/raid1/www/Hosts/bankrupt/TCR_Public/250302.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, March 2, 2025, Vol. 29, No. 60
Headlines
AGL CLO 23: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
AGL CLO 23: Moody's Assigns B3 Rating to $300,000 Class F-R Notes
AMMC CLO 27: S&P Assigns BB- (sf) Rating on Class E-R Notes
ANCHORAGE CREDIT 10: Moody's Ups Rating on Class E Notes From Ba1
BBAM US I: S&P Assigns BB- (sf) Rating on Class E-R Debts
BBCMS MORTGAGE 2025-5C33: Fitch Gives B-(EXP) Rating on G-RR Certs
BDS 2025-FL14: Fitch Assigns 'B-(EXP)sf' Rating on Class G Notes
BENCHMARK 2018-B2: Fitch Lowers Rating on Class G-RR Certs to Csf
BENCHMARK 2025-V13: Fitch Assigns 'B-sf' Rating on Class G-RR Certs
BENCHMARK 208-B1: Fitch Lowers Rating on 2 Tranches to B-sf
BNPP IP CLO 2014-II: S&P Lowers Class E Notes Rating to 'D (sf)'
BRAVO RESIDENTIAL 2025-NQM2: Fitch Assigns Bsf Rating on B-2 Notes
BRAVO RESIDENTIAL 2025-NQM2: Fitch Gives B(EXP) Rating on B-2 Notes
BX TRUST 2025-DIME: Fitch Assigns 'Bsf' Rating on Class F Certs
CANTOR COMMERCIAL 2017-C8: Fitch Affirms CCCsf Rating on 2 Tranches
CANYON CLO 2022-2: Moody's Gives (P)B3 Rating to $250,000 F-R Notes
CASTLELAKE AIRCRAFT 2025-1: Fitch Assigns 'BBsf' Rating on C Notes
CBAMR LLC 2021-15: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
CHURCHILL MIDDLE V: S&P Assigns BB- (sf) Rating on Class E Notes
COMM 2014-UBS5: DBRS Confirms C Rating on Class E Certs
DIAMOND ISSUER 2021-1: Fitch Affirms 'BB-sf' Rating on Cl. C Notes
DRYDEN 64 CLO: Moody's Cuts Rating on $12MM Class F Notes to Caa3
EFMT 2025-CES1: Fitch Assigns 'Bsf' Final Rating on Class B2 Certs
EFMT 2025-INV1: S&P Raises Class B-2 Notes Rating to 'B (sf)'
ELMWOOD CLO XI: S&P Assigns BB-(sf) Rating on Class E-R Notes
FIRSTKEY HOMES 2021-SFR1: DBRS Confirms B(high) Rating on G Certs
FLATIRON RR 22: Moody's Assigns Ba3 Rating to $19.6MM Cl. E-R Notes
FORTRESS CREDIT XXIV: S&P Assigns BB- (sf) Rating on Class E Notes
FS RIALTO 2025-FL10: Fitch Assigns B-sf Final Rating on 3 Tranches
GLS AUTO 2025-1: DBRS Gives Prov. BB Rating on Class E Notes
GSF 2023-1: Fitch Affirms 'BB-sf' Rating on Class E Notes
HAYFIN US XII: S&P Assigns Prelim BB- (sf) Rating on CL. E-R Notes
JP MORGAN 2025-1: DBRS Finalizes B(low) Rating on B5 Certs
JP MORGAN 2025-BMS: Moody's Assigns Ba1 Rating to Cl. E Certs
JP MORGAN 2025-CES1: DBRS Finalizes B(high) Rating on B-2 Certs
JP MORGAN 2025-VIS1: S&P Raises Class B-2 Notes Rating to 'B (sf)'
MF1 LLC 2022-B1: DBRS Confirms B(low) Rating on 3 Classes
MILFORD PARK: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
MILL CITY 2019-GS1: Fitch Assigns 'B+sf' Rating on Class B5A Notes
MKT 2020-525M: DBRS Cuts Class E Certs Rating to B
NATIONAL COLLEGIATE 2007-A: Fitch Affirms Bsf Rating on Cl. C Notes
NEUBERGER BERMAN XX: Fitch Assigns 'BB-sf' Rating on Cl. E-R3 Notes
NYT 2019-NYT: Fitch Affirms BB-sf Rating on 2 Tranches
OCP CLO 2021-21: S&P Assigns BB- (sf) Rating on Class E-R Notes
OCTAGON LTD 51: Moody's Assigns Ba3 Rating to $21.25MM E-R Notes
OLYMPIC TOWER 2017-OT: Fitch Affirms 'Bsf' Rating on Class E Notes
PIKES PEAK 12: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
PIKES PEAK 6: Moody's Assigns B2 Rating to $4.575MM Cl. F-RR Notes
PRM5 TRUST 2025-PRM5: Fitch Assigns 'B-sf' Rating on Class F Notes
PROVIDENT FUNDING 2025-1: Moody's Gives B2 Rating to Cl. B-5 Certs
RAD CLO 21: Fitch Assigns 'BB-sf' Rating on Class E-2-R Notes
RADIAN MORTGAGE 2025-J1: Fitch Assigns Bsf Rating on Cl. B-5 Certs
RALI TRUST: Moody's Hikes 66 Ratings From 10 RMBS Deals
RESIDENTIAL ASSET: Moody's Hikes Ups 16 Ratings From 8 RMBS Deals
RLGH TRUST 2021-TROT: DBRS Confirms B(low) Rating on Class G Certs
SANTANDER BANK 2023-MTG1: Fitch Affirms 'Bsf' Rating on M-5 Notes
