, 2029.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) were extended to Oct. 15, 2037.
-- The target initial par amount remains at $500 million. There is
no additional effective date or ramp-up period, and the first
payment date following the refinancing is Jan. 15, 2025.
-- The required minimum overcollateralization and interest
coverage ratios were amended.
-- No additional subordinated notes were issued on the refinancing
date.
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
Oaktree CLO 2022-2 Ltd./Oaktree CLO 2022-2 LLC
Class A-1-R2, $320.0 million: AAA (sf)
Class A-2-R2, $10.0 million: AAA (sf)
Class B-R2, $50.0 million: AA (sf)
Class C-R2 (deferrable), $30.0 million: A (sf)
Class D-1-R2 (deferrable), $30.0 million: BBB (sf)
Class D-2-R2 (deferrable), $5.0 million: BBB- (sf)
Class E-R2 (deferrable), $15.0 million: BB (sf)
Ratings Withdrawn
Oaktree CLO 2022-2 Ltd./Oaktree CLO 2022-2 LLC
Class A-1-R to not rated from 'AAA (sf)'
Class A-2-R to not rated from 'AAA (sf)'
Class B-R to not rated from 'AA (sf)'
Class C-R to not rated from 'A (sf)'
Class D-R to not rated from 'BBB- (sf)'
Class E-R to not rated from 'BB- (sf)'
Other Debt
Oaktree CLO 2022-2 Ltd./Oaktree CLO 2022-2 LLC
Subordinated notes, $41.8 million: Not rated
OCP CLO 2020-8R: 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, and E-R replacement debt from OCP CLO 2020-8R
Ltd./OCP CLO 2020-8R LLC, a CLO originally issued in January 2021
that is managed by Onex Credit Partners LLC, a subsidiary of Onex
Corp.
The preliminary ratings are based on information as of Oct. 29,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 7, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. S&P
said, "At that time, we expect to withdraw our ratings on the
original debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-1R, D-2R, and E-R debt
is expected to be issued at a spread over three-month SOFR.
-- The replacement class D-2R debt is expected to be issued at a
fixed coupon.
-- The stated maturity, reinvestment period, and non-call period
will be extended by four and a half years, three and a half years,
and three and a half years, respectively.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
OCP CLO 2020-8R Ltd./OCP CLO 2020-8R LLC
Class A-R, $256.00 million: AAA (sf)
Class B-R, $48.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-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)
Other Debt
OCP CLO 2020-8R Ltd./OCP CLO 2020-8R LLC
Subordinated notes, $80.55 million: Not rated
OCP CLO 2021-22: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class X,
A-R, B-R, C-R, D-1R, D-2R, and E-R replacement debt from OCP CLO
2021-22 Ltd., a CLO originally issued in December 2021 that is
managed by Blackstone Liquid Credit Strategies LLC.
On the Nov. 8, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. S&P
said, "At that time, we expect to withdraw our ratings on the
original debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The non-call period will be extended to Oct. 20, 2026.
-- The reinvestment period will be extended to Oct. 20, 2029.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) will be extended to Oct. 20,
2037.
-- The target initial par amount will remain at $550 million.
-- There will be no additional effective date or ramp-up period,
and the first payment date following the refinancing is Jan. 20,
2025.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- $4.45 million of additional subordinated notes will be issued
on the refinancing date.
-- The transaction has adopted benchmark replacement language that
was updated to conform to current rating agency methodology.
Replacement And Original Debt Issuances
Replacement debt
-- Class X, $5.00 million: Three-month CME term SOFR + 1.00%
-- Class A-R, $352.00 million: Three-month CME term SOFR + 1.35%
-- Class B-R, $66.00 million: Three-month CME term SOFR + 1.70%
-- Class C-R (deferrable), $33.00 million: Three-month CME term
SOFR + 1.95%
-- Class D-1R (deferrable), $33.00 million: Three-month CME term
SOFR + 3.00%
-- Class D-2R (deferrable), $5.50 million: 7.659%
-- Class E-R (deferrable), $16.50 million: Three-month CME term
SOFR + 5.75%
Original debt
-- Class A, $346.50 million: Three-month CME term SOFR + 1.44%
-- Class B-1, $56.00 million: Three-month CME term SOFR + 1.96%
-- Class B-2, $15.50 million: 2.678%
-- Class C (deferrable), $33.00 million: Three-month CME term SOFR
+ 2.31%
-- Class D (deferrable), $33.00 million: Three-month CME term SOFR
+ 3.36%
-- Class E (deferrable), $22.00 million: Three-month CME term SOFR
+ 6.86%
-- Subordinated notes, $51.00 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
OCP CLO 2021-22 Ltd./OCP CLO 2021-22 LLC
Class X, $5.00 million: AAA (sf)
Class A-R, $352.00 million: AAA (sf)
Class B-R, $66.00 million: AA (sf)
Class C-R (deferrable), $33.00 million: A (sf)
Class D-1R (deferrable), $33.00 million: BBB (sf)
Class D-2R (deferrable), $5.50 million: BBB- (sf)
Class E-R (deferrable), $16.50 million: BB- (sf)
Other Debt
OCP CLO 2021-22 Ltd./ OCP CLO 2021-22 LLC
Subordinated notes, $55.45 million: Not rated
OCTANE RECEIVABLES 2024-3: S&P Assigns Prelim BB Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Octane
Receivables Trust 2024-3's asset-backed notes.
The note issuance is an ABS transaction backed by consumer
powersport receivables.
The preliminary ratings are based on information as of Oct. 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 availability of approximately 28.81%, 22.60%, 16.57%,
10.82%, and 8.48% in credit support, including excess spread, for
the class A (A-1 and A-2), B, C, D, and E notes, respectively,
based on stressed cash flow scenarios. These credit support levels
provide at least 5.00x, 4.00x, 3.00x, 2.00x, and 1.60x coverage of
our stressed net loss levels for the class A, B, C, D, and E notes,
respectively.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
preliminary ratings.
-- The expectation that under a moderate ('BBB') stress scenario
(2.00x S&P's expected loss level), all else being equal, its
preliminary ratings will be within the credit stability limits
specified in section A.4 of the Appendix in "S&P Global Ratings
Definitions," published June 9, 2023.
-- The collateral characteristics of the amortizing pool of
consumer powersports receivables, including the high percentage
(approximately 77.51%) of the outstanding principal balance in
credit tiers 1 and 2.
-- The transaction's credit enhancement in the form of
subordination, overcollateralization that builds to a target level
of 12.90% of the current receivables balance, a nonamortizing
reserve account, and excess spread.
-- The transaction's sequential-pay structure, which builds credit
enhancement (on a percentage of receivables basis) as the pool
amortizes.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
Octane Receivables Trust 2024-3
Class A-1, $63.30 million: A-1+ (sf)
Class A-2, $185.92 million: AAA (sf)
Class B, $22.61 million: AA (sf)
Class C, $21.59 million: A (sf)
Class D, $22.44 million: BBB (sf)
Class E, $10.54 million: BB (sf)
OHA CREDIT 6: S&P Assigns Prelim BB- (sf) Rating on Cl. E-R2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the
replacement class X-R2, A-R2, B-1-R2, B-2-R2, C-R2, D-1-R2, D-2-R2,
and E-R2 debt from OHA Credit Funding 6 Ltd., a CLO managed by Oak
Hill Advisors L.P. that was originally issued in July 2020 and
underwent a refinancing in July 2021.
The preliminary ratings are based on information as of Oct. 24,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 1, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the current debt. S&P said,
"At that time, we expect to withdraw our ratings on the current
debt and assign ratings to the replacement debt. However, if the
refinancing doesn't occur, we may affirm our ratings on the current
debt and withdraw our preliminary ratings on the replacement
debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The current class B-R debt is expected to be replaced by two
classes of pari passu floating- and fixed-rate debt (classes B-1-R2
and B-2-R2, respectively).
-- The current class D-R debt is expected to be replaced by two
classes of floating-rate debt (classes D-1-R2 and D-2-R2). The
class D-1-R2 debt will be senior to the class D-2-R2 debt.
-- The non-call period will be extended to Oct. 20, 2026.
-- The reinvestment period will be extended to Oct. 20, 2029.
-- The legal final maturity dates for the replacement debt and the
current subordinated notes will be extended to Oct. 20, 2037.
-- The proposed class X-R2 debt is expected to be paid down using
interest proceeds during the first eight payment dates beginning
with the payment date on Jan. 20, 2025.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
OHA Credit Funding 6 Ltd./OHA Credit Funding 6 LLC
Class X-R2, $1.00 million: AAA (sf)
Class A-R2, $341.00 million: AAA (sf)
Class B-1-R2, $65.00 million: AA (sf)
Class B-2-R2, $12.00 million: AA (sf)
Class C-R2 (deferrable), $33.00 million: A (sf)
Class D-1-R2 (deferrable), $33.00 million: BBB- (sf)
Class D-2-R2 (deferrable), $5.50 million: BBB- (sf)
Class E-R2 (deferrable), $16.50 million: BB- (sf)
Subordinated notes, $37.75 million: Not rated
ORION TRUST 2024-1: S&P Assigns B (sf) Rating on Class F Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to eight classes of
residential mortgage-backed securities (RMBS) issued by Perpetual
Corporate Trust Ltd. as trustee of Orion Trust 2024-1. Orion Trust
2024-1 is a securitization of prime and nonconforming residential
mortgage loans originated by Brighten Financial Pty Ltd.
The ratings reflect the following factors.
The credit risk of the underlying collateral portfolio, which
predominantly comprises residential mortgage loans to prime-quality
Australian resident borrowers, and the credit support provided to
each class of notes are commensurate with the ratings assigned.
Credit support is provided by subordination and excess spread, if
any. S&P's assessment of credit risk considers Brighten Financial's
underwriting standards and approval process, and its servicing
quality.
The rated notes can meet timely payment of interest and ultimate
payment of principal under the rating stresses. Key rating factors
are the level of subordination provided, principal draw function,
provision of a liquidity facility, and provision of an
extraordinary expense reserve. S&P said, "Our analysis is on the
basis that the notes are fully redeemed via the principal waterfall
mechanism under the transaction documents by their legal final
maturity date, and we assume the notes are not called at or beyond
the call-option date."
S&P said, "Our ratings also take into account the counterparty
exposure to Westpac Banking Corp. as bank account provider and
liquidity facility provider. We also have factored into our ratings
the legal structure of the trust, which is established as a
special-purpose entity and meets our criteria for insolvency
remoteness.
"We have assessed the servicing and standby servicing arrangements
in this transaction under our "Global Framework For Assessing
Operational Risk In Structured Finance Transactions" criteria,
published Oct. 9, 2014, and concluded that there are no constraints
on the maximum rating that can be assigned to the notes."
Ratings Assigned
Orion Trust 2024-1
Class A-S, A$140.00 million: AAA (sf)
Class A-L, A$420.00 million: AAA (sf)
Class A2, A$64.68 million: AAA (sf)
Class B, A$35.98 million: AA (sf)
Class C, A$20.44 million: A (sf)
Class D, A$10.22 million: BBB (sf)
Class E, A$3.50 million: BB (sf)
Class F, A$2.66 million: B (sf)
Class G, A$2.52 million: Not rated
PRPM 2024-RCF6: DBRS Finalizes BB Rating on Class M-2 Notes
-----------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
Mortgage-Backed Notes, Series 2024-RCF6 (the Notes) to be issued by
PRPM 2024-RCF6, LLC (PRPM 2024-RCF6 or the Trust):
-- $92.7 million Class A-1 at AAA (sf)
-- $7.9 million Class A-2 at AA (sf)
-- $8.0 million Class A-3 at A (sf)
-- $8.8 million Class M-1 at BBB (sf)
-- $8.7 million Class M-2 at BB (sf)
The AAA (sf) credit rating on the Class A-1 Notes reflects 38.55%
of credit enhancement provided by the subordinated notes. The AA
(sf), A (high) (sf), BBB (high) (sf), and BB (low) (sf) credit
ratings reflect 33.30%, 28.00%, 22.15%, and 16.40% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of newly originated
and seasoned, performing and reperforming, first-lien residential
mortgages, to be funded by the issuance of mortgage-backed notes
(the Notes). The Notes are backed by 675 loans with a total
principal balance of $150,885,691 as of the Cut-Off Date (August
31, 2024).
Morningstar DBRS calculated the portfolio to be approximately 103
months seasoned on average, though the age of the loans is quite
dispersed, ranging from two months to 385 months. Approximately
43.2% 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, 44.7% of the loans are modified. The
modifications happened more than two years ago for 72.7% of the
modified loans. Within the portfolio, 165 mortgages have
non-interest-bearing deferred amounts, equating to 5.2% 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
(44.9%) are not subject to or exempt from the Consumer Financial
Protection Bureau's (CFPB) Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules because of seasoning or because they are
business-purpose loans. The loans subject to the ATR rules are
designated as QM Safe Harbor (46.9%), QM Rebuttable Presumption
(7.3%), and Non-Qualified Mortgage (Non-QM; 0.9%) by UPB.
BMCF-EG II, LLC (the Sponsor) acquired the mortgage loans prior to
the up-coming Closing Date and, through a wholly owned subsidiary,
PRP Depositor 2024-RCF6, LLC (the Depositor), will contribute the
loans to the Trust. As the Sponsor, BMCF-EG II, 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-RCF6 is the eighth 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 (SNSC; 99.5%) and Fay Servicing, LLC (Fay
Servicing; 0.5%) will act as the Servicers of the mortgage loans.
The Servicers will not advance any delinquent principal and
interest (P&I) on the mortgages; however, the Servicers are
obligated to make advances in respect of prior liens, insurance,
real estate taxes, and assessments as well as reasonable costs and
expenses incurred in the course of servicing and disposing of
properties.
The Issuer has the option to redeem the Notes in full at a price
equal to the sum of (1) the remaining aggregate Note Amount; (2)
any accrued and unpaid interest due on the Notes through the
redemption date (including any Cap Carryover); and (3) any fees and
expenses of the transaction parties, including any unreimbursed
servicing advances (Redemption Price). Such Optional Redemption may
be exercised on or after the payment date in October 2026.
Additionally, a failure to pay the Notes in full by the Payment
Date in October 2029 will trigger a mandatory auction of the
underlying certificates on the November 2029 payment date 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 subsequently 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 (Payment Date in October 2028) 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 sale 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 October
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 January 2031, or an Event of Default occurs and is
continuing, a Credit Event will have occurred. Upon the occurrence
of a Credit Event, accrued interest on Class A-2 and the other
offered Notes will be paid as principal to Class A-1 or the
succeeding senior Notes until it has been paid in full. The
redirected amounts will accrue on the balances of the respective
Notes and will later be paid as principal payments.
Notes: All figures are in US dollars unless otherwise noted.
RADIAN MORTGAGE 2024-J2: DBRS Finalizes B(low) Rating on B-5 Certs
------------------------------------------------------------------
DBRS, Inc. finalized the following provisional credit ratings on
the Mortgage Pass-Through Certificates, Series 2024-J2 (the
Certificates) issued by the Radian Mortgage Capital Trust 2024-J2
(RMCT 2024-J2):
-- $387.2 million Class A-1 at AAA (sf)
-- $387.2 million Class A-1-X at AAA (sf)
-- $387.2 million Class A-2 at AAA (sf)
-- $359.7 million Class A-3 at AAA (sf)
-- $359.7 million Class A-3-X at AAA (sf)
-- $359.7 million Class A-4 at AAA (sf)
-- $179.8 million Class A-5 at AAA (sf)
-- $179.8 million Class A-5-X at AAA (sf)
-- $179.8 million Class A-6 at AAA (sf)
-- $215.9 million Class A-7 at AAA (sf)
-- $215.9 million Class A-7-X at AAA (sf)
-- $215.9 million Class A-8 at AAA (sf)
-- $36.0 million Class A-9 at AAA (sf)
-- $36.0 million Class A-9-X at AAA (sf)
-- $36.0 million Class A-10 at AAA (sf)
-- $89.9 million Class A-11 at AAA (sf)
-- $89.9 million Class A-11-X at AAA (sf)
-- $89.9 million Class A-12 at AAA (sf)
-- $53.9 million Class A-13 at AAA (sf)
-- $53.9 million Class A-13-X at AAA (sf)
-- $53.9 million Class A-14 at AAA (sf)
-- $269.7 million Class A-15 at AAA (sf)
-- $269.7 million Class A-15-X at AAA (sf)
-- $269.7 million Class A-16 at AAA (sf)
-- $179.8 million Class A-17 at AAA (sf)
-- $179.8 million Class A-17-X at AAA (sf)
-- $179.8 million Class A-18 at AAA (sf)
-- $143.9 million Class A-19 at AAA (sf)
-- $143.9 million Class A-19-X at AAA (sf)
-- $143.9 million Class A-20 at AAA (sf)
-- $89.9 million Class A-21 at AAA (sf)
-- $89.9 million Class A-21-X at AAA (sf)
-- $89.9 million Class A-22 at AAA (sf)
-- $27.5 million Class A-23 at AAA (sf)
-- $27.5 million Class A-23-X at AAA (sf)
-- $27.5 million Class A-24 at AAA (sf)
-- $387.2 million Class A-X at AAA (sf)
-- $21.2 million Class B-1 at AA (low) (sf)
-- $21.2 million Class B-1-A at AA (low) (sf)
-- $21.2 million Class B-1-X at AA (low) (sf)
-- $5.9 million Class B-2 at A (low) (sf)
-- $5.9 million Class B-2-A at A (low) (sf)
-- $5.9 million Class B-2-X at A (low) (sf)
-- $4.4 million Class B-3 at BBB (low) (sf)
-- $4.4 million Class B-3-A at BBB (low) (sf)
-- $4.4 million Class B-3-X at BBB (low) (sf)
-- $1.9 million Class B-4 at BB (low) (sf)
-- $1.1 million Class B-5 at B (low) (sf)
-- $31.5 million Class B at BBB (low) (sf)
-- $31.5 million Class B-X at BBB (low) (sf)
Classes A-1-X, A-3-X, A-5-X, A-7-X, A-9-X, A-11-X, A-13-X, A-15-X,
A-17-X, A-19-X, A-21-X, A-23-X, A-X, B-1-X, B-2-X, B-3-X, and B-X
are interest-only (IO) certificates. The class balances represent
notional amounts.
Classes A-1, A-1-X, A-2, A-3, A-3-X, A-4, A-6, A-7, A-7-X, A-8,
A-10, A-11, A-11-X, A-12, A-14, A-15, A-15-X, A-16, A-17, A-17-X,
A-18, A-19, A-19-X, A-20, A-22, A-24, B-1, B-2 and B-3 are
exchangeable certificates. These classes can be exchanged for
combinations of exchange certificates as specified in the offering
documents.
Classes A-5, A-9, A-13, and A-21 are super-senior certificates.
These classes benefit from additional protection from the senior
support certificate (Class A-23) with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 8.50% of credit
enhancement provided by subordinated certificates. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf)
ratings reflect 3.50%, 2.10%, 1.05%, 0.60%, and 0.35% of credit
enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The transaction is a securitization of a portfolio of first-lien
fixed-rate prime residential mortgages funded by the issuance of
the Mortgage Pass-Through Certificates, Series 2024-J2 (the
Certificates). The Certificates are backed by 409 loans with a
total principal balance of $423,129,527 as of the Cut-Off Date
(October 1, 2024).
The pool consists of fully amortizing fixed-rate mortgages with
original terms to maturity of 30 years and a weighted-average (WA)
loan age of 3 months. Approximately 88.0% of the loans are
traditional, nonagency, prime jumbo mortgage loans. The remaining
12.0% of the loans are conforming mortgage loans that were
underwritten using an automated underwriting system (AUS)
designated by Fannie Mae or Freddie Mac and were eligible for
purchase by such agencies. Details on the underwriting of
conforming loans can be found in the Key Probability of Default
Drivers section. In addition, all of the loans in the pool were
originated in accordance with the new general Qualified Mortgage
(QM) rule.
Rocket Mortgage, LLC (Rocket Mortgage) originated 56.4% of the
pool. Various other originators, each comprising less than 15%,
originated the remainder of the loans. All the mortgage loans will
be serviced by Shellpoint Mortgage Servicing (Shellpoint or SMS).
Computershare Trust Company, N.A. (Computershare; rated BBB with a
Stable trend by Morningstar DBRS) will act as the Master Servicer
and Securities Administrator. Wilmington Trust, National
Association will serve as Trustee. Deutsche Bank National Trust
Company (Deutsche Bank) will act as Custodian.
Notes: All figures are in US dollars unless otherwise noted.
RADIAN MORTGAGE 2024-J2: Moody's Assigns Ba1 Rating to B-4 Certs
----------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to 50 classes of
residential mortgage-backed securities (RMBS) issued by Radian
Mortgage Capital Trust 2024-J2, and sponsored by Radian Mortgage
Capital LLC.
The securities are backed by a pool of prime jumbo (88.0% by
balance) and GSE-eligible (12.0% by balance) residential mortgages
aggregated by Radian Mortgage Capital LLC (RMC) from Rocket
Mortgage, LLC (56.4% by balance) and other originators constituting
less than 10% of the loans (by balance). The loans will be serviced
by Shellpoint Mortgage Servicing d/b/a NewRez LLC.
The complete rating actions are as follows:
Issuer: Radian Mortgage Capital Trust 2024-J2
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-1-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-5-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-9-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-13-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aaa (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-15-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-17-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aaa (sf)
Cl. A-19-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-20, Definitive Rating Assigned Aaa (sf)
Cl. A-21, Definitive Rating Assigned Aaa (sf)
Cl. A-21-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-22, Definitive Rating Assigned Aaa (sf)
Cl. A-23, Definitive Rating Assigned Aaa (sf)
Cl. A-23-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-24, Definitive Rating Assigned Aaa (sf)
Cl. A-X*, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa2 (sf)
Cl. B-1-A, Definitive Rating Assigned Aa2 (sf)
Cl. B-1-X*, Definitive Rating Assigned Aa2 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-2-A, Definitive Rating Assigned A2 (sf)
Cl. B-2-X*, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-3-A, Definitive Rating Assigned Baa2 (sf)
Cl. B-3-X*, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba1 (sf)
Cl. B-5, Definitive Rating Assigned Ba3 (sf)
Cl. B, Definitive Rating Assigned A1 (sf)
Cl. B-X*, Definitive Rating Assigned A2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.28%, in a baseline scenario-median is 0.10% and reaches 4.86% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
RCKT MORTGAGE 2024-CES8: Fitch Assigns Bsf Rating on Five Tranches
------------------------------------------------------------------
Fitch Ratings has assigned ratings to the residential
mortgage-backed notes issued by RCKT Mortgage Trust 2024-CES8 (RCKT
2024-CES8).
Entity/Debt Rating Prior
----------- ------ -----
RCKT 2024-CES8
A1-A LT AAAsf New Rating AAA(EXP)sf
A1-B 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 6,320 closed-end second lien loans with
a total balance of approximately $547.0 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). The issuer upsized the pool after Fitch
published its expected ratings; there was no impact to bond credit
enhancement, expected losses or ratings.
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 11.6% 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 6,320
loans totaling $547.0 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 consisting of a weighted average (WA) Fitch model
FICO score of 740; a 38.3% debt-to-income ratio (DTI); and moderate
leverage, with a sustainable loan-to-value ratio (sLTV) of 78.6%.
Of the pool, 99.2% consists of loans where the borrower maintains a
primary residence and 0.8% represent second homes, while 87.5% of
loans were originated through a retail channel. Additionally, 65.1%
of loans are designated as safe harbor qualified mortgages (SHQM),
14.4% are higher-priced qualified mortgages (HPQM) and 20.5% are
nonqualified mortgages (non-QM, or NQM). Due to the 100% loss
severity (LS) assumption, no additional penalties were applied for
the HPQM and non-QM loan status.
Second-Lien Collateral (Negative): The entirety of the collateral
pool comprises closed-end second-lien loans originated by Rocket
Mortgage. Fitch assumed no recovery and a 100% LS based on the
historical behavior of second-lien loans in economic stress
scenarios. Fitch assumes second-lien loans default at a rate
comparable to first-lien loans; after controlling for credit
attributes, no additional penalty was applied to Fitch's
probability of default (PD) assumption.
Sequential Structure (Positive): The transaction features a typical
sequential payment structure. Principal is used to pay down the
bonds sequentially and losses are allocated reverse sequentially.
Monthly excess cash flow is derived from remaining amounts after
allocation of the interest and principal priority of payments.
These amounts will be applied as principal, first to repay any
current and previously allocated cumulative applied realized loss
amounts and then to repay any potential net WAC shortfalls. A
change from prior RCKT CES transactions is that excess interest is
no longer used to turbo down the bonds and the senior classes now
incorporate a step-up coupon of 1.00% (to the extent still
outstanding) after the 48th payment date.
While Fitch has previously analyzed CES transactions using an
interest rate cut, this stress is no longer being applied. Due to
the lack of evidence of interest rate modifications being used as a
loss mitigation tactic, the application of the stress was overly
punitive. If this re-emerges as a common form of loss mitigation or
if certain structures are overly dependent on excess interest,
Fitch may apply additional sensitivities to test the structure.
180-Day Chargeoff Feature (Positive): The Asset Manager has the
ability, but not the obligation, to instruct the servicer to write
off the balance of a loan at 180 days delinquent (DQ) based on the
Mortgage Bankers Association (MBA) delinquency method. To the
extent the servicer expects a meaningful recovery in any
liquidation scenario, the Asset Manager noteholder may direct the
servicer to continue to monitor the loan and not charge it off. The
180-day chargeoff feature will result in losses incurred sooner
while there is a larger amount of excess interest to protect
against losses.
This compares favorably with a delayed liquidation scenario, where
the loss occurs later in the life of the transaction and less
excess is available. If the loan is not charged off due to a
presumed recovery, this will provide added benefit to the
transaction, above Fitch's expectations.
Additionally, subsequent recoveries realized after the writedown at
180 days DQ (excluding forbearance mortgage or loss mitigation
loans) will be passed on to bondholders as principal.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch's incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the metropolitan statistical area level. Sensitivity
analysis was conducted at the state and national level to assess
the effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 42.6% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
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 2016-2: DBRS Confirms B(high) Rating on G Certs
-----------------------------------------------------
DBRS, Inc. confirmed all credit ratings on the classes of
Commercial Mortgage Pass-Through Certificates, Series 2016-2 issued
by Real Estate Asset Liquidity Trust (REALT) Series 2016-2 as
follows:
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AAA (sf)
-- Class X at AA (high) (sf)
-- Class D at AA (sf)
-- Class E at A (sf)
-- Class F at BB (high) (sf)
-- Class G at B (high) (sf)
All trends are Stable.
The credit rating confirmations are reflective of the pool's
overall stable performance, which remains in line with Morningstar
DBRS' expectations since last review. Since Morningstar DBRS' last
credit rating action, one loan (previously 5.2% of the pool) was
repaid in full at its scheduled maturity date. In total, loan
repayments and amortization have reduced the pool balance to $149.3
million as of the September 2024 reporting, representing a
collateral reduction of 64.6% since issuance. The majority of
remaining loans in the pool secured by nondefeased collateral have
maturity dates by YE2026 and all remaining loans benefit from some
level of meaningful recourse to the loan's sponsor. Morningstar
DBRS expects most of these loans will successfully repay at or near
their scheduled maturity dates given their current performance
remains in line with Morningstar DBRS' expectations since issuance;
however, five loans, representing 30.0% of the pool, were
identified as loans with an increased risk of default because of
performance falling below issuance expectations. As a result of
significant collateral reduction since issuance, the model results
for this review suggest positive pressure on the junior bonds in
the capital stack, but given concerns with the aforementioned five
loans and a relatively small $8.4 million unrated Class H
certificate, the credit rating confirmations are warranted.
As of the September 2024 reporting, there are three loans,
representing 21.4% of the pool, currently being monitored on the
servicer's watchlist, two of which for performance related
concerns. There is one loan, representing 5.8% of the pool, that
has been fully defeased, and no loans are delinquent or in special
servicing. The pool is concentrated by property type with office,
retail, and industrial collateral representing 36.4%, 20.2%, and
15.8% of the pool, respectively. Though the office sector has been
challenged, the majority of office loans in the pool continue to
perform, reporting a weighted-average (WA) debt service coverage
ratio (DSCR) of 1.48 times (x). With this review, Morningstar DBRS
analyzed five loans exhibiting concerning credit metrics with
stressed loan-to-value ratios (LTVs) and/or elevated probabilities
of default (PODs), resulting in a WA expected loss (EL)
approximately 2.5x the pool average.
The largest loan on the watchlist, Cameron Street Industry
Hawkesbury (Prospectus ID#6, 8.0% of the pool), is secured by two
industrial properties, 1303 Cameron and 1173 Cameron, totaling
264,256 square feet in Hawkesbury, Ontario. The loan was placed on
the watchlist in August 2024 for poor property condition, as,
according to servicer commentary, the 1173 Cameron property is not
in a functioning state and has no power nor tenants. The properties
are now presumed to be 78.2% occupied by the sole tenant at 1303
Cameron, Robert Transport (78.2% of net rentable area (NRA)), on a
month-to-month lease. According to YE2022 financials, the most
recent on file, the loan reported a net cash flow (NCF) and DSCR of
$1.2 million and 1.21x, respectively, which represent declines from
the Morningstar DBRS NCF and DSCR of $1.5 million and 1.55x,
respectively. As a mitigant; however, the loan does benefit from
being full recourse to the sponsor. Given the physical state of the
1173 Cameron building and the decline in occupancy, Morningstar
DBRS analyzed the loan utilizing an elevated POD and a stressed
LTV, resulting in an EL greater than 5x the pool average.
Morningstar DBRS made additional analytical adjustments to the 6655
Pierre Bertrand Boulevard (Prospectus ID#4, 8.7% of the pool) and
Rue Laval (Prospectus ID#10, 6.8% of the pool) loans. 6655 Pierre
Bertrand Boulevard is secured by a mixed-use property with office,
retail, and industrial components in Québec City while Rue Laval
is secured by an office property in Gatineau, Québec. 6655 Pierre
Bertrand Boulevard reported a year-over-year decline in NCF, most
recently reporting a DSCR of 1.02x as of YE2023. The property is
reported as 100% occupied, has minimal rollover until 2029, and is
full recourse to the sponsor. Rue Laval continues to report a NCF
in line with issuance levels; however, Morningstar DBRS is
concerned with the significant amount of rollover as four of the
top five tenants, representing 47.9% of NRA, have lease expirations
in the 12 months. Both loans were analyzed with elevated PODs,
resulting in ELs ranging from 1.5x to 2x the pool average.
Notes: All figures are in Canadian dollars unless otherwise noted.
REALT 2018-1: DBRS Hikes Class G Certs Rating to BB(low)
--------------------------------------------------------
DBRS Limited upgraded its credit ratings on three classes of the
Commercial Mortgage Pass-Through Certificates, Series 2018-1 issued
by Real Estate Asset Liquidity Trust (REALT) Series 2018-1 as
follows:
-- Class E to BBB (high) (sf) from BBB (low) (sf)
-- Class F to BB (high) (sf) from BB (sf)
-- Class G to BB (low) (sf) from B (sf)
In addition, Morningstar DBRS confirmed its credit ratings on the
following classes:
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class X at AA (high) (sf)
-- Class C at AA (sf)
-- Class D-1 at A (sf)
-- Class D-2 at A (sf)
All trends are Stable.
The credit rating upgrades reflect the continued paydown since last
review, favorable collateral type concentrations, and the overall
stable performance of the remaining loans in the pool. Since
Morningstar DBRS' last credit rating action, two additional loans
have repaid in full, reflecting an additional principal paydown of
approximately $10 million. There has been an overall collateral
reduction of 59.0% since issuance with a current balance of $144.1
million as of the October 2024 remittance. In addition, two loans
(9.9% of the current pool balance), which continue to perform in
line with issuance expectations, are scheduled to mature within the
next 12 months. Morningstar DBRS expects that those loans will
likely secure takeout financing at maturity based on current
in-place performance and favorable maturity profile. As the
transaction continues to benefit from loan repayment and scheduled
amortization, Morningstar DBRS expects there could be continued
upgrade pressure, particularly toward the middle of the capital
stack as the deal continues to season.
Morningstar DBRS' analysis for this review considered a stressed
scenario to further evaluate the support for credit rating
upgrades. In addition to applying probability of default (POD)
and/or loan-to-value ratio adjustments to a select number of loans,
where supported by current performance and/or upcoming concerns,
Morningstar DBRS also applied a 20.0% haircut to the issuer's
underwritten cash flow for each remaining loan in the pool. The
resulting analysis suggests a significant amount of cushion remains
against future cash flow volatility, further supporting the credit
rating upgrades with this review.
The pool benefits from larger concentrations in loans
collateralized by property types that have historically exhibited
healthy fundamentals with industrial, multifamily, and self-storage
properties representing 29.3%, 28.8%, and 21.4% of the pool,
respectively while office-backed loans account for only 0.4% of the
pool. Based on the most recent year-end financials available, the
remaining loans in the pool reported a healthy weighted-average
(WA) debt service coverage ratio (DSCR) of 2.15 times (x). There
are currently no delinquent or specially serviced loans; however,
there are two loans (15.5% of the current pool balance) on the
servicer's watchlist, one is being monitored for active performance
declines discussed further below while the other is being monitored
for compliance with a previous forbearance.
One of the loans on the servicer's watchlist, Chateau Dollard
Retirement (Prospectus ID#8, 8.5% of the pool), is secured by a
122-unit retirement facility in Dollard-des-Ormeaux, Québec. The
loan was added to the servicer's watchlist in July 2020 because of
a low DSCR reported at 0.75x as of YE2023 (net cash flow (NCF) of
$651,937), remaining well below the Morningstar DBRS DSCR of 1.40x
(Morningstar DBRS NCF of $1.26 million). According to the servicer
commentary, the property was significantly affected by the
coronavirus pandemic and has yet to recover. According to the
provided January 2024 rent roll, the subject was 79% occupied,
which has increased from 70% at YE2021; however, occupancy remains
significantly less than the issuance figure of 92%. Although
occupancy remains depressed, revenue as of YE2023 exceeds the
revenue figure assumed at issuance by Morningstar DBRS, suggesting
unit rents have increased comfortably since that time. However, the
in-place NCF has remained depressed from Morningstar DBRS'
expectations as overall expenses have increased by 26%. While the
loan has full recourse to the sponsor and has remained current
throughout the years of below breakeven coverage, Morningstar DBRS
believes the overall risks have increased significantly from
issuance. As such, the analysis for this review considered an
increased POD from the 2023 credit rating action analysis, as well
as an elevated POD, which resulted in an expected loss (EL) over 5x
the WA pool EL figure.
Notes: All figures are in Canadian dollars unless otherwise noted.
REGATTA XVII: S&P Assigns Prelim B+ (sf) Rating on Cl. E-2R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-1R, B-2R, C-R, D-1R, D-2R, E-1R, and E-2R replacement debt
and proposed new class X-R debt from Regatta XVII Funding
Ltd./Regatta XVII Funding LLC, a CLO originally issued in 2020 that
is managed by Napier Park Global Capital (US) L.P.
The preliminary ratings are based on information as of Oct. 30,
2024. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 5, 2024, refinancing date, the proceeds from the
replacement debt will be used to redeem the original debt. S&P
said, "At that time, we expect to withdraw our ratings on the
original debt and assign ratings to the replacement debt. However,
if the refinancing doesn't occur, we may affirm our ratings on the
original debt and withdraw our preliminary ratings on the
replacement debt."
The replacement debt will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement debt.
According to the proposed supplemental indenture:
-- The replacement class X, A-1-RR, A-2-RR, B-RR, C-RR, D-1-RR,
D-2-RR, and E-RR debt is expected to be issued at a lower spread
over three-month SOFR than the original debt.
-- The replacement class X, A-1-RR, A-2-RR, B-RR, C-RR, D-1-RR,
and E-RR debt is expected to be issued at a floating spread, while
the class D-2-RR debt will be issues at a fixed coupon, replacing
the current floating spread classes.
-- The stated maturity will be extended to Oct. 20, 2035, the
reinvestment period will be extended to Oct. 20, 2027, and the
non-call period will be extended to Oct. 20, 2025.
-- Class X debt will be issued in connection with this
refinancing. The debt is expected to be paid down using interest
proceeds during the first 10 payment dates beginning with the April
20, 2025, payment date.
-- The required minimum overcollateralization and interest
coverage 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."
Preliminary Ratings Assigned
Regatta XVII Funding Ltd./Regatta XVII Funding LLC
Class X-R, $2.00 million: AAA (sf)
Class A-R, $256.00 million: AAA (sf)
Class B-1R, $43.00 million: AA (sf)
Class B-2R, $5.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-1R (deferrable), $20.00 million: BBB (sf)
Class D-2R (deferrable), $8.00 million: BBB- (sf)
Class E-1R (deferrable), $12.00 million: BB- (sf)
Class E-2R (deferrable), $2.40 million: B+ (sf)
Other Debt
Regatta XVII Funding Ltd./Regatta XVII Funding LLC
Subordinated notes, $32.73 million: Not rated
RIAL 2022-FL8: DBRS Confirms B(low) Rating on Class G Notes
-----------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of notes
issued by RIAL 2022-FL8 Issuer, Ltd. (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (low) (sf)
-- Class G Notes at B (low) (sf)
In addition, Morningstar DBRS changed the trends on Classes F and G
to Negative from Stable. The trends on all remaining classes are
Stable.