SEQUOIA MORTGAGE 2025-2: Fitch Assigns Bsf Final Rating on B5 Certs
SIXTH STREET XIV: Fitch Assigns 'BB+sf' Rating on Class E-R2 Notes
SIXTH STREET XIV: S&P Assigns B- (sf) Rating on Class F-R2 Notes
SWCH 2025-DATA: DBRS Gives Prov. BB(low) Rating on F Certs
SYMPHONY CLO XXI: S&P Affirms 'BB- (sf)' Rating on Class E-R Notes
SYMPHONY CLO XXXI: S&P Assigns BB- (sf) Rating on Class E-R Notes
TCI-FLATIRON CLO 2016-1: S&P Affirms 'BB-' Rating on E-R-3 Notes
TMSQ 2014-1500: Moody's Downgrades Rating on Cl. D Certs to Caa1
TOWD POINT 2025-R1: Fitch Gives 'B-sf' Rating on Class M2 Notes
TRESTLES CLO VI: Fitch Assigns 'B+(EXP)sf' Rating on Cl. F-R Notes
TRINITAS CLO XX: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
VELOCITY COMMERCIAL 2025-1: DBRS Gives Prov. B Rating on 3 Classes
VOYA CLO 2015-3: Fitch Lowers Rating on Class E-R Notes to 'CCCsf'
WBRK 2025-WBRK: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. HRR Certs
WELLS FARGO 2015-NXS2: DBRS Confirms C Rating on 3 Classes
ZAYO ISSUER 2025-1: Fitch Assigns BB-sf Rating on C Notes
[] DBRS Hikes 23 Credit Ratings From 15 Carvana Auto Transactions
[] Fitch Affirms 37 Classes From 12 National Collegiate Trusts
[] Moody's Upgrades Ratings on 11 Bonds From 4 US RMBS Deals
*********
AGL CLO 23: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
-----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to AGL CLO
23 Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
AGL CLO 23, Ltd.
X-R LT NRsf New Rating
A 00119EAA5 LT PIFsf Paid In Full AAAsf
A-1R LT NRsf New Rating
A-2R LT AAAsf New Rating
B 00119EAC1 LT PIFsf Paid In Full AAsf
B-R LT AA+sf New Rating
C 00119EAE7 LT PIFsf Paid In Full Asf
C-R LT A+sf New Rating
D 00119EAG2 LT PIFsf Paid In Full BBB-sf
D-1R LT BBB+sf New Rating
D-2R LT BBB-sf New Rating
E 00120RAA3 LT PIFsf Paid In Full BB-sf
E-R LT BB+sf New Rating
F-R LT NRsf New Rating
Transaction Summary
AGL CLO 23 Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by AGL
CLO Credit Management LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $500 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.8% first-lien senior secured loans and has a weighted average
recovery assumption of 74.32%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 5.2-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The 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 'AA-sf' for class B-R, between 'B+sf' and 'A-sf' for
class C-R, between less than 'B-sf' and 'BBB-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 'AAAsf' for class B-R, 'AA+sf' for class C-R, 'A+sf'
for class D-1R, 'A+sf' for class D-2R, and 'BBB+sf' for class E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
A 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 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 AGL CLO 23 Ltd. In
cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis. For more information on Fitch's ESG Relevance
Scores, visit the Fitch Ratings ESG Relevance Scores page.
AGL CLO 23: Moody's Assigns B3 Rating to $300,000 Class F-R Notes
-----------------------------------------------------------------
Moody's Ratings has assigned ratings to three classes of CLO
refinancing notes (the Refinancing Notes) issued by AGL CLO 23 Ltd.
(the "Issuer" or "AGL 23").
US$1,500,000 Class X-R Senior Secured Floating Rate Notes due 2038,
Assigned Aaa (sf)
US$320,000,000 Class A-1R Senior Secured Floating Rate Notes due
2038, Assigned Aaa (sf)
US$300,000 Class F-R Junior Secured Deferrable Floating Rate Notes
due 2038, Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
92.5% of the portfolio must consist of first lien senior secured
loans and up to 7.5% of the portfolio may consist of second lien
loans, unsecured loans, senior secured bonds or senior secured
notes.