The trend changes reflect Morningstar DBRS' higher loan-level loss
expectations for select loans in the transaction, including the
largest loan in the pool, Oakland Office (Prospectus ID# 3; 13.2%
of the pool), which transferred to special servicing in August
2024. The pool includes a high concentration of loans secured by
office properties or mixed-use properties with significant office
components, representing 31.6% of the current trust balance.
Morningstar DBRS notes the majority of the borrowers of these loans
are facing increased execution risk regarding their respective
business plans because of a combination of factors, including
lackluster leasing momentum, higher construction costs, and
increases in debt service obligations. Additionally, near-term
maturity risk is of concern as 11 loans, representing approximately
70.0% of the current trust balance, have matured, or are expected
to mature within the next six months. While all loans are
structured with extension options, Morningstar DBRS notes that most
will not qualify to exercise those options based on current
property performance metrics and therefore will likely need to be
modified.
Beyond the office and mixed-use concentration, loans representing
40.2% and 28.2% of the trust are secured by lodging and multifamily
properties, respectively. Multifamily properties have historically
proven better at withstanding market downturns, thereby sustaining
positive cash flow and retaining property value, as compared with
other property types. The transaction also benefits from a sizeable
unrated first-loss piece totaling $84.6 million, in addition to
$87.5 million of below-investment-grade rated bonds, strengthening
credit enhancement levels, especially for the higher-rated bonds
and further supporting the credit rating confirmations with this
review. 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, including
business plan updates on select loans. To access this report,
please click on the link under Related Documents below or contact
us at info-DBRS@morningstar.com.
The initial collateral consisted of 18 floating-rate mortgages
secured by 24 mostly transitional properties with a cut-off date
balance totaling $769.3 million. Most loans were in a period of
transition with plans to stabilize performance and improve the
values of the underlying assets. As of the September 2024
remittance, the pool comprised 14 loans secured by 20 properties
with a cumulative trust balance of $737.6 million. Since issuance,
four loans with a prior cumulative trust balance of $89.6 million
have been successfully repaid in full. The transaction was
structured with a 36-month replenishment period, scheduled to end
with the May 2025 payment date. As of the September 2024 reporting,
the current cash reinvestment account had a balance of $31.7
million. Morningstar DBRS expects those funds will be used by the
Issuer to purchase funded loan participations on existing loan
collateral in the trust.
As of the September 2024 remittance, there were nine loans on the
servicer's watchlist, representing 63.9% of the current trust
balance. The majority of those loans are being monitored for
upcoming maturity dates. The Holiday Inn San Jose loan (Prospectus
ID#9; 6.2% of the pool) is delinquent with the last debt service
payment made in July 2024. An additional two loans, representing
17.2% of the current trust balance, are in special servicing. The
larger of those loans, Oakland Office Portfolio (Prospectus ID#3;
13.2% of the pool), is secured by an office portfolio in downtown
Oakland, California. The loan transferred to the special servicer
in August 2024 and a fourth loan modification is reportedly being
discussed with the borrower. The sponsor and the lender previously
executed a loan modification in August, the terms of which included
an interest rate reduction in exchange for a $5.5 million principal
repayment over the next 12 months and a one-year maturity extension
to January 2026. As of June 2024, portfolio occupancy had declined
to 34.6% from 64.1% at loan closing. Cash flow has decreased
significantly from the previous quarter, primarily as a result of
increased vacancy. The borrower's business plan to use $11.9
million to fund building upgrades and leasing costs is
significantly behind schedule, and as such, Morningstar DBRS
analyzed the loan with a stressed loan-to-value (LTV) ratio and
elevated probability of default (PoD) penalty resulting in an
expected loss (EL) that was approximately 30.0% greater than the
pool's weighted-average (WA) EL.
The second specially serviced loan, 152 North 3rd Street
(Prospectus ID#11; 4.2% of the pool), is secured by an office
building in downtown San Jose, California. The borrower failed to
make the April 2023 debt service payment, replenish the interest
reserve account, and purchase a replacement interest rate cap, and
as such, the loan transferred to special servicing in May 2023.
According to the servicer, the borrower has signed a
pre-negotiation letter and discussions with respect to a settlement
remain ongoing. The borrower's business plan at loan closing was to
complete $3.5 million of capex work and to lease the property to
stabilization. The capex funds and additional projected carry costs
of $3.2 million were to be funded by the borrower while $9.0
million of loan future funding was available for leasing costs and
$5.0 million of loan future funding was available as a
performance-based earn-out. The property was originally 100.0%
leased to WeWork Inc.; however, the tenant terminated its lease in
2020. An appraisal dated March 2024 valued the property on an as-is
basis at $52.9 million, a decline from the August 2023 and issuance
appraised values of $55.0 million and $67.1 million, respectively.
Given the status of the loan, it is unlikely any future funding
proceeds will be advanced to the borrower. Based on the current
loan exposure of $34.7 million and the updated as-is value, the LTV
ratio is 65.5%; however, in its analysis, Morningstar DBRS stressed
the value further considering the increased leasing costs and
general lack of demand for office product in the submarket. The
resulting LTV ratio was capped at 100.0% and Morningstar DBRS also
increased the PoD assumption, with the expected loss for the loan
approximately 1.5 times (x) greater than the pool average.
The pool is primarily secured by properties in suburban markets,
with nine loans, representing 59.4% of the pool, assigned a
Morningstar DBRS Market Rank of 3, 4, or 5. An additional three
loans, representing 27.6% of the pool, are secured by properties in
urban markets, with a Morningstar DBRS Market Rank of 6, 7, or 8.
The remaining loans are backed by properties with a Morningstar
DBRS Market Rank of 1 or 2, denoting tertiary markets. These
property-type and market-type concentrations remain generally in
line with both the pool composition at issuance and the October
2023 credit rating action.
Leverage across the pool has remained consistent since issuance. As
of the September 2024 reporting, the current WA as-is appraised LTV
ratio was 64.1%, with a current WA stabilized LTV of 55.1%. In
comparison, these figures were 63.4% and 58.3%, respectively, at
issuance. Morningstar DBRS recognizes that select property values
may be inflated as the majority of the individual property
appraisals were completed in 2022 and may not fully reflect the
effects of increased interest rates and/or widening capitalization
rates in the current environment. In the analysis for this review,
Morningstar DBRS applied upward LTV adjustments across 10 loans,
representing 71.3% of the current trust balance.
Through September 2024, the lender had advanced cumulative loan
future funding of $104.3 million to eight of the 14 outstanding
individual borrowers to aid in property stabilization efforts. The
largest advances have been made to the borrowers of the Warren
Corporate Center ($45.0 million) and Paseo ($23.3 million) loans.
The Warren Corporate Center loan is secured by an office property
in Warren, New Jersey. The advanced funds have been provided to the
borrower to complete its renovation and lease-up of the
three-building property. The borrower executed a 17-year lease with
PTC Therapeutics (PTC) for two (building 400 and 500) of the three
buildings, totaling 70.2% of the net rentable area. The tenant
received a leasing package of $36.2 million ($100.00 per square
foot (psf)) and is slated to pay a base rental rate of $22.50 psf.
Reported cash flow has increased considerably from the previous
quarter as a result of PTC's rent commencing on approximately 75.0%
of its space. The Q2 2024 collateral manager report noted that the
majority of PTC's buildout is now complete. The borrower is
actively leasing the remainder of the vacant space at building 300,
and in March 2024, executed an 11-year lease with Regeneron
Pharmaceuticals for approximately 127,000 sf, with rent expected to
commence in August 2026. As of September 2024, $11.0 million of
loan future funding remained available.
An additional $48.2 million of loan future funding allocated to
seven of the outstanding individual borrowers remains available.
The largest portion, $14.0 million, is allocated to the borrower of
the 152 North 3rd Street loan, which Morningstar DBRS does not
expect will be advanced to the borrower given the status of the
loan, as noted above. The second-largest portion is allocated to
the borrower of the Warren Corporate Center loan.
Notes: All figures are in U.S. dollars unless otherwise noted.
ROC MORTGAGE 2024-RTL1: DBRS Finalizes B(low) Rating on M2 Notes
----------------------------------------------------------------
DBRS, Inc. finalized the following provisional credit ratings on
the Mortgage-Backed Notes, Series 2024-RTL1 (the Notes) issued by
ROC Mortgage Trust 2024-RTL1 (ROC 2024-RTL1 or the Issuer) as
follows:
-- $187.1 million Class A1 at A (low) (sf)
-- $17.0 million Class A2 at BBB (low) (sf)
-- $15.4 million Class M1 at BB (low) (sf)
-- $18.0 million Class M2 at B (low) (sf)
The A (low) (sf) credit rating reflects 25.15% of credit
enhancement provided by the subordinated notes and
overcollateralization. The BBB (low) (sf), BB (low) (sf), and B
(low) (sf) credit ratings reflect 18.35%, 12.20%, and 5.00% of
credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
This transaction is a securitization of a two-year revolving
portfolio of residential transition loans (RTLs) funded by the
issuance of the Mortgage-Backed Notes, Series 2024-RTL1 (the
Notes). As of the Initial Cut-Off Date, the Notes are backed by:
-- 532 mortgage loans with a total unpaid principal balance of
approximately $186,366,692,
-- Approximately $63,633,308 in the Accumulation Account, and
-- Approximately $1,500,000 in the Pre-funding Interest Account.
Subsequent to publication of the pre-sale report, the sponsor
increased the Initial cash amount to be deposited in accumulation
account to purchase Additional Mortgage Loans and to fund Unfunded
Commitment Advances . The transaction's capital structure, and
subordination/credit enhancement remain the same as what was
described in the prior publication, however the issued note
balances were increased accordingly.
Additional RTLs may be added to the revolving portfolio on future
additional transfer dates, subject to the transaction's eligibility
criteria.
Roc 2024-RTL1 represents the second RTL securitization on the Roc
shelf. Roc Capital Holdings LLC, is a privately held company
incorporated in 2015 that provides business purpose loans to
residential real estate investors. Roc Capital Holdings LLC,
through affiliated entities (collectively, Roc360), is the
originator (Loan Funder LLC), servicer (Loan Servicer LLC), and
asset manager (ROC 360 Advisors LLC). The Sponsor, Roc360 Real
Estate Income Trust, Inc., is a real estate investment trust
incorporated in 2023 that is managed by Roc360 Advisors LLC.
The revolving portfolio generally consists of first-lien,
fixed-rate, interest-only (IO) balloon RTL with original terms to
maturity of 6 to 36 months. The loans may include extension
options, which can lengthen maturities beyond the original terms.
The characteristics of the revolving pool will be subject to
eligibility criteria specified in the transaction documents and
include, but are not limited to:
-- A minimum non-zero weighted-average (NZ WA) FICO score of 730.
-- A maximum NZ WA As-Is Loan-to-Value (AIV LTV) ratio of 80%.
-- A maximum NZ WA Loan-to-Cost (LTC) ratio of 85.0% for 1-4
family and 80.0% for multi-family & mixed use.
-- A maximum NZ WA As Repaired Loan-to-Value (ARV LTV) ratio of
65.0%.
RTL Features
RTLs, also known as fix-and-flip mortgage loans, are short-term
bridge, construction, or renovation loans designed to help real
estate investors purchase and renovate residential or multifamily
5+ properties (the latter is limited to 1.0% of the revolving
portfolio), generally within 12 to 36 months. RTLs are similar to
traditional mortgages in many aspects but may differ significantly
in terms of initial property condition, construction draws, and the
timing and incentives by which borrowers repay principal. For
traditional residential mortgages, borrowers are generally
incentivized to pay principal monthly, so they can occupy the
properties while building equity in their homes. In the RTL space,
borrowers repay their entire loan amount when they (1) sell the
property with the goal to generate a profit or (2) refinance to a
term loan and rent out the property to earn income.
In general, RTLs are short-term IO balloon loans with the full
amount of principal (balloon payment) due at maturity. The
repayment of an RTL is mainly based on the ability to sell the
related mortgaged property or to convert it into a rental property.
In addition, many RTL lenders offer extension options, which
provide additional time for borrowers to repay their mortgage
beyond the original maturity date. For the loans in this
transaction, such extensions may be granted, subject to certain
conditions, at the direction of the Asset Manager.
In the Roc 2024-RTL1 revolving portfolio, RTLs may be:
Fully funded:
-- With no obligation of further advances to the borrower, or
-- With a portion of the loan proceeds allocated to a
rehabilitation (rehab) escrow account for future disbursement to
fund construction draw requests upon the satisfaction of certain
conditions.
Partially funded:
-- With a commitment to fund borrower-requested draws for approved
rehab, construction, or repairs of the property (Rehabilitation
Disbursement Requests) upon the satisfaction of certain
conditions.
After completing certain construction/repairs using their own
funds, the borrower usually seeks reimbursement by making draw
requests. Generally, construction draws are disbursed only upon the
completion of approved construction/repairs and after a
satisfactory construction progress inspection. Based on the Roc
2024-RTL1 eligibility criteria, unfunded commitments are limited to
30.0% of the portfolio by assets of the issuer, which includes (1)
the unpaid principal balance (UPB) of the mortgage loans and (2)
amounts in the Accumulation Account.
Cash Flow Structure and Draw Funding
The transaction employs a sequential-pay cash flow structure.
During the reinvestment period, the Notes will generally be IO.
After the reinvestment period, principal will be applied to pay
down the Notes, sequentially. If the Issuer does not redeem the
Notes by the payment date in April 2027, the Class A1 and A2 fixed
rates will step up by 1.000% the following payment date.
There will be no advancing of delinquent (DQ) interest on any
mortgage loan by the Servicer or any other party to the
transaction. However, the Servicer is obligated to fund Servicing
Advances which include taxes, insurance premiums, and reasonable
costs incurred in the course of servicing and disposing properties.
The Servicer will be entitled to reimburse itself for Servicing
Advances from available funds prior to any payments on the Notes.
The Servicer will satisfy Rehabilitation Disbursement Requests by
(1) directing release of funds from the Rehab Escrow Account to the
applicable borrower for loans with funded commitments (as of the
initial cut-off date, there are no loans with funded commitments);
or (2) for loans with unfunded commitments, (a) advancing funds on
behalf of the Issuer (Rehabilitation Advances) or (b) directing the
release of funds from the Accumulation Account. The Servicer will
be entitled to reimburse itself for Rehabilitation Disbursement
Requests from time to time from the Accumulation Account and from
the transaction cash flow waterfall, after payment of interest to
the notes.
The Accumulation Account is replenished from the transaction cash
flow waterfall, after payment of interest to the Notes, to maintain
a minimum required funding balance. During the reinvestment period,
amounts held in the Accumulation Account, along with the mortgage
collateral, must be sufficient to maintain a minimum credit
enhancement (CE) of approximately 5.0% to the most subordinate
rated class. The transaction incorporates a Minimum Credit
Enhancement Test during the reinvestment period, which if breached,
redirects available funds to pay down the Notes, sequentially,
prior to replenishing the Accumulation Account, to maintain the
minimum CE for the rated Notes.
The transaction also employs the Expense Reserve Account, which
will be available to cover fees and expenses. The Expense Reserve
Account is replenished from the transaction cash flow waterfall,
before payment of interest to the Notes, to maintain a minimum
reserve balance.
A Pre-funding Interest Account is in place to help cover three
months of interest payments to the Notes. Such account is funded
upfront in an amount equal to $1,500,000. On the payment dates
occurring in November 2024, December 2024, and January 2025, the
Paying Agent will withdraw a specified amount to be included in the
available funds.
Historically, Roc360 RTL originations reviewed by Morningstar have
generated robust mortgage repayments, which have been able to cover
unfunded commitments in securitizations. In the RTL space, because
of the lack of amortization and the short term nature of the loans,
mortgage repayments (paydowns and payoffs) tend to occur closer to
or at the related maturity dates when compared with traditional
residential mortgages. Morningstar DBRS considers paydowns to be
unscheduled voluntary balance reductions (generally repayments in
full) that occur prior to the maturity date of the loans, while
payoffs are scheduled balance reductions that occur on the maturity
or extended maturity date of the loans. In its cash flow analysis,
Morningstar DBRS evaluated mortgage repayments relative to draw
commitments for Roc360's historical originations and incorporated
several stress scenarios where paydowns may or may not sufficiently
cover draw commitments. Please see the Cash Flow Analysis section
of the related rating report for more details.
Other Transaction Features
Optional Redemption
On any date on or after the earlier of (1) the Payment Date
following the termination of the Reinvestment Period or (2) the
date on which the aggregate Note Amount falls to less than 25% of
the initial Closing Date Note Amount, the Issuer, at its option,
may purchase all of the outstanding Notes at the par plus interest
and fees.
Repurchase Option
The Depositor will have the option to repurchase any DQ, defaulted
or extended mortgage loan at the Repurchase Price, which is equal
to par plus interest and fees. However, such voluntary repurchases
may not exceed 10.0% of the cumulative UPB of the mortgage loans.
During the reinvestment period, if the Depositor repurchases DQ,
defaulted or extended loans, this could potentially delay the
natural occurrence of an early amortization event based on the DQ
or default trigger. Morningstar DBRS' revolving structure analysis
assumes the repayment of Notes is reliant on the amortization of an
adverse pool regardless of whether it occurs early or not.
Loan Sales
The Issuer may sell a mortgage loan under the following
circumstances:
-- The Seller is required to repurchase a loan because of a
material breach, a material document defect, or the loan is a
non-REMIC qualified mortgage
-- The Depositor elects to exercise its Repurchase Option
-- An automatic repurchase is triggered in connection with the
third-party due diligence review
-- An optional redemption occurs.
U.S. Credit Risk Retention
As the Sponsor, Roc360 Real Estate Income Trust, Inc., or through a
majority-owned affiliate, will initially retain an eligible
horizontal residual interest comprising at least 5% of the
aggregate fair value of the securities (the Class XS Notes) to
satisfy the credit risk retention requirements.
Notes: All figures are in U.S. dollars unless otherwise noted.
SELF COMMERCIAL 2024-STRG: Fitch Gives B-(EXP) Rating on HRR Certs
------------------------------------------------------------------
Fitch Ratings has assigned the following expected ratings and
Rating Outlooks to SELF Commercial Mortgage Trust 2024-STRG
Commercial Mortgage Pass-Through Certificates, Series 2024-STRG
(SELF 2024-STRG):
- $135,900,000 class A at 'AAAsf'; Outlook Stable;
- $22,800,000 class B at 'AA-sf'; Outlook Stable;
- $18,000,000 class C at 'A-sf'; Outlook Stable;
- $25,200,000 class D at 'BBB-sf'; Outlook Stable;
- $38,800,000 class E at 'BB-sf'; Outlook Stable;
- $20,550,000 class F at 'Bsf'; Outlook Stable;
- $13,750,000 class HRR at 'B-sf'; Outlook Stable.
HRR - Horizontal risk retention interest representing at least 5.0%
of the estimated fair value of all classes.
Transaction Summary
The certificates represent the beneficial ownership interest in
SELF Commercial Mortgage Trust 2024-STRG, a New York common law
trust that will hold two promissory notes comprising a $275.0
million, two-year, floating-rate, IO commercial mortgage loan with
three one-year extension options. The mortgage loan is expected to
be co-originated by Wells Fargo Bank, National Association and
Goldman Sachs Bank USA. It will be secured by cross-collateralized
and cross defaulted first priority lien mortgages on the borrowers'
e fee simple interests in a portfolio of 43 self-storage properties
located across 11 states.
Mortgage loan proceeds, together with $40.0 in mezzanine debt and
approximately $10.5 million of sponsor equity, will be used to
refinance $313.2 million of existing debt and pay $12.3 million of
closing costs.
Wells Fargo Bank, National Association and Goldman Sachs Mortgage
Company will act as mortgage loan sellers. KeyBank National
Association will serve as the master servicer and 3650 REIT Loan
Servicing LLC will serve as the special servicer. Computershare
Trust Company, National Association will act as trustee and
certificate administrator. Park Bridge Lender Services LLC will act
as operating advisor.
The certificates are expected to follow a pro rata paydown for the
initial 30% of the loan amount and a standard senior sequential
paydown thereafter. The transaction is scheduled to close on Nov.
15, 2024.
KEY RATING DRIVERS
Net Cash Flow: Fitch's net cash flow (NCF) for the portfolio is
estimated at $19.6 million; this is 6.1% lower than the issuer's
NCF. Fitch applied an 8.0% capitalization rate to derive a Fitch
value of $244.8 million for the portfolio.
High Fitch Leverage: The $275.0 million mortgage loan equates to
debt of about $88 per square foot (psf), with a Fitch stressed
loan-to-value ratio (LTV) of 112.3%, debt service coverage ratio
(DSCR) of 0.79x and debt yield of 7.1%. Inclusive of the $40.0
million mezzanine loan, total debt would amount to $101.21 psf with
a Fitch DSCR, LTV and DY of 0.69, 128.7% and 6.2%, respectively.
Geographic Diversity: The portfolio exhibits geographic diversity,
with 43 self-storage properties located across 11 states and 24
unique markets. The four states with the largest concentrations, by
allocated loan amount (ALA), are Texas (15 properties; 26.5% of
ALA), Florida (11; 25.1%), Arizona (5; 19.5%), and North Carolina
(5, 10.6%). No other state accounts for more than 4.2% of ALA. The
properties are generally located in densely populated infill
areas.
Experienced Sponsorship and Management: The sponsorship is a joint
venture between affiliates of TPG Angelo Gordon and Andover LLC
(Andover). TPG Angelo Gordon is a global investment firm with about
$229 billion of AUM. Andover owns, manages, and operates its
facilities under the brand Storage King USA, which it founded in
2003. The firm owns and manages about 162 self-storage facilities,
totaling over 13.5 million square feet, in 18 states.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' /
'BBB-sf'/'BB-sf'/'Bsf'/'B-sf';
- 10% NCF Decrease: 'AAsf' / 'A-sf' / 'BBB-sf' /
'BBsf'/'Bsf'/'CCCsf'/'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' /
'BBB-sf'/'BB-sf'/'Bsf'/'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AA+sf' / 'A+sf' /
'BBBsf'/'BBsf'/'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 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.
SHR TRUST 2024-LXRY: DBRS Finalizes BB(high) Rating on HRR Certs
----------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following classes of Commercial Mortgage Pass-Through Certificates,
Series 2024-LXRY (the Certificates) issued by SHR Trust 2024-LXRY
(the Trust):
-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class HRR at BB (high) (sf)
All trends are Stable.
The SHR 2024-LXRY transaction is secured by the fee-simple and/or
leasehold interests in nine luxury hospitality properties located
across five states and Washington, D.C. The portfolio consists of
4,957 total keys, including four properties (2,374 keys) operating
under the Marriott brand family (Ritz-Carlton Laguna Niguel,
Ritz-Carlton Half Moon Bay, Westin St. Francis, and JW Marriott
Essex House) three properties (1,611 keys) operating under the
InterContinental brand family (Regent Santa Monica,
InterContinental Miami, and InterContinental Chicago), one property
(750 keys) operating under the AccorHotels brand family (Fairmont
Scottsdale Princess), and one property (222 keys) operating under
the Four Seasons brand family (Four Seasons Washington, D.C.). The
properties were constructed between 1904 and 2001 and have a
weighted-average (WA) year built of 1988 and a WA renovation year
of 2024.
The transaction sponsor is an affiliate of Strategic Hotels &
Resorts (Strategic). Founded in 2004, Strategic currently owns and
manages 12 luxury hotels across North America and Europe. Strategic
employs brand-specific hotel management companies to operate its
management contracts and operating leases. Previously, Strategic
was publicly traded on the New York Stock Exchange under the ticker
BEE and was subsequently acquired by AB Stable VIII LLC (AB
Stable), an indirect subsidiary of Anbang Insurance Group Co., Ltd.
(Anbang). The borrower sponsor is under common control with Anbang,
the predecessor to the borrower sponsor as owner of the borrower.
The largest two properties by Issuer net cash flow (NCF) are the
Fairmont Scottsdale Princess, which represents 26.8% of the Issuer
NCF, and the Ritz-Carlton Laguna Niguel, which represents 17.6% of
the Issuer NCF. No other property represents more than 13.7% of
portfolio Issuer NCF. The properties average 551 keys and the
largest hotel, Fairmont Scottsdale Princess, contains 750 keys or
15.1% of the total aggregate keys in the portfolio. The portfolio
is located across five states and Washington, D.C., with the
largest concentration by Issuer NCF in California, which accounts
for 37.3% of the Issuer NCF. The second-largest concentration by
Issuer NCF is in Arizona, which accounts for 26.8%, followed by
Florida at 13.7%, Illinois at 8.4%, Washington, D.C. at 7.0%, and
New York at 6.7%.
The portfolio demonstrated strong performance metrics prior to the
onset of the coronavirus pandemic, with 2019 WA (by NCF) occupancy,
average daily rate (ADR), and revenue per available room (RevPAR
penetration rates of 94.2%, 114.7%, and 107.7%, respectively. The
portfolio struggled during the pandemic and has since slowly
rebounded with a YE2021 RevPAR of $152.45, representing a 41.1%
decrease over the YE2019 RevPAR. The portfolio's RevPAR has picked
up over the past two years, reaching $263.73 in 2022, 73.0% above
2021 figures, and increasing slightly to $267.01 at YE2023.
Morningstar DBRS expects moderate room-rate growth in the future as
a result of recent renovations, the desirable locations of the
collateral, and experienced sponsorship. Morningstar DBRS concluded
a RevPAR of $289.84, which is 9.7% above the 2019 figure and only
5.3% above the figure for the trailing 12 months ended June 30,
2024, even though the Regent Santa Monica was completely closed and
there were capital improvements totaling $129.9 million across the
portfolio as of July 2024.
Notes: All figures are in U.S. dollars unless otherwise noted.
SOFI PERSONAL 2024-3: Fitch Assigns 'B+sf' Rating on Class F Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the notes
issued by SoFi Personal Loan Trust 2024-3 (SPLT 2024-3).
Entity/Debt Rating
----------- ------
SoFi Personal Loan
Trust 2024-3
A LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBBsf New Rating
E LT BBsf New Rating
F LT B+sf New Rating
Transaction Summary
The SPLT 2024-3 trust is a discrete trust backed by a static pool
of unsecured consumer loans originated by SoFi Bank, National
Association (SoFi Bank) under the SoFi Personal Loan Program. The
transaction is being offered as a Rule 144A issuance. SoFi Bank is
the sponsor, administrator and servicer. SPLT 2024-3 is the fourth
SoFi-sponsored ABS transaction rated by Fitch.
KEY RATING DRIVERS
Consistent Receivable Quality: The SPLT 2024-3 pool primarily
consists of unsecured consumer loans made to obligors with strong
credit scores (average credit score: 746) and high incomes
(weighted average [WA] income: $173,085). The pool consists of
amortizing loans with a WA net interest rate of 12.66% and a WA
original term of 48 months, and has been seasoned for three months
on average.
Base Case Default Reflects Recent Performance Trends: SoFi's
managed default rates increased in vintage years 2022 and early
2023 relative to prior origination vintages since 2015. Fitch took
this recent weaker performance into account as part of its base
case default assumption analysis, using 2021 and 2022 as more
relevant years for comparative purposes. These periods are
considered more indicative of future trends and also highlight the
early-stage performance improvements observed in recent 2023 and
2024 vintages, leading to a base case default assumption of 6.11%.
Fitch applied a stress multiple of 4.5x at the 'AAAsf' stress level
for the pool.
Stable Historical Performance: To date, the default performance of
SoFi's prior securitizations and overall managed portfolio has been
stable. However, managed default performance, particularly in the
2022 and early 2023 vintages, has been weaker than seen in
historical originations. While early indicators show improving
performance in recent 2023 and 2024 vintages due to tighter credit
processes, Fitch factored these recent weaker performance trends
into its base case default assumptions and default stress
multiple.
Adequate Servicing Capabilities: SoFi has a long track record as an
originator, underwriter and servicer. SoFi began originating
personal loans in 2015. The entity's credit-risk profile is
mitigated by backup servicing provided by Systems & Services
Technologies, Inc. (SST). Fitch considers all parties to be
adequate servicers for this pool at their expected rating levels.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Current Expected Ratings: 'AAAsf', 'AAsf', 'Asf', 'BBBsf', 'BBsf',
'B+sf';
Increased default base case by 10%: 'AA+sf', 'AA-sf', 'A-sf',
'BBB-sf', 'B+sf', 'Bsf';
Increased default base case by 25%: 'AAsf', 'Asf', 'BBBsf',
'BB+sf', 'B-sf', 'CCCsf';
Increased default base case by 50%: 'A+sf', 'BBB+sf', 'BBB-sf',
'BBsf', 'NRsf', 'NRsf';
Increased default base case by 100%: 'BBB+sf', 'BBB-sf', 'BBsf',
'CCCsf', 'NRsf', 'NRsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Current Expected Ratings: 'AAAsf', 'AAsf', 'Asf', 'BBBsf', 'BBsf',
'B+sf';
Decreased default base case by 25%: 'AAAsf', 'AAAsf', 'AA-sf',
'A-sf', 'BB+sf', 'BB+sf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on a comparison and recalculation of
certain characteristics with respect to 125 randomly selected
statistical receivables. 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.
TOWD POINT 2024-4: DBRS Gives Prov. B(low) Rating on B3 Notes
-------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the Asset Backed
Securities, Series 2024-4 (the Notes) to be issued by Towd Point
Mortgage Trust 2024-4 (the Trust) as follows:
-- $440.6 million Class A1A at (P) AAA (sf)
-- $78.2 million Class A1B at (P) AAA (sf)
-- $ 518.8 million Class A1 at (P) AAA (sf)
-- $12.7 million Class A2 at (P) AA (sf)
-- $6.9 million Class M1 at (P) A (low) (sf)
-- $3.3 million Class M2 at (P) BBB (high) (sf)
-- $3.3 million Class B1 at (P) BB (high) (sf)
-- $1.9 million Class B2 at (P) BB (low) (sf)
-- $1.4 million Class B3 at (P) B (low) (sf)
The Class A1 Notes are exchangeable. This class can be exchanged
for combinations of exchange notes as specified in the offering
documents.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The (P) AAA (sf) credit ratings reflect 5.80% of credit enhancement
provided by subordinated certificates. The (P) AA (sf), (P) A (sf),
(P) BBB (sf), (P) BB (sf), (P) B (sf), and (P) B (low) (sf) credit
ratings reflect 3.50%, 2.25%, 1.65%, 1.05%, 0.70%, and 0.45% of
credit enhancement, respectively.
The Trust is a securitization of a portfolio of predominantly
seasoned performing and reperforming first-lien mortgages funded by
the issuance of the Notes. The Notes are backed by 1,083 loans with
a total scheduled principal balance of $550,769,634 as of September
1, 2024 (the Statistical Calculation Date).
The portfolio is approximately 81 months seasoned, with 98.4% of
the pool seasoned for more than 24 months. The portfolio contains
0.8% modified loans, and modifications happened more than two years
ago for 59.5% of these modified loans in the pool. Within the pool,
45 of the mortgages have non-interest-bearing deferred amounts.
As of the Statistical Calculation Date, 98.9% of the pool is
current under the Mortgage Bankers Association (MBA) delinquency
method. Approximately 93.7% of the mortgage loans have been zero
times 30 days delinquent for at least the past 24 months under the
MBA delinquency method.
Morningstar DBRS assumed approximately 18.5% of the pool is exempt
from the Consumer Financial Protection Bureau
Ability-to-Repay/Qualified Mortgage (QM) rules. Additionally,
Morningstar DBRS assumed 16.9% of the loans to be designated as
Temporary QM Safe Harbor or QM Safe Harbor and 64.3% to be Non-QM
based on the results of the third-party due diligence.
FirstKey Mortgage, LLC (FirstKey; the Asset Manager) will acquire
the loans from various transferring trusts on October 30, 2024 (the
Closing Date). The transferring trusts acquired the mortgage loans
and are beneficially owned by funds managed by affiliates of
Cerberus Capital Management, L.P. Upon acquiring the loans from the
transferring trusts, FirstKey, through a wholly owned subsidiary,
Towd Point Asset Funding, LLC (the Depositor), will contribute
loans to the Trust. As the Sponsor, FirstKey, through one or more
majority-owned affiliates, will acquire and retain a 5% eligible
vertical interest in each class of securities to be issued (other
than any residual certificates) to satisfy the credit risk
retention requirements.
As of the related servicing transfer date (November 1, 2024) all of
the loans will be serviced by Select Portfolio Servicing, Inc. (SPS
or the Servicer). SPS aggregate servicing fee rate for each payment
date is 0.1100% per annum. In its analysis, Morningstar DBRS
applied a higher servicing fee rate.
For this transaction, the Servicer will fund advances of delinquent
principal and interest (P&I) until the loans become 180 days
delinquent under the MBA delinquency method or are otherwise deemed
unrecoverable. Additionally, the Servicer is obligated to make
certain advances in respect of homeowner association fees, taxes,
and insurance, installment payments on energy improvement liens,
and reasonable costs and expenses incurred in the course of
servicing and disposing of properties.
FirstKey, as the Asset Manager, has the option to sell certain
nonperforming loans or real estate-owned (REO) properties to
unaffiliated third parties individually or in bulk sales. Such
sales require an asset sale price at least equal to a minimum
reserve amount of the product of (1) 91.62 % and (2) the current
principal amount of the mortgage loans or REO properties as of the
sale date.
When the aggregate pool balance of the mortgage loans is reduced to
less than 20% of the balance on October 1, 2024 (the Cut-Off-Date),
the Call Option Holder (an affiliate of the Sponsor, the Seller,
the Asset Manager, the Depositor, and the Risk Retention Holder)
will have the option to cause the Issuer to sell all of its
remaining property (other than amounts in the Breach Reserve
Account) to one or more third-party purchasers so long as the
aggregate proceeds meet a minimum price.
When the aggregate pool balance is reduced to less than 10% of the
balance as of the Cut-Off Date, the Call Option Holder may purchase
all of the mortgage loans, REO properties, and other properties
from the Issuer, as long as the aggregate proceeds meet a minimum
price.
The transaction allows for the issuance of Class A1 loans in which
the Issuer may enter into a Credit Agreement to borrow up to the
balance of the Class A1 loans from Class A1 lenders on the Closing
Date. For the TPMT 2024-4 transaction, the Class A1 loans will not
be issued at closing.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on Class A2
and more subordinate bonds will not be paid from principal proceeds
until the Class A1A and A1B notes are retired.
Notes: All figures are in U.S. dollars unless otherwise noted.
TRAPEZA CDO XII: Moody's Upgrades Rating on 2 Tranches to B1
------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Trapeza CDO XII, Ltd.:
US$68,000,000 Class A-2 Second Priority Senior Secured Floating
Rate Notes due 2042 (current outstanding balance $66,304,819.49),
Upgraded to Aaa (sf); previously on October 3, 2023 Upgraded to Aa1
(sf)
US$19,000,000 Class A-3 Third Priority Senior Secured Floating Rate
Notes due 2042, Upgraded to Aa1 (sf); previously on October 3, 2023
Upgraded to Aa2 (sf)
US$49,000,000 Class B Fourth Priority Secured Deferrable Floating
Rate Notes due 2042, Upgraded to Aa3 (sf); previously on October 3,
2023 Upgraded to Baa1 (sf)
US$38,000,000 Class C-1 Fifth Priority Secured Deferrable Floating
Rate Notes due 2042 (current balance of $40,871,364.32, including
deferred interest balance), Upgraded to B1 (sf); previously on May
14, 2018 Upgraded to Caa2 (sf)
US$9,000,000 Class C-2 Fifth Priority Secured Deferrable
Fixed/Floating Rate Notes due 2042 (current balance of
$12,432,030.71, including deferred interest balance), Upgraded to
B1 (sf); previously on May 14, 2018 Upgraded to Caa2 (sf)
Trapeza CDO XII, Ltd., issued in March 2007, is a collateralized
debt obligation (CDO) backed mainly by a portfolio of bank trust
preferred securities (TruPS) with small exposure to insurance
TruPS.
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 the deleveraging of
the Class A-1 and A-2 notes, an increase in the transaction's
over-collateralization (OC) ratios and partial repayment of the
Class C-1 and C-2 deferred interest balance since October 2023.
The Class A-1 notes have paid down in full and the Class A-2 have
paid down by approximately 2.5% or $1.7 million since then, using
principal proceeds from the redemption of the underlying assets.
Based on Moody's calculations, the OC ratios for the Class A-2,
Class A-3, Class B and Class C notes have improved to 313.33%,
243.54%, 154.69% and 110.74%, respectively, from October 2023
levels of 222.67%, 190.41%, 138.62% and 105.36% , respectively.
Based on the trustee's October 2024 report[1], the Class C OC
ratio, at 113.48%, was passing the trigger of 109.00%, therefore,
excess interest proceeds are being used to pay the Class C-1 and
C-2 deferred interest balances.
The key model inputs Moody's used in Moody's analysis, such as par,
weighted average rating factor, 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: $207.8 million
Defaulted par: $69.5 million
Weighted average default probability: 7.96% (implying a WARF of
866)
Weighted average recovery rate upon default of 10%
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. The
additional scenarios include, among others, deteriorating credit
quality of the portfolio.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs" published in July 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The portfolio consists primarily
of unrated assets whose default probability Moody's asses through
credit scores derived using RiskCalc(TM) or credit estimates.
Because these are not public ratings, they are subject to
additional estimation uncertainty.
UBS COMMERCIAL 2017-C6: Fitch Lowers X-F Debt to CCsf
-----------------------------------------------------
Fitch Ratings has downgraded six and affirmed 10 classes of UBS
Commercial Mortgage Trust commercial mortgage pass-through
certificates, series 2017-C6. Following their downgrades, classes
D, X-D, E and X-E were assigned Negative Rating Outlooks. The
Outlooks on classes A-S, B, X-B and C were revised to Negative from
Stable.