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 extended
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, the other six
classes of secured notes and 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 reinstatement of 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: 75
Weighted Average Rating Factor (WARF): 3166
Weighted Average Spread (WAS): 3.30%
Weighted Average Recovery Rate (WARR): 46.00%
Weighted Average Life (WAL): 8 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
AMMC CLO 27: S&P Assigns BB- (sf) Rating on Class E-R Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-1-R, A-2-R, B-1-R, B-2-R, C-R, D-R, and E-R debt and the new
class X-R debt from AMMC CLO 27 Ltd./AMMC CLO 27 LLC, a CLO
originally issued in December 2022 that is managed by American
Money Management Corp. At the same time, S&P withdrew its ratings
on the original class B-1, B-F, C, D, and E debt following payment
in full on the Feb. 21, 2025, 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 Jan. 20, 2026.
-- The reinvestment period was extended to Jan. 20, 2028.
-- The legal final maturity dates (for the replacement debt and
the existing subordinated notes) were extended to Jan. 20, 2037.
-- No additional assets were purchased on the Feb. 21, 2025,
refinancing date, and the target initial par amount remains at
$354.00 million. There was no additional effective date or ramp-up
period, and the first payment date following the refinancing is
April 20, 2025
-- The class X-R notes were issued on the refinancing date and are
expected to be paid down using interest proceeds during 10 payment
dates in equal installments of $200,000, beginning from the second
payment date in July 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 and
portfolio analysis, to estimate future performance. In line with
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
AMMC CLO 27 Ltd./AMMC CLO 27 LLC
Class X-R, $2.000 million: AAA (sf)
Class A-1-R, $219.480 million: AAA (sf)
Class A-2-R, $10.620 million: AAA (sf)
Class B-1-R, $32.940 million: AA (sf)
Class B-2-R, $6.000 million: AA (sf)
Class C-R (deferrable), $21.240 million: A (sf)
Class D-R (deferrable), $21.240 million: BBB- (sf)
Class E-R (deferrable), $13.275 million: BB- (sf)
Ratings Withdrawn
AMMC CLO 27 Ltd./AMMC CLO 27 LLC
Class B-1 to NR from 'AA (sf)'
Class B-F to NR from 'AA (sf)'
Class C (deferrable) to NR from 'A (sf)'
Class D (deferrable) to NR from 'BBB- (sf)'
Class E (deferrable) to NR from 'BB- (sf)'
Other Debt
AMMC CLO 27 Ltd./AMMC CLO 27 LLC
Subordinated notes, $32.100 million: Not rated
ANCHORAGE CREDIT 10: Moody's Ups Rating on Class E Notes From Ba1
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings on the following notes
issued by Anchorage Credit Funding 10, Ltd.:
US$68.35M Class B Senior Secured Fixed Rate Notes, Upgraded to Aaa
(sf); previously on Jul 26, 2024 Upgraded to Aa1 (sf)
US$27.5M Class C Mezzanine Secured Deferrable Fixed Rate Notes,
Upgraded to Aaa (sf); previously on Jul 26, 2024 Upgraded to A1
(sf)
US$27.5M Class D Mezzanine Secured Deferrable Fixed Rate Notes,
Upgraded to Aa3 (sf); previously on Jul 26, 2024 Upgraded to Baa1
(sf)
US$27.5M Class E Junior Secured Deferrable Fixed Rate Notes,
Upgraded to Baa1 (sf); previously on Jul 26, 2024 Upgraded to Ba1
(sf)
Moody's have also affirmed the ratings on the following notes:
US$241.65M Class A Senior Secured Fixed Rate Notes, Affirmed Aaa
(sf); previously on Mar 20, 2020 Definitive Rating Assigned Aaa
(sf)
Anchorage Credit Funding 10, Ltd., issued in March 2020, is a
managed cashflow CBO. The notes are collateralized primarily by a
portfolio of corporate bonds and loans. The portfolio is managed by
Anchorage Capital Group, L.L.C. The transaction's reinvestment
period will end in April 2025.
RATINGS RATIONALE
The rating upgrades on the Class B, Class C, Class D and Class E
notes are primarily a result of the benefit of the shorter period
of time remaining before the end of the reinvestment period in
April 2025.
The affirmation on the rating on the Class A notes is primarily a
result of the expected losses on the notes remaining consistent
with their current rating levels, after taking into account the
CBO's latest portfolio, its relevant structural features and its
actual over-collateralisation ratios.
In light of reinvestment restrictions during the amortisation
period, and therefore the limited ability to effect significant
changes to the current collateral pool, Moody's analysed the deal
assuming a higher likelihood that the collateral pool
characteristics would maintain an adequate buffer relative to
certain covenant requirements.
The key model inputs Moody's use in Moody's analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on Moody's published methodology
and could differ from the trustee's reported numbers.