Entity/Debt Rating Prior
----------- ------ -----
UBS 2017-C6
A-4 90276UAW1 LT AAAsf Affirmed AAAsf
A-5 90276UAX9 LT AAAsf Affirmed AAAsf
A-BP 90276UAY7 LT AAAsf Affirmed AAAsf
A-S 90276UBC4 LT AAAsf Affirmed AAAsf
A-SB 90276UAU5 LT AAAsf Affirmed AAAsf
B 90276UBD2 LT AA-sf Affirmed AA-sf
C 90276UBE0 LT A-sf Affirmed A-sf
D 90276UAJ0 LT BB-sf Downgrade BBB-sf
E 90276UAL5 LT B-sf Downgrade BB-sf
F 90276UAN1 LT CCsf Downgrade B-sf
X-A 90276UAZ4 LT AAAsf Affirmed AAAsf
X-B 90276UBB6 LT AA-sf Affirmed AA-sf
X-BP 90276UBA8 LT AAAsf Affirmed AAAsf
X-D 90276UAA9 LT BB-sf Downgrade BBB-sf
X-E 90276UAC5 LT B-sf Downgrade BB-sf
X-F 90276UAE1 LT CCsf Downgrade B-sf
KEY RATING DRIVERS
Performance and 'B' Loss Expectations: Deal-level 'Bsf' rating case
loss is 6%, up from 4.8% at Fitch's prior rating action. Eight
loans (23.9% of the pool), including four loans (12.4%) in special
servicing, have been identified as Fitch Loans of Concern (FLOCs).
The downgrades reflect higher pool loss expectations, driven
primarily by a significantly lower updated appraisal value since
the last rating action for the specially serviced 111 West Jackson
and declining performance of Murrieta Plaza 2U Headquarters.
The Negative Outlooks reflect the potential for downgrades if FLOCs
fail to stabilize and/or recovery prospects worsen or workouts are
prolonged for the specially serviced loans, particularly 111 West
Jackson, 2U Headquarters and Murrieta Plaza.
Largest Increases in Loss Expectations: The largest increase in
loss since the prior rating action and second largest contributor
to overall pool loss expectations is 111 West Jackson (5.7%), which
is secured by a 574,878-sf office building located in Chicago, IL.
The loan transferred to special servicing in May 2023 for imminent
default. A receiver was appointed in February 2024 and continues to
operate and lease the property. As of February 2024, the property
was 55% occupied. Fitch's 'Bsf' rating case loss of 17.5%
incorporates a haircut to the most recent appraised value,
reflecting a stressed value of $60 psf.
The second largest increase in loss since the prior rating action
and largest contributor to overall pool loss expectations is
Murrieta Plaza (2.8%), which is secured by a 141,122-sf retail
property located in Murrieta, CA. The loan was flagged as a FLOC
due to declining performance. As of YE 2023, servicer reported net
operating income (NOI) debt service coverage ratio was 0.60x.
Occupancy is reportedly 42% due to Dick's Sporting Goods (42.5%)
vacating at lease expiration in March 2022. Fitch's 'Bsf' rating
case loss of 38.7% (prior to concentration adjustments) is based on
a 10.5% cap rate and a 7.5% stress to YE 2023 NOI.
The third largest increase in loss since the prior rating action
and fourth largest contributor to overall pool loss expectations is
2U Headquarters (3.6%), which is secured by a 309,303-sf suburban
office property located in Lanham, Maryland. The loan transferred
to special servicing in August 2024 due to imminent monetary
default. The sole tenant of the property filed Chapter 11
bankruptcy in July 2024 and has delivered notice it intends to
vacate the property prior to its original 2028 lease expiration.
Fitch's 'Bsf' rating case loss of 11.4% (prior to concentration
adjustments) reflects a 9% cap rate, 10% stress to YE 2023 NOI and
increased probability of default.
Change in Credit Enhancement (CE): As of the September 2024
distribution date, the transaction has been reduced by 23.5% since
issuance. Five loans (7.5%) have been defeased. One specially
serviced loan disposed since last rating action with higher than
expected recoveries; actual realized losses were $3.1 million
compared to $4.7 million in modeled losses at Fitch's prior rating
action.
Interest Shortfalls: Interest shortfalls totaling $389,952 are
impacting class NR.
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 the 'AAsf' and 'Asf' rated categories, especially
classes with Negative Outlooks, could occur with further
performance deterioration and/or lack of stabilization of the
FLOCs, including Murrieta Plaza and Holiday Inn Express - Lansing.
Downgrades to 'BBsf' and 'Bsf' rated categories could occur with
additional performance declines of the aforementioned FLOCS as well
as the specially serviced 111 West Jackson, 2U Headquarters and IGF
Portfolio loans.
Further downgrades to the distressed class 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 'AAsf' and 'Asf' rated categories would occur with
continued improvement in CE from defeasance, amortization and/or
loan paydowns, as well as performance improvement of the FLOCs
including Murrieta Plaza and Holiday Inn Express - Lansing.
Upgrades to 'BBsf' and 'Bsf' rated categories could occur with
performance improvements of the aforementioned FLOCs as well as
better recovery prospects of the loans in special servicing,
including 111 West Jackson, 2U Headquarters and IGF Portfolio.
Upgrades to the distressed class are not expected but could occur
with better than expected recoveries on specially serviced 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
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.
VELOCITY COMMERCIAL 2024-5: DBRS Finalizes B Rating on 3 Classes
----------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
Mortgage-Backed Certificates, Series 2024-5 (the Certificates)
issued by Velocity Commercial Capital Loan Trust 2024-5 (VCC 2024-5
or the Issuer) as follows:
-- $199.6 million Class A at AAA (sf)
-- $17.4 million Class M-1 at AA (Low) (sf)
-- $18.8 million Class M-2 at A (Low) (sf)
-- $33.2 million Class M-3 at BBB (low) (sf)
-- $17.1 million Class M-4 at BB (sf)
-- $6.8 million Class M-5 at B (high) (sf)
-- $3.8 million Class M-6 at B (sf)
-- $199.6 million Class A-S at AAA (sf)
-- $199.6 million Class A-IO at AAA (sf)
-- $17.4 million Class M1-A at AA (Low) (sf)
-- $17.4 million Class M1-IO at AA (Low) (sf)
-- $18.8 million Class M2-A at A (Low) (sf)
-- $18.8 million Class M2-IO at A (Low) (sf)
-- $33.2 million Class M3-A at BBB (low) (sf)
-- $33.2 million Class M3-IO at BBB (low) (sf)
-- $17.1 million Class M4-A at BB (sf)
-- $17.1 million Class M4-IO at BB (sf)
-- $6.8 million Class M5-A at B (high) (sf)
-- $6.8 million Class M5-IO at B (high) (sf)
-- $3.8 million Class M6-A at B (sf)
-- $3.8 million Class M6-IO at B (sf)
Classes A-IO, M1-IO, M2-IO, M3-IO, M4-IO, M5-IO, and M6-IO are
interest-only (IO) certificates. The class balances represent
notional amounts.
Classes A, M-1, M-2, M-3, M-4, M-5, and M-6 are exchangeable
certificates. These classes can be exchanged for combinations of
initial exchangeable certificates as specified in the offering
documents.
The AAA (sf) credit ratings on the Certificates reflect 33.55% of
credit enhancement (CE) provided by subordinated certificates. The
AA (low) (sf), A (low) (sf), BBB (low) (sf), BB (sf), B (high)
(sf), and B (sf) credit ratings reflect 27.75%, 21.50%, 10.45%,
4.75%, 2.50%, and 1.25% of CE, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
VCC 2024-5 is a securitization of a portfolio of newly originated
and seasoned fixed- and adjustable-rate, first-lien residential
mortgages collateralized by investor properties with one to four
units (residential investor loans), and small-balance commercial
mortgages (SBC) collateralized by various types of commercial,
multifamily rental, and mixed-use properties. Four of these loans
were originated through the U.S. SBA 504 loan program, and are
backed by first-lien, owner- occupied, commercial real estate. The
securitization is funded by the issuance of the Certificates. The
transaction includes 154 seasoned loans (17.0% of the pool) from
the prior VCC 2020-2 and VCC 2016-1 transactions. The Certificates
are backed by 832 mortgage loans with a total principal balance of
$300,390,172 as of the Cut-Off Date (September 1, 2024).
Approximately 54.3% of the pool comprises residential investor
loans, about 44.1% are traditional SBC loans, and about 1.6% are
the SBA 504 loans mentioned above. Most of the loans in this
securitization (93.9%) were originated by Velocity Commercial
Capital, LLC (Velocity or VCC). Fifteen loans (6.1% of the pool)
were originated by New Day Commercial Capital, LLC, a wholly owned
subsidiary of Velocity Commercial Capital, LLC, which in turn is
wholly owned by Velocity Financial, Inc.
The loans were generally underwritten to program guidelines for
business-purpose loans where the lender generally expects the
property (or its value) to be the primary source of repayment (with
the exception being the four SBA 504 loans that, per SBA
guidelines, were underwritten to the small business cash flows
rather than to the property value). For all of the New
Day-originated loans, underwriting was based on business cash
flows, but loans were secured by real estate. For the SBC and
residential investor loans, the lender reviews the mortgagor's
credit profile although it does not rely on the borrower's income
to make its credit decision. However, the lender considers the
property-level cash flows or minimum debt service coverage ratio
(DSCR) in underwriting SBC loans with balances of more than
$750,000 for purchase transactions and more than $500,000 for
refinance transactions. Because the loans were made to investors
for business purposes, they are exempt from the Consumer Financial
Protection Bureau's Ability-to-Repay rules and TILA-RESPA
Integrated Disclosure rule.
On January 5, 2024, a suit was filed in the U.S. District Court for
the Central District of California by Harvest Small Business
Finance, LLC and Harvest Commercial Capital, LLC against certain
employees of New Day Business Finance LLC and Velocity Commercial
Capital, LLC d/b/a New Day Commercial Capital, LLC (New Day)
alleging violations of the Defend Trade Secrets Act, the California
Uniform Trade Secrets Act and the California Unfair Competition
Law. New Day has indicated that it does not believe that this suit
is material.
PHH Mortgage Corporation (PMC) will service all loans in the pool
for a servicing fee of 0.30% per annum. New Day will act as
subservicer for the 15 New Day-originated loans (including the four
SBA 504 loans), and PHH will act as the Backup Servicer for these
loans. In the event that New Day fails to service these loans in
accordance with the related subservicing agreement, PHH will
terminate the subservicing agreement and commence directly
servicing such mortgage loans within 30 days. In addition, Velocity
will act as a Special Servicer servicing the loans that defaulted
or became 60 or more days delinquent under the Mortgage Bankers
Association (MBA) method and other loans, as defined in the
transaction documents (Specially Serviced Mortgage Loans). The
Special Servicer will be entitled to receive compensation based on
an annual fee of 0.75% and the balance of Specially Serviced
Loans.
Also, the Special Servicer is entitled to a liquidation fee equal
to 2.00% of the net proceeds from the liquidation of a Specially
Serviced Mortgage Loan, as described in the transaction documents.
The Servicer will fund advances of delinquent principal and
interest (P&I) until the advances are deemed unrecoverable. Also,
the Servicer is obligated to make advances with respect to taxes,
insurance premiums, and reasonable costs incurred in the course of
servicing and disposing properties.
U.S. Bank National Association (U.S. Bank; rated AA with a Stable
trend by Morningstar DBRS) will act as the Custodian. U.S. Bank
Trust Company, National Association will act as the Trustee.
The Seller, directly or indirectly through a majority-owned
affiliate, is expected to retain an eligible horizontal residual
interest consisting of the Class XS Certificates, collectively
representing at least 5% of the fair value of all Certificates, to
satisfy the credit risk-retention requirements under Section 15G of
the Securities Exchange Act of 1934 and the regulations promulgated
thereunder. Such retention aligns Sponsor and investor interest in
the capital structure.
On or after the later of (1) the three-year anniversary of the
Closing Date or (2) the date when the aggregate stated principal
balance of the mortgage loans is reduced to 30% of the Closing Date
balance, the Depositor may purchase all outstanding Certificates
(Optional Purchase) at a price equal to the sum of the remaining
aggregate balance of the Certificates plus accrued and unpaid
interest, and any fees, expenses, and indemnity payments due and
unpaid to the transaction parties, including any unreimbursed P&I
and servicing advances, and other amounts due as applicable. The
Optional Purchase will be conducted concurrently with a qualified
liquidation of the Issuer.
Additionally, if on any date on which the unpaid mortgage loan
balance and the value of real estate owned (REO) properties has
declined to less than 10% of the initial mortgage loan balance as
of the Cut-off Date, the Directing Holder, the Special Servicer, or
the Servicer, in that order of priority, may purchase all of the
mortgages, REO properties, and any other properties from the Issuer
(Optional Termination) at a price specified in the transaction
documents. The Optional Termination will be conducted as a
qualified liquidation of the Issuer. The Directing Holder
(initially, the Seller) is the representative selected by the
holders of more than 50% of the Class XS certificates (the
Controlling Class).
The transaction uses a structure sometimes referred to as a
modified pro rata structure. Prior to the Class A CE falling below
10.0% of the loan balance as of the Cut-off Date (Class A Minimum
CE Event), the principal distributions allow for amortization of
all senior and subordinate bonds based on CE targets set at
different levels for performing (same CE as at issuance) and
nonperforming (higher CE than at issuance) loans. The target
principal balance of each class is determined based on the CE
targets and the performing and nonperforming (i.e., those that are
90 or more days MBA delinquent, in foreclosure and REO, and subject
to a servicing modification within the prior 12 months) loan
amounts. As such, the principal payments are paid on a pro rata
basis, up to the target principal balance of each class, so long as
no loans in the pool are nonperforming. If the share of
nonperforming loans grows, the corresponding CE target increases.
Thus, the principal payment amount increases for the senior and
senior subordinate classes and falls for the more subordinate
bonds. The goal is to distribute the appropriate amount of
principal to the senior and subordinate bonds each month, to always
maintain the desired level of CE, based on the performing and
nonperforming pool percentages. After the Class A Minimum CE Event,
the principal distributions are made sequentially.
Relative to the sequential pay structure, the modified pro rata
structure is more sensitive to the timing of the projected defaults
and losses as the losses may be applied at a time when the amount
of credit support is reduced as the principal balances of the bonds
amortize over the life of the transaction. That said, the excess
spread can be used to cover realized losses after being allocated
to the unpaid net weighted-average coupon shortfalls (Net WAC Rate
Carryover Amounts). VCC 2024-5, in contrast to the prior VCC
securitizations, will also allocate certain excess spread amounts
(after first paying Net Wac Rate Carryover Amounts and before
covering realized losses) as principal in every period, when
available. In prior transactions, this feature was not incorporated
after the occurrence of a Class A Minimum Credit Enhancement Event.
Please see the Cash Flow Structure and Features section of the
report for more details.
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) METHODOLOGY - SMALL
BALANCE COMMERCIAL (SBC) LOANS
The collateral for the SBC portion of the pool consists of 278
individual loans secured by 278 commercial and multifamily
properties with an average cut-off date balance of $476,115. None
of the mortgage loans is cross-collateralized or cross-defaulted
with each other. Given the complexity of the structure and
granularity of the pool, Morningstar DBRS applied its "North
American CMBS Multi-Borrower Rating Methodology."
The CMBS loans have a weighted-average (WA) fixed-interest rate of
10.7%. This is approximately 70 basis points (bps) lower than the
VCC 2024-4 transaction, 100 bps lower than the VCC 2024-3
transaction, and 90 bps lower than the VCC 2024-2 and VCC 2024-1
transactions. While the overall interest rate is still relatively
elevated, highlighting the increase in interest rates over the last
few years, the reduced rate relative to the other 2024 transactions
reflects the lower interest rates of the loans originated between
2015 and 2020. Most of the loans in this transaction have original
term lengths of 30 years and fully amortize over 30-year schedules.
However, five loans, which represent 2.1% of the SBC pool, have an
initial IO period of 60 or 120 months.
All of the SBC loans were originated between October 2015 and
August 2024 (100.0% of the cut-off pool balance), resulting in a WA
seasoning of 13.5 months. The SBC pool has a WA original term
length of 360 months, or approximately 30 years. Based on the
current loan amount, which reflects 30 bps of amortization, and the
current appraised values, the SBC pool has a WA loan-to-value ratio
(LTV) of 59.0%. However, Morningstar DBRS made LTV adjustments to
31 loans that had an implied capitalization rate more than 200 bps
lower than the set of minimal capitalization rates established by
the Morningstar DBRS Market Rank. The Morningstar DBRS minimum
capitalization rates range from 5.0% for properties in Market Rank
8 to 8.0% for properties in Market Rank 1. This resulted in a
higher Morningstar DBRS LTV of 63.2%. Lastly, all loans fully
amortize over their respective remaining terms, resulting in 100%
expected amortization; this amount of amortization is greater than
what is typical for CMBS conduit pools. Morningstar DBRS' research
indicates that, for CMBS conduit transactions securitized between
2000 and 2021, average amortization by year has ranged between 6.5%
and 22.0%, with a median rate of 16.5%.
As contemplated and explained in Morningstar DBRS' "Rating North
American CMBS Interest-Only Certificates" methodology, the most
significant risk to an IO cash flow stream is term default risk. As
Morningstar DBRS notes in the methodology, for a pool of
approximately 63,000 CMBS loans that had fully cycled through to
their maturity defaults, the average total default rate across all
property types was approximately 17%, the refinance default rate
was 6% (approximately one-third of the total default rate), and the
term default rate was approximately 11%. Morningstar DBRS
recognizes the muted impact of refinance risk on IO certificates by
notching the IO rating up by one notch from the Reference
Obligation rating. When using the 10-year Idealized Default Table
default probability to derive a probability of default (POD) for a
CMBS bond from its rating, Morningstar DBRS estimates that, in
general, a one-third reduction in the CMBS Reference Obligation POD
maps to a tranche rating that is approximately one notch higher
than the Reference Obligation or the Applicable Reference
Obligation, whichever is appropriate. Therefore, similar logic
regarding term default risk supports the rationale for Morningstar
DBRS to reduce the POD in the CMBS Insight Model by one notch
because refinance risk is largely absent for this SBC pool of
loans.
The Morningstar DBRS CMBS Insight Model does not contemplate the
ability to prepay loans, which is generally seen as credit positive
because a prepaid loan cannot default. The CMBS predictive model
was calibrated using loans that have prepayment lockout features.