In Moody's base case, Moody's used the following assumptions:
Performing par and principal proceeds balance: USD496.7m
Defaulted Securities: USD6.97m
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2647
Weighted Average Life (WAL): 5.67 years
Weighted Average Spread (WAS): 4.53%
Weighted Average Coupon (WAC): 5.64%
Weighted Average Recovery Rate (WARR): 34.66%
The default probability derives from the credit quality of the
collateral pool and Moody's expectations of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into Moody's cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CBO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, using the methodology "Moody's Approach to
Assessing Counterparty Risks in Structured Finance" published in
October 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: Once reaching the end of the
reinvestment period in April 2025, 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.
-- Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which could
lengthen as a result of the manager's decision to reinvest in new
issue loans or other loans with longer maturities, or participate
in amend-to-extend offerings. The effect on the ratings of
extending the portfolio's weighted average life can be positive or
negative depending on the notes' seniority.
-- Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's analysed
defaulted recoveries assuming the lower of the market price or the
recovery rate to account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a positive
impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
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.
BBAM US I: S&P Assigns BB- (sf) Rating on Class E-R Debts
---------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-1-R, D-2-R, and E-R replacement debt and the new class X-R debt
from BBAM US CLO I Ltd., a CLO originally issued in March 2022 that
is managed by RBC Global Asset Management (U.S.) Inc. 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 Feb. 26, 2025,
refinancing date.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-1-R, and E-R debt were
issued at a lower spread over a three-month term SOFR than the
original debt.
-- The stated maturity, reinvestment period, and non-call period
were extended approximately to three years.
-- The class X-R notes issued in connection with this refinancing
are expected to be paid down using interest proceeds over the
course of 12 payment dates, beginning with the payment date in July
2025.
-- Of the identified underlying collateral obligations, 100.00%
have credit ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings.
-- Of the identified underlying collateral obligations, 91.54%
have recovery ratings (which may include confidential and private
ratings) assigned by S&P Global Ratings.
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
BBAM US CLO I LTD./BBAM US CLO I LLC.
Class X-R, $5.75 million: AAA (sf)
Class A-R, $252.00 million: AAA (sf)
Class B-R, $52.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-1-R (deferrable), $24.00 million: BBB- (sf)
Class D-2-R (deferrable), $3.00 million: BBB- (sf)
Class E-R (deferrable), $13.00 million: BB- (sf)
Ratings Withdrawn
BBAM US CLO I LTD./BBAM US CLO I 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
BBAM US CLO I LTD./BBAM US CLO I LLC.
Subordinated notes, $34.00 million: NR
NR--Not rated.
BBCMS MORTGAGE 2025-5C33: Fitch Gives B-(EXP) Rating on G-RR Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BBCMS Mortgage Trust 2025-5C33 commercial mortgage pass-through
certificates series 2025-5C33 as follows:
- $3,680,000 class A-1 'AAA(EXP)sf'; Outlook Stable;
- $30,000,000 class A-2 'AAA(EXP)sf'; Outlook Stable;
- $200,000,000a class A-3 'AAA(EXP)sf'; Outlook Stable;
- $390,967,000a class A-4 'AAA(EXP)sf'; Outlook Stable;
- $624,647,000b class X-A 'AAA(EXP)sf'; Outlook Stable;
- $98,159,000 class A-S 'AAA(EXP)sf'; Outlook Stable;
- $44,618,000 class B 'AA-(EXP)sf'; Outlook Stable;
- $32,348,000 class C 'A-(EXP)sf'; Outlook Stable;
- $175,125,000bc class X-B 'A-(EXP)sf'; Outlook Stable;
- $12,269,000c class D 'BBB(EXP)sf'; Outlook Stable;
- $12,269,000bc class X-D 'BBB(EXP)sf'; Outlook Stable;
- $15,617,000cd class E-RR 'BBB-(EXP)sf'; Outlook Stable;
- $15,616,000cd class F-RR 'BB-(EXP)sf'; Outlook Stable;
- $11,154,000cd class G-RR 'B-(EXP)sf'; Outlook Stable.
Fitch is not expected to rate the following class:
- $37,925,718cd class J-RR.
a) The exact initial certificate balances of class A-3 and A-4
certificates are unknown but are expected to be $590,967,000 in
aggregate, subject to a 5% variance. The certificate balances will
be determined based on the final pricing of these classes of
certificates. The expected class A-3 balance range is $0 to
$200,000,000, and the expected class A-4 balance range is
$390,967,000 to $590,967,000. The balance for class A-3 reflects
the top point of its range, and the balance for class A-4 reflects
the bottom point of its range. In the event the class A-4
certificates are issued at $590,967,000, the class A-3 certificates
will not be issued.
b) Notional amount and interest only.
c) Privately placed pursuant to Rule 144A.
d) Horizontal risk retention interest.
Transaction Summary
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 44 loans secured by 100
commercial properties with an aggregate principal balance of
$892,353,718 as of the cutoff date. The loans were contributed to
the trust by Barclays Capital Real Estate Inc., Citi Real Estate
Funding Inc., German American Capital Corporation, Starwood
Mortgage Capital LLC, Societe Generale Financial Corporation,
Goldman Sachs Mortgage Company, BSPRT CMBS Finance, LLC and KeyBank
National Association.
The master servicer is expected to be KeyBank National Association,
and the special servicer is expected to be Greystone Servicing
Company LLC. Computershare Trust Company, National Association is
expected to be the trustee and certificate administrator. The
certificates are expected to follow a sequential paydown
structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch Ratings performed cash flow analyses on
26 loans totaling 83.5% of the pool by balance. Fitch's aggregate
pool net cash flow (NCF) of $85.0 million represents a 14.2%
decline from the issuer's underwritten aggregate pool NCF of $99.0
million.
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 101.1% is worse than the
2024 and 2023 averages of 95.2% and 89.7%, respectively. The pool's
Fitch NCF debt yield (DY) of 9.5% is lower than the 2024 and 2023
averages of 10.2% and 10.6%, respectively.
Investment-Grade Credit Opinion Loans: One loan, representing 5.8%
of the pool, received an investment-grade credit opinion. Project
Midway (5.8%) received a standalone credit opinion of 'BBB+sf*'.
The pool's total credit opinion percentage is lower than both the
2024 average of 12.6% and the 2023 average of 14.6% for Fitch-rated
five-year multiborrower transactions. Excluding the credit opinion
loan, the pool's Fitch LTV and DY are 103.1% and 9.5%,
respectively, compared with the equivalent 2024 LTV and DY averages
of 99.1% and 9.9%, respectively.
Lower Pool Concentration: The pool is less concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 55.9% of the pool, which is lower than the 2024 level of
60.2% and 2023 level of 65.3%. The pool's effective loan count of
30.7 is higher than the 2024 and 2023 average effective loan count
of 22.7 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.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Reduction in cash flow decreases property value and capacity to
meet its debt service obligations.
The table below indicates the model implied rating sensitivity to
changes to the same one variable, Fitch NCF:
- Original Rating: 'AAAsf' / 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Decline: 'AAAsf' / 'AAsf' / 'A-sf' / 'BBBsf' / 'BBB-sf' /
'BB-sf' / 'B-sf' / less than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Similarly, improvement in cash flow increases property value and
capacity to meet its debt service obligations.
The list below indicates the model implied rating sensitivity to
changes in one variable, Fitch NCF:
- Original Rating: 'AAAsf' / 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'A-sf' /
'BBBsf' / '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 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.
BDS 2025-FL14: Fitch Assigns 'B-(EXP)sf' Rating on Class G Notes
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
the BDS 2025-FL14 LLC notes as follows:
- $460,000,000a class A 'AAAsf'; Outlook Stable;
- $86,000,000a class A-S 'AAAsf'; Outlook Stable;
- $57,000,000a class B 'AA-sf'; Outlook Stable;
- $0ac class B-E 'AA-sf'; Outlook Stable;
- $0ad class B-X 'AA-sf'; Outlook Stable;
- $46,000,000ab class C 'A-sf'; Outlook Stable;
- $0ac class C-E 'A-sf'; Outlook Stable;
- $0ad class C-X 'A-sf'; Outlook Stable;
- $30,000,000ab class D 'BBBsf'; Outlook Stable;
- $0ac class D-E 'BBBsf'; Outlook Stable;
- $0ad class D-X 'BBBsf'; Outlook Stable;
- $14,000,000ab class E 'BBB-sf'; Outlook Stable;
- $0ac class E-E 'BBB-sf'; Outlook Stable;
- $0ad class E-X 'BBB-sf'; Outlook Stable;
- $28,000,000e class F 'BB-sf'; Outlook Stable;
- $20,000,000e class G 'B-sf'; Outlook Stable.
The following class is not expected to be rated by Fitch:
- $59,000,000ef Income notes.
(a) Privately placed and pursuant to Rule 144A.
(b) Exchangeable Notes: The class B, class C, class D and class E
notes are exchangeable notes and are exchangeable for proportionate
interests in the MASCOT notes, subject to the satisfaction of
certain conditions and restrictions; provided that at the time of
the exchange, such notes are owned by a wholly owned subsidiary of
Bridge REIT. The principal balance of each of the exchangeable
notes, received in an exchange will be equal to the principal
balance of the corresponding MASCOT P&I notes surrendered in such
exchange.
(c) MASCOT P&I notes.
(d) MASCOT Interest-Only notes.
(e) Retained notes.
(f) Horizontal risk retention interest, estimated to be 7.375% of
the notional amount of the notes.
The approximate collateral interest balance as of the cutoff date
is $701,201,076 and does not include future funding.