The historical prepayment performance of those loans is close to a
0% conditional prepayment rate. If the CMBS predictive model had an
expectation of prepayments, Morningstar DBRS would expect the
default levels to be reduced. Any loan that prepays is removed from
the pool and can no longer default. In previous VCC transactions,
Morningstar DBRS applied a 5.0% reduction to the cumulative default
assumptions to provide credit for expected payments. The assumption
reflects Morningstar DBRS' opinion that, in a rising interest-rate
environment, fewer borrowers may elect to prepay their loans. The
VCC 2024-5 transaction featured 77 seasoned loans (23.9% of the SBC
pool) from the prior VCC 2020-2 and VCC 2016-1 transactions.
Because of the larger concentration of seasoned loans that did not
elect to prepay, Morningstar DBRS elected to remove the 5.0%
reduction to the cumulative default assumptions to provide credit
for expected payments.
As a result of higher interest rates and lending spreads, the SBC
pool has had a significant increase in interest rates compared with
prior VCC transactions. Consequently, approximately 55.3% of the
deal has an Issuer net operating income DSCR of less than 1.0 times
(x), which is in line with VCC transactions in 2024 but represents
a larger composition than previous VCC transactions in 2023 and
2022. Although the Morningstar DBRS CMBS Insight Model does not
contemplate FICO scores, the WA FICO score for the SBC loans is
720, which is relatively similar to FICO scores in prior
transactions. With regard to these concerns, Morningstar DBRS
applied a 5.0% penalty to the fully adjusted cumulative default
assumptions to account for risks given these factors.
The SBC pool is quite diverse, based on loan count and size, with
an average cut-off date balance of $476,115, a concentration
profile equivalent to that of a transaction of 140 equal-size
loans, and a top 10 loan concentration of 17.6%. Increased pool
diversity helps insulate the higher-rated classes from event risk.
The loans are mostly secured by traditional property types (i.e.,
multifamily, retail, office, and industrial).
All loans in the SBC pool fully amortize over their respective
remaining loan terms, reducing refinance risk.
As classified by Morningstar DBRS for modeling purposes, the SBC
pool contains a significant exposure to retail (22.7% of the SBC
pool) and office (17.4% of the SBC pool), which are two of the
higher-volatility asset types. Loans counted as retail include
those identified as automotive and potentially as commercial
condominium. Combined, retail and office properties represent 40.1%
of the SBC pool balance. Morningstar DBRS applied a -21.1%
reduction to the net cash flow (NCF) for retail properties and a
-35.9% reduction to the NCF for office assets in the SBC pool,
which is above the average NCF reduction applied to comparable
property types in CMBS analyzed deals.
Morningstar DBRS did not perform site inspections on loans within
its sample for this transaction. Instead, Morningstar DBRS relied
upon analysis of third-party reports and online searches to
determine property quality assessments. Of the 80 loans Morningstar
DBRS sampled, 14 were of Average quality (21.4%), 39 were of
Average- quality (41.2%), 24 were of Below Average quality (34.8%),
and three were of Poor quality (2.6%). Morningstar DBRS assumed the
unsampled loans were of Average- quality, which has a slightly
increased POD level. This is consistent with the assessments of
sampled loans and other SBC transactions rated by Morningstar
DBRS.
Limited property-level information was available for Morningstar
DBRS to review. Asset summary reports, property condition reports ,
Phase I/II environmental site assessment (ESA) reports, and
historical cash flows were generally not available for review in
conjunction with this securitization. Morningstar DBRS received and
reviewed appraisals for sampled loans for the top 29 of the pool,
which represent 34.0% of the SBC pool balance. These appraisals
were issued between September 2019 and July 2024 when the
respective loans were originated. Morningstar DBRS was able to
perform a loan-level cash flow analysis on the top 29 loans in the
pool. The NCF haircuts to these loans ranged from -4.8% to -100.0%,
with an average of -19.8% when excluding outliers; however,
Morningstar DBRS generally applied more conservative haircuts on
the unsampled loans. No ESA reports were provided nor required by
the Issuer; however, all of the loans have an environmental
insurance policy that provides coverage to the Issuer and the
securitization trust in the event of a claim. No probable maximum
loss information or earthquake insurance requirements are provided.
Therefore, a loss severity given default penalty was applied to all
properties in California to mitigate this potential risk.
Morningstar DBRS received limited borrower information, net worth
or liquidity information, and credit histories. Additionally, the
WA interest rate of the deal is 10.7%, which is indicative of the
broader increased interest-rate environment and represents a large
increase over VCC deals in 2022 and early 2023. Morningstar DBRS
generally initially assumed loans had Weak sponsorship scores,
which increases the stress on the default rate. The initial
assumption of Weak sponsorship reflects the generally less
sophisticated nature of small balance borrowers and assessments
from past small balance transactions rated by Morningstar DBRS.
Furthermore, Morningstar DBRS received a 12-month pay history on
each loan through September 12, 2024. If any loan had more than two
late pays within this period or was currently 30 days past due,
Morningstar DBRS applied an additional stress to the default rate.
This occurred with 23 loans, representing 6.2% of the SBC pool
balance.
SBA 504 LOANS
The transaction includes four SBA 504 loans, totaling approximately
$4.9 million or 1.6% of the aggregate 2024-5 collateral pool. These
are owner-occupied, first-lien, commercial real estate-backed
loans, originated via the U.S. Small Business Administration's 504
loan program (SBA 504) in conjunction with community development
companies, made to small businesses, with the stated goal of
community economic development.
The SBA 504 loans are fixed rate with 360-month original terms and
are fully amortizing. The loans were originated between June 24,
2024, and August 13, 2024, via New Day, which will also act as
subservicer of the loans. The total outstanding principal balance
as of the Cut-Off Date is approximately $4.9 million, with an
average balance of $ 1,220,113. The WA interest rate is 10.05%. The
loans are subject to prepayment penalties of 5%,4%, 3%, 2%, and 1%
respectively in the first five years from origination. These loans
are for properties that are owner-occupied by the small business
owner. The WA LTV is 50.91%, the WA DSCR is 1.26x, and the WA FICO
score of this sub-pool is 674.
For these loans, Morningstar DBRS applied its "Rating U.S.
Structured Finance Transactions" methodology, Small Business
Appendix (XVIII). As there is limited historical information about
the originator, Morningstar DBRS used proxy data from the publicly
available SBA data set, which contains several decades of
performance data, stratified by industry categories of the small
business operators to derive an expected default rate. Recovery
assumptions were derived from the Morningstar DBRS CMBS data set of
loss given default stratified by property type, LTV, and market
rank. These were input into Morningstar DBRS' proprietary model,
the Morningstar DBRS CLO Insight Model, which uses a Monte Carlo
process to generate stressed loss rates corresponding to a specific
rating level.
RESIDENTIAL MORTGAGE-BACKED SECURITIES (RMBS) METHODOLOGY
The collateral pool consists of 550 mortgage loans with a total
balance of approximately $163.1 million collateralized by one- to
four-unit investment properties. Velocity underwrote the mortgage
loans to the No Ratio program guidelines for business-purpose
loans.
The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns September 2024 Update," published on September 25, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
Notes: All figures are in US dollars unless otherwise noted.
VENTURE XXVII CLO: Moody's Cuts Rating on $29.5MM Cl. E Notes to B1
-------------------------------------------------------------------
Moody's Ratings has downgraded the rating on the following notes
issued by Venture XXVII CLO, Limited:
US$29,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2030 (the "Class E Notes"), Downgraded to B1 (sf); previously
on October 30, 2020 Confirmed at Ba3 (sf)
Venture XXVII CLO, Limited, originally issued in May 2017 and
partially refinanced February 2021, is a managed cashflow CLO. The
notes are collateralized primarily by a portfolio of broadly
syndicated senior secured corporate loans. The transaction's
reinvestment period ended in July 2022.
A comprehensive review of all credit ratings for the respective
transaction has been conducted during a rating committee.
RATINGS RATIONALE
The downgrade rating action on the Class 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's September 2024 report, the OC ratio for the Class E
notes are reported at 103.37% [1] versus October 2023 level of
104.33% [2], respectively. Furthermore, based on Moody's
calculation, the current weighted average rating factor (WARF) has
increased to 2969 from 2592 in August 2023, which Moody's attribute
in part to increased exposure to unrated obligors or instruments.
No actions were taken on the Class A-R, Class B-R, Class C-R 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: $445,530,453
Defaulted par: $5,160,908
Diversity Score: 77
Weighted Average Rating Factor (WARF): 2969
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.39%
Weighted Average Coupon (WAC): 8.00%
Weighted Average Recovery Rate (WARR): 47.06%
Weighted Average Life (WAL): 3.15 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, and, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
VERUS SECURITIZATION 2024-R1: S&P Assigns 'B' Rating on B-2 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Verus Securitization
Trust 2024-R1's mortgage-backed notes.
The note issuance is an RMBS securitization backed by primarily
seasoned first-lien, fixed- and adjustable-rate residential
mortgage loans, including mortgage loans with initial interest-only
periods, to both prime and non-prime borrowers. The loans are
secured by single-family residences, planned-unit developments,
two- to four-family residential properties, condominiums,
townhouses, mixed-use properties, and five- to 10-unit multifamily
residences. The pool has 1,008 loans backed by 1,024 properties.
S&P Said, "Since we assigned our preliminary ratings on Oct. 16,
2024, the issuer dropped four loans from the pool, resulting in a
final pool balance of $336,692,674. Furthermore, for nine loans
that were 30-days delinquent as of the cut-off date, the borrowers
of these loans made the delinquent payment after the cut-off date
and subsequently became current.. We also received updated
valuations for two loans. The bond sizes were correspondingly
reduced such that credit enhancement for the rated bonds remained
the same. Furthermore, the issuer added initial exchangeable class
A-1A and A-1B notes, which together can be exchanged for
exchangeable class A-1 notes. After accounting for the
aforementioned updates and assessing the final pool and the capital
structure, the final ratings we assigned are unchanged from our
preliminary ratings on all classes."
The ratings reflect S&P's view of:
-- The pool's collateral composition (see the Collateral Summary
section);
-- The transaction's credit enhancement, associated structural
mechanics, representations and warranties (R&W) framework,
modifications, prior credit events, and geographic concentration;
-- The mortgage aggregator, Invictus Capital Partners (Invictus);
and
-- One key change in our baseline forecast since June is an
acceleration in the pace of monetary policy easing. S&P said, "We
anticipate the Federal Reserve will deliver two more rate cuts of
25 basis points (bps) this year and a total of 225 bps of rate cuts
by year-end 2025--a 75 bps increase from our prior forecast. We
continue to expect real GDP growth to slow from above-trend growth
this year to below-trend growth in 2025, accompanied by a further
rise in the unemployment rate and lower inflation. However, our
probability of a recession starting over the next 12 months remains
unchanged at 25%. With personal consumption still healthy for now,
near-term recession fears appear overblown. Therefore, we maintain
our current market outlook as it relates to the 'B' projected
archetypal foreclosure frequency of 2.50%. This reflects our benign
view of the mortgage and housing markets, as demonstrated through
general national level home price behavior, unemployment rates,
mortgage performance, and underwriting.
Request For Comment: Global Methodology And Assumptions: Assessing
Pools Of Residential Loans (U.S.)"
S&P Global Ratings announced on Oct. 16, 2024, that it is
requesting comments on its proposal to update its criteria for
rating U.S. RMBS transactions issued 2009 and later. The proposal,
if implemented, would apply to the transaction discussed here.
Ratings Assigned
Verus Securitization Trust 2024-R1
Class A-1A, $228,783,000: AAA (sf)
Class A-1B, $33,668,000: AAA (sf)
Class A-1, $262,451,000: AAA (sf)
Class A-2, $15,657,000: AA (sf)
Class A-3, $32,490,000: A (sf)
Class M-1, $11,953,000: BBB- (sf)
Class B-1, $6,397,000: BB- (sf)
Class B-2, $3,367,000: B (sf)
Class B-3, $4,377,674: NR
Class A-IO-S, Notional: NR
Class XS, Notional: NR
Class DA, N/A: NR
Class R, N/A: NR
VOYA CLO 2024-5: Fitch Assigns 'BB-sf' Rating on Class E-2 Notes
----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Voya CLO
2024-5, Ltd.
Entity/Debt Rating
----------- ------
Voya CLO 2024-5,
Ltd.
Class X LT AAAsf New Rating
Class A-1 LT NRsf New Rating
Class A-2 LT AAAsf New Rating
Class B-1 LT AAsf New Rating
Class B-2 LT AAsf New Rating
Class C LT Asf New Rating
Class D-1a LT BBB+sf New Rating
Class D-1b LT BBB+sf New Rating
Class D-2 LT BBB-sf New Rating
Class E-1 LT BB+sf New Rating
Class E-2 LT BB-sf New Rating
Sub Notes LT NRsf New Rating
Transaction Summary
Voya CLO 2024-5, 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, 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
98.55% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.34% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as 'AAAsf' for class X, between 'BBB+sf' and 'AA+sf' for
class A-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 'BBB-sf' for
class D-1, between less than 'B-sf' and 'BB+sf' for class D-2,
between less than 'B-sf' and 'BB-sf' for class E-1, and between
less than 'B-sf' and 'B+sf' for class E-2.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X 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, 'BBB+sf' for class E-1, and
'BBB-sf' for class E-2.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for VOYA CLO 2024-5,
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.
WAMU COMMERCIAL 2006-SL1: Fitch Affirms Dsf Rating on 6 Tranches
----------------------------------------------------------------
Fitch Ratings has affirmed nine classes of WaMu Commercial Mortgage
Securities Trust 2006-SL1, small balance commercial mortgage
pass-through certificates (WAMU 2006-SL1) and eight classes of WaMu
Commercial Mortgage Securities Trust 2007-SL2, small balance
commercial mortgage pass-through certificates (WAMU 2007-SL2). All
Rating Outlooks remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
WaMu Commercial
Mortgage Securities
Trust 2006-SL1
D 933633AF6 LT Asf Affirmed Asf
E 933633AG4 LT BBsf Affirmed BBsf
F 933633AH2 LT CCCsf Affirmed CCCsf
G 933633AJ8 LT Dsf Affirmed Dsf
H 933633AK5 LT Dsf Affirmed Dsf
J 933633AL3 LT Dsf Affirmed Dsf
K 933633AM1 LT Dsf Affirmed Dsf
L 933633AN9 LT Dsf Affirmed Dsf
M 933633AP4 LT Dsf Affirmed Dsf
WaMu Commercial
Mortgage Securities
Trust 2007-SL2
E 933632AG6 LT Asf Affirmed Asf
F 933632AH4 LT BBsf Affirmed BBsf
G 933632AJ0 LT Dsf Affirmed Dsf
H 933632AK7 LT Dsf Affirmed Dsf
J 933632AL5 LT Dsf Affirmed Dsf
K 933632AM3 LT Dsf Affirmed Dsf
L 933632AN1 LT Dsf Affirmed Dsf
M 933632AP6 LT Dsf Affirmed Dsf
KEY RATING DRIVERS
Rating Cap; Adverse Selection; Extended Maturity Profile: The
ratings on classes D and E in WAMU 2006-SL1 and classes E and F in
WAMU 2007-SL2 have been capped at the current ratings due to
increasing pool concentration, adverse selection, interest rate
risk and the extended maturity profile of the remaining pool.
Pool Concentration: The pool consists entirely of small balance
loans which traditionally have elevated risk profiles and higher
loss severities. The pools are adversely selected with the best
performing loans refinancing in the prior low interest rate
environment. Loans secured by multifamily properties account for
98.8% of WAMU 2006-SL1 and 75.1% of WAMU 2007-SL2, while mixed-use
properties with a multifamily component account for the remainder.
Both pools have high geographic concentration in California,
comprising 68.2% of the pool balance in WAMU 2006-SL1 and 48.7% in
WAMU 2007-SL2
Interest Rate Risk: All of the remaining loans are floating rate
indexed and therefore subject to interest rate risk. Higher
interest rates are negatively impacting the properties' NOI and may
also slow down loan repayments.
Extended Maturity Profile: All but one loan remaining in WAMU
2006-SL1 mature in 2036; the remaining loans of WAMU 2007-SL2
mature in or after 2031. Fully amortizing loans comprise 79.6% of
WAMU 2006-SL1 and 64.2% of WAMU 2007-SL2.
Generally Stable Performance: The majority of the pool has
exhibited relatively stable performance since the last rating
action. One loan (2.0% of the pool) in the WAMU 2006-SL1
transaction is in special servicing.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the most senior 'Asf' rated classes are not expected
due to the high credit enhancement, expected continued amortization
and senior position in the capital structure.
Downgrades to the 'BBsf' rated classes are considered unlikely, but
may be possible should pool-level loss expectations increase
significantly and/or additional defaults beyond Fitch's current
expectations occur. A further downgrade to the 'CCCsf' class is
possible as additional losses are realized or as losses become more
certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Further upgrades to the 'Asf' rated classes are unlikely due to
increasing pool concentration, adverse selection, interest rate
risk and the extended maturity profile of the remaining pool.
Upgrades to classes rated 'BBsf' and 'CCCsf' are possible with
continued paydown of the pool coupled with stable collateral
performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WELLS FARGO 2015-NXS1: Fitch Lowers Rating on Two Tranches to CCCsf
-------------------------------------------------------------------
Fitch Ratings has downgraded four classes and affirmed eight
classes of Wells Fargo Commercial Mortgage Trust 2015-NXS1. Classes
E and X-E were assigned a Negative Outlook following their
downgrade. The Rating Outlook was revised to Negative from Stable
for classes C, PEX and D.
Fitch has downgraded six classes and affirmed nine classes of Wells
Fargo Commercial Mortgage Trust 2015-NXS4. Classes E and X-D were
assigned a Negative Outlook following their downgrade. The Outlook
was revised to Negative from Stable for classes C and D.
Entity/Debt Rating Prior
----------- ------ -----
WFCM 2015-NXS4
A-3 94989XBB0 LT AAAsf Affirmed AAAsf
A-4 94989XBC8 LT AAAsf Affirmed AAAsf
A-S 94989XBE4 LT AAAsf Affirmed AAAsf
A-SB 94989XBD6 LT AAAsf Affirmed AAAsf
B 94989XBH7 LT AA-sf Affirmed AA-sf
C 94989XBJ3 LT A-sf Affirmed A-sf
D 94989XBL8 LT BBBsf Affirmed BBBsf
E 94989XAL9 LT BB-sf Downgrade BBB-sf
F 94989XAN5 LT CCCsf Downgrade Bsf
G 94989XAQ8 LT CCsf Downgrade CCCsf
X-A 94989XBF1 LT AAAsf Affirmed AAAsf
X-B 94989XBG9 LT AA-sf Affirmed AA-sf
X-D 94989XBK0 LT BB-sf Downgrade BBB-sf
X-F 94989XAA3 LT CCCsf Downgrade Bsf
X-G 94989XAC9 LT CCsf Downgrade CCCsf
WFCM 2015-NXS1
A-4 94989HAM2 LT AAAsf Affirmed AAAsf
A-5 94989HAQ3 LT AAAsf Affirmed AAAsf
A-S 94989HAW0 LT AAAsf Affirmed AAAsf
B 94989HBF6 LT AAsf Affirmed AAsf
C 94989HBJ8 LT A-sf Affirmed A-sf
D 94989HBM1 LT BBB-sf Affirmed BBB-sf
E 94989HBR0 LT B-sf Downgrade BB-sf
F 94989HBU3 LT CCCsf Downgrade B-sf
PEX 94989HBQ2 LT A-sf Affirmed A-sf
X-A 94989HAZ3 LT AAAsf Affirmed AAAsf
X-E 94989HCA6 LT B-sf Downgrade BB-sf
X-F 94989HCD0 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Maturity Concentration/Refinancing Concerns: Given the scheduled
maturity concentration of the WFCM 2015-NXS1 and WFCM 2015-NXS4
transactions within the next year, Fitch performed a sensitivity
and liquidation analysis that grouped the remaining loans based on
their current status, collateral quality and perceived likelihood
of repayment and/or loss expectation. Higher probabilities of
default were assigned to loans anticipated to default at maturity
due to submarket, occupancy and/or rollover concerns.