Transaction Summary
The primary assets of the trust are 18 loans secured by 23
commercial properties with an aggregate principal balance of
$701,201,076 as of the cut-off date, including three delayed-close
loans totaling $87 million. The pool also includes ramp-up
collateral interest of approximately $98,798,924. The pool does not
include $6.1 million of future funding. The loans were contributed
to the trust by BDS V Loan Seller LLC.
Wells Fargo Bank, National Association is expected to be the
servicer and the special servicer. The trustee is expected to be
Wilmington Trust, National Association, and the note administrator
is expected to be Computershare Trust Company, National
Association. The notes are expected to follow a sequential paydown
structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch Ratings performed net cash flow (NCF)
analysis on 10 loans totaling 65.0% of the pool by balance. Fitch's
resulting NCF of $26.2 million represents a 7.7% decline from the
issuer's underwritten NCF of$28.4 million, excluding loans for
which Fitch conducted an alternate value analysis.
Higher Fitch Leverage: The pool has higher leverage than recent CRE
CLO transactions rated by Fitch. The pool's Fitch loan‐to‐value
ratio (LTV) of 144.1% is higher than the 2025 YTD CRE CLO average
and 2024 CRE CLO average of 138.6% and 140.7%, respectively. The
pool's Fitch NCF debt yield (DY) of 5.9% is lower than the 2025 YTD
CRE CLO and 2024 CRE CLO average of 6.3% and 6.5%, respectively.
Average Pool Concentration: The pool's concentration is comparable
to that of recently rated Fitch CRE CLO transactions. The top 10
loans account for 69.5% of the pool, which is slightly lower than
the 2024 CRE CLO average of 70.5%, but higher than the 2025 YTD
average of 57.5%. Fitch measures loan concentration risk using an
effective loan count, which accounts for both the number and size
of loans in the pool.
The pool's effective loan count is 18.0 (given partial credit to
the ramp cash-collateral interest). Fitch views diversity as a key
mitigator to idiosyncratic risk. Fitch raises the overall loss for
pools with effective loan counts below 40.
No Amortization: Based on the scheduled balances at the end of the
fully extended loan term, the pool will pay down by 0.0%, as 100.0%
of the pool consists of interest‐only loans. The pool's
percentage paydown of 0.0% is worse than the 2025 YTD CRE CLO
average and the 2024 CRE CLO average of 0.3% and 0.6%,
respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
debt service obligations. The model-implied rating sensitivity to
changes in one variable, Fitch NCF, are as follows:
- Original Rating:
'AAAsf'/'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Decline: 'AAAsf'/'AAsf'/'Asf'
/'BBBsf'/'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 in one variable, Fitch
NCF, are as follows:
- Original Rating:
'AAAsf'/'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Increase: 'AAAsf'/'AAAsf'/'AAsf'
/'Asf'/'BBB+sf'/'BBBsf'/'BBsf'/'B+sf'.
SUMMARY OF FINANCIAL ADJUSTMENTS
In accordance with Fitch's U.S. and Canadian Multiborrower CMBS
criteria, Fitch modeled different stress scenarios using the Global
Cash Flow model as a tool. These stresses include different
interest rate, default and default timing scenarios. All
Fitch‐rated classes passed each stress scenario. The cash flow
modeling results showed that the default rates in the stressed
scenarios did not exceed the available CE in any stressed
scenario.
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.
BENCHMARK 2018-B2: Fitch Lowers Rating on Class G-RR Certs to Csf
-----------------------------------------------------------------
Fitch Ratings has downgraded nine and affirmed five classes of
BENCHMARK 2018-B2 Mortgage Trust (BMARK 2018-B2) commercial
mortgage pass-through certificates. Following their downgrades,
classes A-S, X-A, B, C, D and X-D have been assigned Negative
Rating Outlooks.
Entity/Debt Rating Prior
----------- ------ -----
Benchmark 2018-B2
A-2 08161CAB7 LT AAAsf Affirmed AAAsf
A-3 08161CAC5 LT AAAsf Affirmed AAAsf
A-4 08161CAD3 LT AAAsf Affirmed AAAsf
A-5 08161CAE1 LT AAAsf Affirmed AAAsf
A-S 08161CAJ0 LT AA-sf Downgrade AAAsf
A-SB 08161CAF8 LT AAAsf Affirmed AAAsf
B 08161CAK7 LT A-sf Downgrade AA-sf
C 08161CAL5 LT BBB-sf Downgrade A-sf
D 08161CAP6 LT BB-sf Downgrade BBB-sf
E-RR 08161CAR2 LT CCCsf Downgrade BB-sf
F-RR 08161CAT8 LT CCsf Downgrade B-sf
G-RR 08161CAV3 LT Csf Downgrade CCCsf
X-A 08161CAG6 LT AA-sf Downgrade AAAsf
X-D 08161CAM3 LT BB-sf Downgrade BBB-sf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Deal-level 'Bsf' rating case
loss increased to 11.3% from 6.7% at Fitch's prior rating action.
Fitch identified 16 Fitch Loans of Concern (FLOCs; 44.5% of the
pool), including six loans (19.4%) in special servicing.
The downgrades reflect the overall significantly higher pool loss
expectations since Fitch's prior rating action, driven by
deteriorated appraisal values for specially serviced asset/loans
including the largest asset in the transaction Central Park of
Lisle (7.1%), as well as Village Green of Waterford (2.0%) and 220
Northwest 8th Avenue (1.7%), and a decline in performance of the
newly transferred Braddock Metro Center loan (3.8%).
The Negative Outlooks for classes A-S, X-A, B, C, D and X-D reflect
a high office concentration of 47.0%, the majority of which were
considered B quality at issuance and the possible further
downgrades should recovery prospects on the aforementioned
specially serviced loans/REO asset worsen and/or performance
continues to deteriorate beyond current expectations on the FLOCs,
including InterContinental San Francisco (4.7%), Worldwide Plaza
(4.5%), 90 Hudson (2.7%) and Gateway Plaza (2.0%).
Largest Contributors to Loss: The largest increase in loss
expectations since the prior rating action and the largest
contributor to expected losses in the pool is the REO Central Park
of Lisle asset (7.1% and largest asset in the transaction), which
is a 693,606-sf office complex located in Lisle, IL, a western
suburb of Chicago. The asset transferred to special servicing in
September 2022 for imminent maturity default and became REO in
February 2024.
Property performance has continued to decline with the December
2024 occupancy falling to 57% from 68% at YE 2023, primarily due to
the largest tenant, KONE, downsizing and the departure of major
tenant, Farmers Insurance (9.4% of the NRA), at lease expiration in
May 2024. The occupancy is expected to decline further with the
second largest tenant, Kantar (5.8%), vacating at lease expiration
in January 2025.
Fitch's 'Bsf' rating case loss of 49.7% (prior to concentration
adjustments) reflects a discount to the most recent appraisal value
to address expected further declines in value, challenged market
conditions and an anticipated increase in trust expenses/fees
equating to a stressed value of $57.6 psf.
The second largest increase in loss expectations since the prior
rating action is the Braddock Metro Center loan (3.8%), which is
secured by a three-property office portfolio totaling 315,589 sf
located in Alexandria, VA. The loan transferred to special
servicing in September 2024 for non-monetary default.
Property occupancy declined to 79% as of October 2024 from 81% at
YE 2023 and 89% at YE 2022. As of June 2024, the servicer-reported
NOI DSCR fell to 1.01x from 1.25x at YE 2023 and 1.69x at YE 2022.
The property has 83,758 sf (21.5% of the NRA) of total available
space, of which 4,175 sf is from the space of the third largest
tenant, Cushman & Wakefield, according to CoStar.
The complex's largest tenant is the USDA (41.5% of the NRA). The
lease term has another nine years remaining with an expiration in
December 2034. However, there is uncertainty of the status of U.S.
General Services Administration (GSA) leases given the new
administration's statements, the potential impact on all GSA
leases, and on the overall Washington, D.C. market.
Fitch's 'Bsf' rating case loss of 40.1% (prior to concentration
adjustments) reflects a 10% cap rate and 10% stress to the YE 2023
NOI to account for the performance deterioration. The expected loss
also reflects the loan's recent default and specially serviced
status.
The third largest increase in loss expectations since the prior
rating action is the Village Green of Waterford loan (2.0%), which
is secured by a 405-unit multifamily property located in Waterford,
MI. The loan transferred to special servicing in March 2024 for
monetary default. A receiver was appointed in September 2024 and
the servicer is tracking foreclosure.
The November 2024 occupancy was 59%, down from 70% at YE 2023 and
77% at YE 2022. The property was found in poor condition with 12
down units according to the latest inspection report.
Fitch's 'Bsf' rating case loss of 38.8% (prior to concentration
adjustments) reflects a discount to the most recent appraisal value
equating to a stressed value of $39,111 per unit.
The fourth largest increase in loss expectations since the prior
rating action is the 220 Northwest 8th Avenue loan (1.7%), which is
secured by a 66,935-sf office property located in Portland, OR. The
loan transferred to special servicing in February 2024 due to
payment default. The special servicer marketed the note for sale
and it is under contract with a closing anticipated by the end of
February 2025.
As of November 2024, the property was entirely vacant following the
departure of its only tenant, Industrious (63% of NRA), at the end
of June 2024. The property had been previously 100% occupied by
WeWork, until they terminated their lease and vacated in June 2021.
Fitch's 'Bsf' rating case loss of 73.3% (prior to concentration
adjustments) reflects a discount to the most recent appraisal value
reflecting a stressed value of $89.3 psf.