The downgrades reflect increased expected losses, as well as higher
certainty of loss on Fitch Loans of Concern (FLOCs), uncertainty
and timing of recovery of the FLOCs, particularly for loans
primarily secured by office collateral and/or specially serviced
assets. Negative Outlooks also reflect the liquidation analysis as
well as the potential for downgrade given the reliance on FLOCs to
pay in full. Downgrades are expected if FLOCs default at maturity
and expected losses increase.
WFCM 2015-NXS1: Fitch identified 19 FLOCs (29% of the pool
balance), including three loans in special servicing (10.1%). The
transaction has a high concentration of office loans (41%), with
eight office loans (15.8%) designated as FLOCs.
WFCM 2015-NXS4: Fitch identified 16 FLOCs (29% of the pool balance)
in WFCM 2015-NXS4, including five loans in special servicing
(13.1%).
The affirmations and Stable Outlooks on senior classes in both
transactions reflect the classes' reliance on pay down expectations
from performing loans, defeasance and/or limited reliance on
FLOCs.
Fitch Loans of Concern/Specially Serviced Loans: The largest
contributor to overall loss expectations in WFCM 2015-NXS1 is the
specially serviced 760 & 800 Westchester Avenue (FLOC, 5.2%). The
loan, which is current, is secured by a two-building, 561,513 sf
suburban office property located in Rye Brook, NY, southeast of
White Plains near Interstate 287. The loan transferred to special
servicing in April 2024 due to imminent monetary default. Per
recent servicer commentary, a pre-negotiation letter has been
signed and discussions remain ongoing with respect to a potential
modification and extension of the loan.
The largest tenant, Sonic Healthcare (11.5% of the NRA), renewed
its lease to October 2031. As of YE 2023, overall occupancy was 87%
with a NOI DSCR of 1.15x. As of October 2024, per CoStar, the East
I-287 Corridor office submarket has a vacancy of 17.5% and an
average annual market rent of $33.38 psf for similar class
properties. Fitch's 'Bsf' rating case loss of approximately 22%
reflects a 10% cap rate and 10% stress to the YE 2023 NOI and a
higher probability of default due to the loan's specially serviced
status.
Canyon Falls (1.4% of the pool) is secured by a 94,315 sf suburban
office property located in Twinsburg, OH. The property lost its
major tenant, Envision (81% of the NRA) in 2023 and is now in
foreclosure. The most recent servicer reported occupancy is 26%.
Fitch's 'Bsf' rating case loss of approximately 41% reflects a 12%
cap rate and 50% stress to the YE 2022 NOI to account for the low
occupancy and distressed status.
The largest driver of expected losses in WFCM 2015-NXS4 is the
specially serviced CityPlace I loan (6.1% of the pool), secured by
an 884,366-sf office building in Hartford, CT. The property has
experienced a decline in occupancy to 47% as of April 2024
following the previously largest tenant, United Healthcare,
significantly reducing its space to 6.6% of the NRA from 45.2%.
Bank of America and PwC also reduced their footprints to 5.7% and
2.7% of the NRA, respectively. As of October 2024, per Costar, the
Hartford office submarket has a vacancy of 10.9% and an average
annual market rent of $21.17 psf for similar class properties.
The loan is now classified as 60 days delinquent as of the October
2024 remittance. Fitch requested a valuation update and it was not
available. Fitch's 'Bsf' rating case loss of 51% reflects a 65%
haircut to the YE 2022 NOI and assumed default.
Additional specially serviced assets in WFCM 2015-NXS4 with high
loss expectations are The Streets of Chester (2.1% of the pool) and
Farm Fresh at Princess Anne (1.1%). The real-estate owned (REO) The
Streets of Chester transferred to special servicing in December
2018 for imminent default attributed to a decline in base rents. A
receiver was appointed in June 2019 and the asset became REO in
March 2021. The open-air retail property's reported YE 2023
occupancy was 73%. Fitch's 'Bsf' rating case loss of 47% assumed a
discount to the most recent appraisal value to account for the
increased total loan exposure and a stressed value of $119 psf.
The REO Farm Fresh at Princess Anne asset is a 57,510 sf retail
property located in Virginia Beach, VA next to a Target. The loan
remains vacant after the prior tenant, Farm Fresh, vacated at 2019
lease expiration. Fitch's 'Bsf' rating case loss of 94% assumed a
discount to the most recent appraisal value to account for the
increased total loan exposure and a stressed value of $57 psf.
Increase in CE: As of the September 2024 distribution date, WFCM
2015-NXS1 and WFCM 2015-NXS4 have paid down by 34.7% and 27.8%,
respectively. WFCM 2015-NXS1 has 12 defeased loan representing 14%
of the pool and WFCM 2015-NXS4 has 18 defeased loans representing
30.1%. Cumulative interest shortfalls are currently affecting the
non-rated class G in WFCM 2015-NXS1 and non-rated class H in WFCM
2015-NXS4. WFCM 2015-NXS1 and WFCM 2015-NXS4 have realized losses
of 1.7% and 0.8%, respectively, of the original pool balance as of
the September 2024 distribution date.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would be triggered by an increase in expected losses
from underperforming or specially serviced loans and/or greater
than expected maturity defaults.
Downgrades to 'AAAsf' and 'AAsf' rated classes of the WFCM
2015-NXS1 and WFCM 2015-NXS4 transactions are unlikely due to
improving CE from expected continued amortization and loan payoffs
at maturity, but could occur should the performance of the FLOCs
decline further, causing a significant increase in loss
expectations, and/or more loans than expected default at maturity.
Downgrades to the 'AAAsf' classes would occur should interest
shortfalls affect these classes.
Classes rated in the 'Asf' through 'Bsf' categories would be
downgraded should aggregate losses increase, loans fail to payoff
at loan maturity and/or one or more of the larger aforementioned
FLOCs have an outsized loss, or if loans in special servicing
experience extended workout times resulting in increased expenses
and value erosion.
Downgrades to the distressed classes 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
Given the maturity concentration and potential for adverse
selection of the WFCM 2015-NXS1 and WFCM 2015-NXS4 transactions,
upgrades are not expected, but may occur with significant paydown
from dispositions, better than expected recoveries on specially
serviced loans and/or significantly higher values or recovery
expectations on the remaining FLOCs, including loans secured by
office collateral.
Upgrades to the distressed classes are not expected, but possible
with better than expected recoveries on specially serviced loans or
significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WELLS FARGO 2017-RB1: DBRS Confirms C Rating on 4 Classes
----------------------------------------------------------
DBRS Limited downgraded its credit ratings on eight classes of
Commercial Mortgage Pass-Through Certificates, Series 2017-RB1
issued by Wells Fargo Commercial Mortgage Trust 2017-RB1 as
follows:
-- Class B to A (high) (sf) from AA (low) (sf)
-- Class X-B to BBB (high) (sf) from A (sf)
-- Class C to BBB (sf) from A (low) (sf)
-- Class X-D to BB (high) (sf) from BBB (sf)
-- Class D to BB (sf) from BBB (low) (sf)
-- Class E-1 to B (low) (sf) from B (high) (sf)
-- Class E-2 to CCC (sf) from B (sf)
-- Class E to CCC (sf) from B (sf)
Morningstar DBRS also confirmed its credit ratings on the remaining
classes as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class EF at CCC (sf)
-- Class F at CCC (sf)
-- Class F-1 at CCC (sf)
-- Class F-2 at CCC (sf)
-- Class EFG at C (sf)
-- Class G at C (sf)
-- Class G-1 at C (sf)
-- Class G-2 at C (sf)
Morningstar DBRS maintained the Negative trends on Classes B, C, D,
E-1, X-B, and X-D. The trends on all other classes are Stable with
the exception of Classes E-2, F-1, F-2, G-1, G-2, E, EF, EFG, F,
and G, which have credit ratings that do not carry trends in
commercial mortgage-backed securities (CMBS) transactions.
The credit rating downgrades reflect an increase in Morningstar
DBRS' loss projections, attributable to the specially serviced 340
Bryant loan (Prospectus ID#17, 2.6% of the pool), coupled with the
credit deterioration and recent transfer of the 1166 Avenue of the
Americas loan (Prospectus ID#8, 5.3% of the pool) as well as
ongoing concerns regarding the delinquent Anaheim Marriott Suites
loan (Prospectus ID#10, 4.3% of the pool) loan. Morningstar DBRS'
loss projection from the liquidation of the 340 Bryant loan is
contained to the unrated Class H certificate; however, the capital
structure provides limited credit support to the junior bonds in
the event of additional losses, given the thin tranching for the
junior bonds. In the event that the Anaheim Marriott Suites loan
resolves with a liquidation or there is an additional value decline
for the 340 Bryant loan, the principal balance of the Class E
certificates would be reduced to zero and would erode the credit
support to the Class D certificates, supporting the credit rating
downgrades.
The Negative trends on Classes B, C, D, E-1, X-B, and X-D reflect
the ongoing concerns above as well as the significant concentration
of loans backed by office properties. Morningstar DBRS identified a
number of loans that continue to exhibit declining credit metrics
with little to no performance improvement since the last review.
Although a number of loans continue to struggle, there is still
runway prior to the 2027 maturity dates for the majority of loans
in the pool, providing some time for property stabilization to
occur. In the event that loans continue to deteriorate ahead of
2027; Morningstar DBRS could take further credit rating downgrades
on the classes that currently carry Negative trends.
As of the September 2024 remittance, the pool had experienced a
15.5% collateral reduction since issuance, with 33 of the original
37 loans remaining in the pool with an aggregate principal balance
of $538.7 million. Four loans are fully defeased, representing 4.1%
of the pool balance. Two loans, representing 8.0% of the pool, are
in special servicing and six loans, representing 21.4% of the pool,
are on the servicer's watchlist primarily for performance-related
concerns. Fifteen loans, representing 53.5% of the pool, are
secured by office properties. Where applicable, Morningstar DBRS
increased its probability of default (POD) penalties and, in
certain cases, applied stressed loan-to-value ratios (LTV) for
office loans exhibiting performance concerns.
The largest loan in special servicing, 1166 Avenue of the Americas,
is secured by the first five floors of a Class A office property in
Midtown Manhattan. The loan recently transferred to the special
servicer in July 2024 with a pre-negotiation letter sent to the
borrower. The loan was previously added to the servicer's watchlist
in July 2023 because the largest tenant, The D.E. Shaw Group (D.E.
Shaw; 43.6% of the net rentable area (NRA)), confirmed that it will
vacate its space upon lease expiration in September 2024. Bloomberg
reports that the tenant is moving its headquarters to Two Manhattan
West in 2024. The second-largest tenant, Arcesium LLC (Arcesium;
20.0% of the NRA), has a lease guaranteed by D.E. Shaw and had a
lease expiration in June 2024. The master servicer previously noted
that Arcesium is looking for space elsewhere; however, a final
decision is pending. Although it appears that Arcesium remains
active at the property, the tenant is likely operating on a
month-to-month lease. As of the August 2024, rent roll, the subject
remains 100% leased but occupancy could drop to 36% with the
departure of these two tenants, which appears likely given the
recent transfer to special servicing.
According to the YE2023 financial reporting, the property generated
$10.8 million of net cash flow, higher than the prior year and
issuance figures of $9.8 million and $8.2 million, respectively.
The loan is also structured with a cash sweep that was triggered
when D.E. Shaw and Arcesium failed to provide notice of renewal 18
months prior to their initial June 2024 lease expiration dates. The
cash sweep is structured to trap all excess cash until an amount
equal to $75.00 per square foot is collected. According to the
September 2024 reporting from the lead securitization in
Morningstar DBRS-rated BBCMS Mortgage Trust 2017-C1 transaction,
reserve balances totaled $10.4 million, including $4.2 million in
its tenant reserve account and $6.2 million in a letter of credit.
While the upcoming rollover is noteworthy, the loan benefits from
structural mitigants, namely the low going-in LTV ratio of 48.9%
based on the whole-loan balance of $110.0 million and the issuance
appraised value of $225.0 million as well as the cash sweep
provisions. Moreover, the loan's maturity date in 2027 will provide
the sponsor time to backfill vacant space and work toward
stabilization once tenants begin rolling in 2024. Furthermore, the
property benefits from its excellent location in Manhattan and a
strong loan sponsor, Edward J. Minskoff Equities, Inc. Morningstar
DBRS analyzed the loan with an increased POD penalty and stressed
LTV, resulting in an expected loss of approximately double the pool
average.
The 340 Bryant loan is secured by a 62,270-sf, Class B office
property in downtown San Francisco. In December 2021, the
property's largest former tenant, WeWork (77.0% of NRA), terminated
its leases ahead of their respective scheduled expirations in 2028
and 2029. While the tenant paid a termination fee of approximately
$5.0 million, the borrower has been unable to backfill the space
since the tenant's departure. An updated rent roll was not
available; however, it appears that the entire building is now
vacant following the departure of the last remaining tenant,
Logitech (23.0% of the NRA), which had a scheduled lease expiration
in April 2024. The loan has been in special servicing since
September 2022 with foreclosure occurring in October 2023. As of
the September 2024 reporting, the loan was real estate owned with
disposition of the property expected to take place at YE2024. The
property's value was reappraised in April 2024 at $8.2 million,
representing an 84% decline from the issuance value of $52.0
million. In its analysis for this review, Morningstar DBRS
liquidated the loan from the trust using a haircut to the most
recent appraisal, resulting in an implied loss exceeding $12.5
million or a loss severity approaching 90%.
Another loan of concern, Anaheim Marriott Suites, is secured by a
371-room, full-service hotel located in Disneyland, California. In
Morningstar DBRS' previous review in October 2023, the loan was in
special servicing; however, the borrower had signed a reinstatement
agreement in July 2023 and the loan was brought current. The loan
is on the servicer's watchlist, once again for delinquent payments
as the borrower last paid debt service in July 2024. The loan is
also flagged for performance concerns, namely a low debt service
coverage ratio (DSCR). According to the most recent financials for
the trailing 12-month period ended March 31, 2024, the loan
reported a DSCR of 0.39 times (x), down from 0.87x at YE2023.
According to the April 2024 STR, Inc. report, occupancy, average
daily rate, and revenue per available room (RevPAR) at the subject
property were underperforming the competitive set with a RevPAR
penetration of 81%. The subject's value was reappraised in June
2023 at $64.5 million, reflecting a 22.3% decline compared with the
issuance value of $83.0 million. Morningstar DBRS believes that
this loan will likely transfer back to the special servicer in the
near term if payments are not made current. In light of these
issues, Morningstar DBRS applied a stressed LTV assumption based on
the updated value and an additional POD adjustment, resulting in an
expected loss of approximately double the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2018-C45: DBRS Confirms BB Rating on Class GRR Certs
----------------------------------------------------------------
DBRS, Inc. downgraded the credit rating on one class of Commercial
Mortgage Pass-Through Certificates, Series 2018-C45 issued by Wells
Fargo Commercial Mortgage Trust 2018-C45 as follows:
-- Class H-RR to B (low) (sf) from B (high) (sf)
Morningstar DBRS confirmed the credit ratings on all the remaining
classes:
-- 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 X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BBB (low) (sf)
-- Class G-RR at BB (sf)
Morningstar DBRS changed the trend on Class H-RR to Negative from
Stable. All other trends are Stable.
The credit rating downgrade reflects increased loss projections
stemming from the only loan in special servicing, Parkway Center
(Prospectus ID#3, 6.8% of the pool), secured by a Class B office
park in suburban Pittsburgh. Morningstar DBRS' liquidation scenario
for this loan, as further discussed below, projects a loss of $12.8
million, significantly eroding credit support to Class H-RR. The
Negative trend reflects the potential for further value decline of
the specially serviced asset and additional loans Morningstar DBRS
has deemed to be at increased risk of default, particularly 5800
North Course Office (Prospectus ID#27, 1.1% of the pool). In total,
four loans, all backed by office properties, were analyzed with
elevated loan-to-value (LTV) ratios and/or probability of default
(PD) penalties, resulting in a weighted-average expected loss that
was more than 2 times the pool average.
As of the September 2024 remittance, 44 of the original 49 loans
remain in the pool, representing a collateral reduction of 10.0%
since issuance. There is one loan, representing 6.8% of the pool,
that is in special servicing and seven loans, representing 15.8% of
the pool, are on the servicer's watchlist; however, only three of
the loans representing 2.3% of the pool, are on the watchlist for
performance-related concerns. Additionally, there are six loans,
representing 5.7% of the pool, that have been fully defeased.
The only loan in special servicing is Parkway Center (Prospectus
ID#3, 6.7% of the current pool balance), which is secured by six
Class B office buildings totaling 588,913 square feet (sf) in
Pittsburgh. The loan transferred to the special servicer in
November 2022 because of imminent default following the lease
default of two tenants that have since vacated, Alorica (formerly
occupied 6.5% of the net rentable area (NRA), lease expiry in
October 2023) and McKesson Corporation (formerly occupied 8.4% of
the NRA, lease expired in December 2022), which triggered cash
management. The most recent rent roll available is dated September
2023 and indicated an occupancy rate of 64%, down from 86% at
issuance. At the last credit rating action, the loan was current
and servicer commentary indicated a loan modification agreement was
being finalized; however, those negotiations have been
unsuccessful. In August 2024, the loan became delinquent and the
servicer has engaged legal counsel to begin foreclosure
proceedings. An August 2023 appraisal valued the property at $39.4
million, a 41.1% decline in value from the issuance appraised value
of $66.6 million. Given the significant value decline, stagnation
of modification negotiations, and recent delinquency, Morningstar
DBRS analyzed the loan in a liquidation scenario, resulting in a
projected loss severity in excess of 30%.
5800 North Course Office is secured by a 78,450 sf Class B suburban
office building in Houston that is fully leased to Alltran
Financial LP (100% of the NRA, lease expiry in December 2025).
Although the tenant continues to make payments, the tenant has not
been in occupancy since March 2023. To date, Alltran continues to
be listed as the sole tenant and no leasing updates have been
provided. The property is located in the Southwest submarket of
Houston, which reported a Q2 2024 vacancy rate of 24.5% according
to Reis. A May 2023 appraisal valued the property at $7.0 million.
In its analysis of this loan, Morningstar DBRS made an upward
adjustment to the loan's LTV based on a stress to this value, and
also applied an elevated PD adjustment. Unless the borrower is able
to backfill the space, which could prove challenging given the high
submarket vacancy, the loan may be noncash flowing by the end of
next year, and Morningstar DBRS considers this loan at high risk of
default. Should the loan transfer to special servicing, Morningstar
DBRS' projected losses could increase and additional classes may be
downgraded.
The CoolSprings Galleria loan (Prospectus ID#11, 3.0% of the trust
balance), was shadow-rated investment grade at issuance. With this
review, Morningstar DBRS confirms that the loan's performance
remains consistent with the investment-grade rating.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2019-C49: DBRS Confirms BB Rating on Class G-RR Certs
-----------------------------------------------------------------
DBRS Limited confirmed all credit ratings on the classes of
Commercial Mortgage Pass-Through Certificates, Series 2019-C49
issued by Wells Fargo Commercial Mortgage Trust 2019-C49 as
follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E-RR at BBB (low) (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at BB (sf)
-- Class H-RR at B (high) (sf)
-- Class J-RR at B (low) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at A (high) (sf)
-- Class X-D at A (low) (sf)
All trends are Stable.
The credit rating confirmations and stable trends reflect the
overall stable performance of the underlying loans in the pool as
evidenced by the weighted-average (WA) debt service coverage ratio
(DSCR) of 1.66 times (x), and the healthy WA debt yield (DY) of
9.9%, based on the most recent financials reported (excluding
defeased loans). Additionally, the pool benefits from a relatively
low office concentration, with only eight loans, representing 15.3%
of the pool, secured by office collateral. Although there are four
office loans, representing 11.7% of the pool, in the top 15, those
loans are generally performing as expected with minimal near-term
credit risk, with the exception of the Merge Office loan
(Prospectus ID#11; 2.2% of the pool), the largest loan on the
servicer's watchlist. That loan is secured by a suburban office
property in Westminster, California, which has been reporting
declining occupancy since issuance and has been late on making
payments since April 2024. For this review, Morningstar DBRS
increased the probability of default (POD) penalty and stressed the
loan-to-value ratio (LTV) for the loan, resulting in an expected
loss (EL) that was more than 165% higher than the pool average.
As of the October 2024 remittance, 61 of the original 64 loans
remain in the pool, with a collateral reduction of 5.6% since
issuance. A total of eight loans, representing 8.7% of the pool
have fully defeased. An additional seven loans, representing 8.2%
of the pool, are on the servicer's watchlist, being predominantly
monitored for declining DSCR and/or occupancy. The pool is mostly
concentrated by loans backed by retail and lodging properties,
which represent 30.8% and 20.5% of the pool, respectively.
There are two loans in special servicing, representing 2.4% of the
pool, Florissant Marketplace (Prospectus ID#19, 1.6% of the pool)
and 659 Broadway (Prospectus ID#46, 0.8% of the pool). Following
Morningstar DBRS' last credit rating action, Morningstar DBRS
received updated 2023 appraisals for both collateral properties,
reflecting a WA value decline from issuance of 48.8% and a WA LTV
of 128.5% based on the respective outstanding loan amounts. Both
loans were transferred to special servicing in the second half of
2020 for payment default, and disposition strategies are at various
stages for both loans, which are both delinquent. For this review,
Morningstar DBRS maintained a liquidation scenario for both loans,
based on haircuts to the most recent appraised values for each
property, which resulted in a WA implied loss severity of 70.9%,
with a cumulative projected loss of $12.3 million, eroding more
than half of the nonrated Class K-RR balance. Although this
reduction in support is noteworthy, given the low credit ratings
assigned for the four certificates above that Class in Classes
F-RR, G-RR, H-RR, and G-RR between BB (high) (sf) and B (low) (sf),
with a combined balance of $37.7 million and liquidated credit
support of just under 6.0% for the highest of the four classes in
the waterfall, Morningstar DBRS believes there remains sufficient
cushion against loss for the investment-grade credit rated classes,
supporting the credit rating confirmations and Stable trends for
all classes with this review.
The largest loan in special servicing, Florissant Marketplace, is
secured by a 146,257-square-foot (sf) grocery-anchored retail
property in the St. Louis suburb of Florissant, Missouri. Per the
servicer's most recent commentary, the receiver has secured a new
lease with Crunch Fitness to backfill the gym space that had been
vacant since 2020, a development which will bring the physical
occupancy rate back to issuance levels approaching 100%. The
property was reappraised in October 2023 at $8.5 million,
reflecting a 50.9% decline from the issuance value of $17.3
million, and results in a current LTV of 135.8%. The October 2023
value is in line with previous values obtained in 2021 and 2022.
Morningstar DBRS analyzed a liquidation scenario based on a 15.0%
haircut to the October 2023 value, which resulted in a loss
severity in excess of 77.0%.
The second loan in special servicing, 659 Broadway, is secured by a
4,876-sf, single-tenant retail property located within a larger
residential co-op building known as Bleecker Court, in Manhattan.
According to the servicer, the lender was the successful bidder at
the property's foreclosure sale in November 2023, and the property
became real estate owned as of December 2023. The building is
currently occupied by an unauthorized tenant, Sneaker City (lease
expiration in April 2027), and per the servicer's commentary,
management is currently working with the tenant to sign an
authorized lease. The property was reappraised in March 2023 for
$5.1 million, reflecting a 44.6% decline from the issuance value of
$9.2 million and generally in line with previous appraisals
obtained in 2020 and 2022. The Morningstar DBRS liquidation
scenario for this loan, also based on a 15.0% haircut to the most
recent appraised value, resulted in a projected loss severity in
excess of 57.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
[*] DBRS Reviews 13 Classes From 3 US RMBS Transactions
-------------------------------------------------------
DBRS, Inc. reviewed 13 classes from three U.S. residential
mortgage-backed securities (RMBS) transactions. The three
transactions reviewed are classified as Mortgage Insurance-Linked
Note transactions. Of the 13 classes reviewed, Morningstar DBRS
confirmed all credit ratings.
The Affected Ratings are available at https://bit.ly/4e9uuZB
The Issuers are:
Home Re 2023-1 Ltd.
Triangle Re 2023-1 Ltd.
Bellemeade Re 2023-1 Ltd.
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 September 2024 Update" published on September 25, 2024
(https://dbrs.morningstar.com/research/439965). 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 U.S. dollars unless otherwise noted.
[*] DBRS Reviews 153 Classes From 15 US RMBS Transactions
---------------------------------------------------------
DBRS, Inc. reviewed 153 classes from 15 U.S. residential
mortgage-backed securities (RMBS) transactions. Of the 15
transactions reviewed, 14 are classified as legacy RMBS and one is
classified as a reperforming mortgage. Of the 153 classes reviewed,
Morningstar DBRS upgraded its credit ratings on 22 classes and
confirmed its credit ratings on 131 classes.
The Affected Ratings are available at https://bit.ly/4husI8m
The Issuers are:
Lehman Mortgage Trust 2008-6
MASTR Adjustable Rate Mortgages Trust 2005-2
Citigroup Mortgage Loan Trust 2021-RP6
Lehman XS Trust 2006-5
J.P. Morgan Mortgage Trust 2006-S1
J.P. Morgan Mortgage Trust 2005-A5
GSR Mortgage Loan Trust 2005-AR6
DSLA Mortgage Loan Trust 2005-AR6
Long Beach Mortgage Loan Trust 2005-3
Encore Credit Receivables Trust 2005-4
First Franklin Mortgage Loan Trust 2005-FF9
First Franklin Mortgage Loan Trust 2006-FF8
CWABS Asset-Backed Certificates Trust 2004-BC5
CWABS Asset-Backed Certificates Trust 2006-SPS1
Morgan Stanley Home Equity Loan Trust 2005-2
The credit rating upgrades reflect a positive performance trend and
an increase in credit support sufficient to withstand stresses at
the new credit rating level. 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 September 2024 Update" published on September 25, 2024
(https://dbrs.morningstar.com/research/439965). 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 U.S. dollars unless otherwise noted.
[*] Moody's Takes Action on 12 Bonds from 10 US RMBS Deals
----------------------------------------------------------
Moody's Ratings has upgraded the ratings of eight bonds and
downgraded the ratings of four bonds from 10 US residential
mortgage-backed transactions (RMBS), backed by Alt-A and subprime
mortgages issued by multiple issuers.
A List of Affected Credit Ratings is available at
https://urlcurt.com/u?l=phEmps
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Bear Stearns Asset Backed Securities I Trust 2004-HE10
Cl. M-1, Downgraded to B3 (sf); previously on Jan 15, 2020
Downgraded to B1 (sf)
Issuer: ChaseFlex Trust Series 2007-2
Cl. A-1, Upgraded to A1 (sf); previously on Dec 14, 2023 Upgraded
to Ba1 (sf)
Cl. A-2, Upgraded to A2 (sf); previously on Dec 14, 2023 Upgraded
to B3 (sf)
Issuer: Nomura Home Equity Loan Trust 2005-HE1
Cl. M-5, Upgraded to Aaa (sf); previously on Apr 24, 2023 Upgraded
to Aa3 (sf)
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2004-WCW1
Cl. M-3, Downgraded to Caa1 (sf); previously on Feb 24, 2016
Upgraded to B1 (sf)
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2005-WCW1
Cl. M-3, Downgraded to Caa1 (sf); previously on Dec 20, 2018
Upgraded to B1 (sf)
Issuer: Securitized Asset Backed Receivables LLC Trust 2007-NC2
Cl. A-1, Upgraded to Aaa (sf); previously on Apr 24, 2023 Upgraded
to A1 (sf)
Issuer: Structured Asset Investment Loan Trust 2005-HE2
Cl. M2, Upgraded to A1 (sf); previously on Dec 14, 2023 Upgraded to
Baa2 (sf)
Issuer: Structured Asset Securities Corp 2006-W1
Cl. A1, Upgraded to Baa1 (sf); previously on Dec 14, 2023 Upgraded
to Ba2 (sf)
Cl. A5, Upgraded to A3 (sf); previously on Dec 14, 2023 Upgraded to
B3 (sf)
Issuer: WaMu Asset-Backed Certificates, WaMu Series 2007-HE3 Trust
Cl. I-A, Upgraded to Ba1 (sf); previously on Dec 14, 2023 Upgraded
to Caa1 (sf)
Issuer: Wells Fargo Home Equity Asset-Backed Securities 2005-3
Trust
Cl. M-7, Downgraded to B2 (sf); previously on Dec 17, 2018 Upgraded
to B1 (sf)
RATINGS RATIONALE
The rating actions reflect the current levels of credit enhancement
available to the bonds, the recent performance, analysis of the
transaction structures, and Moody's updated loss expectations on
the underlying pools.
The rating upgrades are a result of the improving performance of
the related pools, and/or an increase in credit enhancement
available to the bonds. Credit enhancement levels, over the last 12
months, have grown on average by 2.6% for the tranches upgraded.
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.
The rating downgrades are the result of outstanding credit interest
shortfalls that are unlikely to be recouped. Each of the downgraded
bonds has a weak interest recoupment mechanism where missed
interest payments will likely result in a permanent interest loss.
Unpaid interest owed to bonds with weak interest recoupment
mechanisms are reimbursed sequentially based on bond priority, from
excess interest, if available, and often only after the
overcollateralization has built to a pre-specified target amount.
In transactions where overcollateralization has already been
reduced or depleted due to poor performance, any such missed
interest payments to these bonds is unlikely to be repaid. The size
and length of the outstanding interest shortfalls were considered
in Moody's analysis.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Takes Action on 15 Bonds From 9 US RMBS Deals
---------------------------------------------------------
Moody's Ratings has upgraded the ratings of nine bonds and
downgraded the ratings of six bonds from nine US residential
mortgage-backed transactions (RMBS), backed by Alt-A and subprime
mortgages issued by multiple issuers.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Bravo Mortgage Asset Trust 2006-1
Cl. M-1, Downgraded to Caa1 (sf); previously on Nov 20, 2018
Upgraded to B1 (sf)
Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series
2004-CB7
Cl. M-1, Downgraded to Caa1 (sf); previously on Jul 10, 2023
Downgraded to B2 (sf)
Cl. M-2, Downgraded to Caa1 (sf); previously on Jul 10, 2023
Downgraded to B3 (sf)
Issuer: CSFB Mortgage Pass-Through Certificates, Series 2001-HE17
Cl. A-1, Upgraded to Baa1 (sf); previously on Jul 10, 2023 Upgraded
to Ba1 (sf)
Cl. A-2, Upgraded to Aa3 (sf); previously on Mar 21, 2022 Upgraded
to A1 (sf)
Underlying Rating: Upgraded to Aa3 (sf); previously on Jul 10, 2023
Upgraded to Ba1 (sf)
Financial Guarantor: Assured Guaranty Corp (Affirmed at A1, Outlook
Stable on July 10, 2024)
Cl. A-IO*, Upgraded to Baa1 (sf); previously on Jul 10, 2023
Upgraded to Ba1 (sf)
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2004-8CB
Cl. M-2, Downgraded to B1 (sf); previously on Aug 1, 2018 Upgraded
to Ba1 (sf)
Issuer: Fieldstone Mortgage Investment Trust 2006-3
Cl. 1-A, Downgraded to Caa1 (sf); previously on Nov 8, 2018
Downgraded to B1 (sf)
Issuer: GSAA Home Equity Trust 2004-7
Cl. AF-5, Upgraded to Aaa (sf); previously on Oct 25, 2018 Upgraded
to Aa2 (sf)
Issuer: GSAMP Trust 2006-HE5
Cl. A-1, Upgraded to Aa3 (sf); previously on Feb 8, 2022 Upgraded
to Ba2 (sf)
Cl. A-2D, Upgraded to Ba1 (sf); previously on Feb 1, 2017 Upgraded
to B2 (sf)
Cl. A-2C, Upgraded to Aaa (sf); previously on Feb 8, 2022 Upgraded
to Ba2 (sf)
Issuer: New Century Home Equity Loan Trust, Series 2004-1
Cl. M-1, Downgraded to Caa1 (sf); previously on May 6, 2019
Downgraded to B1 (sf)
Issuer: SG Mortgage Securities Trust 2007-NC1
Cl. A-1, Upgraded to B3 (sf); previously on May 5, 2010 Downgraded
to Caa3 (sf)
* Reflects Interest-Only Classes
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, or an increase in credit enhancement available
to the bonds. The transactions with upgrades continue to display
strong collateral performance. Credit enhancement levels, over the
last 12 months, have grown on average 9% for the tranches
upgraded.
Moody's analysis also reflects the potential for collateral
volatility given the number of deal-level and macro factors that
can impact collateral performance, the potential impact of any
collateral volatility on the model output, and the ultimate size or
any incurred and projected loss. Moody's also considered the
existence of historical interest shortfalls for some of the bonds.
While some shortfalls have since been recouped, the size and length
of the past shortfalls, as well as the potential for recurrence and
eventual repayment, were analyzed as part of the upgrades.
In addition, 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.
The rating downgrades are the result of outstanding credit interest
shortfalls or missed interest that are unlikely to be recouped.
Each of the downgraded bonds has a weak interest recoupment
mechanism where missed interest payments will likely result in a
permanent interest loss. Unpaid interest owed to bonds with weak
interest recoupment mechanisms are reimbursed sequentially based on
bond priority, from excess interest, if available, and often only
after the overcollateralization has built to a pre-specified target
amount. In transactions where overcollateralization has already
been reduced or depleted due to poor performance, any such missed
interest payments to these bonds are unlikely to be repaid. The
size and length of the outstanding interest shortfalls were
considered in Moody's analysis.
Certain bonds in this review are currently impaired or expected to
become impaired. Moody's ratings on those bonds reflect any losses
to date as well as Moody's expected future loss.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "US RMBS Surveillance Methodology"
published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades Ratings on 13 Bonds From Nine US RMBS Deals
----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 13 bonds from nine US
residential mortgage-backed transactions (RMBS), backed by subprime
mortgages issued by multiple issuers.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Asset Backed Funding Corporation Asset-Backed Certificates,
Series 2006-OPT2
Cl. A-2, Upgraded to Baa1 (sf); previously on Jul 23, 2018 Upgraded
to B1 (sf)
Cl. A-3C, Upgraded to B1 (sf); previously on Jul 23, 2018 Upgraded
to Caa1 (sf)
Issuer: Carrington Mortgage Loan Trust, Series 2007-FRE1
Cl. A-3, Upgraded to Ba3 (sf); previously on Mar 13, 2020 Upgraded
to Caa2 (sf)
Cl. A-4, Upgraded to B1 (sf); previously on Feb 29, 2016 Upgraded
to Caa3 (sf)
Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series
2006-CB6
Cl. A-II-4, Upgraded to Aa1 (sf); previously on Jun 30, 2022
Upgraded to Baa1 (sf)
Issuer: Centex Home Equity Loan Trust 2005-D
Cl. M-7, Upgraded to B2 (sf); previously on May 5, 2010 Downgraded
to C (sf)
Issuer: Citicorp Residential Mortgage Trust Series 2006-1
Cl. M-2, Upgraded to B1 (sf); previously on Jun 1, 2010 Downgraded
to C (sf)
Issuer: Citigroup Mortgage Loan Trust 2007-AMC2
Cl. A-1, Upgraded to Ba3 (sf); previously on Apr 6, 2010 Downgraded
to Ca (sf)
Issuer: CWABS Asset-Backed Certificates Trust 2006-12
Cl. 2-A-3, Upgraded to B1 (sf); previously on May 8, 2019 Upgraded
to B2 (sf)
Issuer: GSAMP Trust 2007-HSBC1
Cl. M-5, Upgraded to B1 (sf); previously on Jun 29, 2016 Upgraded
to B2 (sf)
Cl. M-6, Upgraded to B1 (sf); previously on Dec 11, 2019 Upgraded
to B3 (sf)
Cl. M-7, Upgraded to B2 (sf); previously on Jun 21, 2010 Downgraded
to C (sf)
Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE1
Cl. M-2, Upgraded to B1 (sf); previously on Aug 1, 2019 Upgraded to
Caa3 (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. Moody's analysis also considered the existence of
historical interest shortfalls for these bonds.
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 credit enhancement has grown, on average, by
10% for the upgraded tranches over the last 12 months.
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.
In addition, Moody's analysis also reflects the potential for
collateral volatility given the number of deal-level and macro
factors that can impact collateral performance, the potential
impact of any collateral volatility on the model output, and the
ultimate size or any incurred and projected loss.
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.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
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however, be complete or accurate. The Monday Bond Pricing table
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*********
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