Fitch is also monitoring the performance of the specially serviced
Worldwide Plaza (4.5% of the pool), which transferred to special
servicing in September 2024 due to imminent monetary default. The
2.0 million-sf office property is located in Manhattan, NY on 8th
Avenue between 49th and 50th streets. The property's second largest
tenant, Cravath Swaine & Moore (30.0% of the NRA), vacated at lease
expiration in August 2024 resulting in an occupancy of 62.8% as of
September 2024.
In addition, largest tenant Nomura (currently 34.3% of the NRA;
lease expiration on Sept. 30, 2032) downsized to its current 705k
sf from 819k sf. Nomura has a one-time termination right in 2027
with a required notice in July 2025. A modification is currently
being finalized.
Fitch's 'Bsf' rating case loss of 6.9% (prior to concentration
adjustments) reflects an 8% cap rate, with a 40% stress to the YE
2023 NOI, reflecting a lower sustainable Fitch NCF assuming an 80%
stabilized occupancy and an $80 psf rental rate assumption on
vacant space which equates to an average rental rate of $61 psf for
the collateral. The losses also reflect the senior position of the
securitized loan.
Increased Credit Enhancement (CE): As of the January 2025
distribution date, the pool's aggregate principal balance has been
reduced by 25.9% to $1.1 billion from $1.5 billion at issuance.
Three loans (3.8% of the pool) are fully defeased. There are 13
(46.9%) full-term, interest-only (IO) loans and 31 (53.1%) loans
that are currently amortizing. Cumulative interest shortfalls of
$400,767 are affecting the non-rated class NR-RR.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the high CE, senior position in the capital structure and expected
continued amortization and loan repayments, but may occur if
deal-level losses increase significantly and/or interest shortfalls
occur or are expected to occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if performance and/or valuation of the FLOCs/specially
serviced loans, most notably Central Park of Lisle, Village Green
of Waterford, 220 Northwest 8th Avenue, InterContinental San
Francisco, Worldwide Plaza, 90 Hudson and Gateway Plaza,
deteriorate further or fail to stabilize.
Downgrades for the 'BBBsf' and 'BBsf' categories are likely with
higher-than-expected losses from continued underperformance of the
FLOCs, particularly the aforementioned loans with deteriorating
performance and/or with greater certainty of losses on the
specially serviced loans, or with prolonged workouts of the loans
in special servicing.
Downgrades to distressed ratings would occur should additional
loans be transferred to special servicing or default, as losses are
realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance and/or valuation on the
FLOCs/specially serviced loans. This includes Central Park of
Lisle, Village Green of Waterford, 220 Northwest 8th Avenue,
InterContinental San Francisco, Worldwide Plaza, 90 Hudson and
Gateway Plaza. Classes would not be upgraded above 'AA+sf' if there
is likelihood for interest shortfalls.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration.
Upgrades to the 'BBsf' category rated classes are not likely until
the later years in a transaction and only if the performance of the
remaining pool is stable, recoveries on the FLOCs are better than
expected and there is sufficient CE to the classes.
Upgrades to distressed ratings are not expected and would only
occur with better-than-expected recoveries on specially serviced
loans and/or significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BENCHMARK 2025-V13: Fitch Assigns 'B-sf' Rating on Class G-RR Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Benchmark 2025-V13 Mortgage Trust, Commercial Mortgage Pass-Through
Certificates Series 2025-V13 as follows:
- $300,000 class A-1 'AAAsf'; Outlook Stable;
- $76,500,000 class A-2 'AAAsf'; Outlook Stable;
- $120,000,000 class A-3 'AAAsf'; Outlook Stable;
- $340,366,000 class A-4 'AAAsf'; Outlook Stable;
- $537,166,000a class X-A 'AAAsf'; Outlook Stable;
- $84,411,000 class A-S 'AAAsf'; Outlook Stable;
- $38,369,000 class B 'AA-sf'; Outlook Stable;
- $30,696,000 class C 'A-sf'; Outlook Stable;
- $153,476,000a class X-B 'A-sf'; Outlook Stable;
- $10,167,000b class D 'BBBsf'; Outlook Stable;
- $13,813,000bc class E-RR 'BBB-sf'; Outlook Stable;
- $15,348,000bc class F-RR 'BB-sf'; Outlook Stable;
- $9,592,000bc class G-RR 'B-sf'; Outlook Stable.
Fitch does not rate the following class:
- $27,818,000bc class J-RR.
(a) Notional Amount and interest only.
(b) Privately Placed and pursuant to Rule 144A.
(c) Horizontal risk retention.
Transaction Summary
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 36 loans secured by the
borrowers' fee and leasehold interests in 120 commercial properties
having an aggregate principal balance of $767,380,000 as of the
cutoff date. The loans were contributed to the trust by Citi Real
Estate Funding Inc., German American Capital Corporation, Goldman
Sachs Mortgage Company, Bank of Montreal, and Barclays Capital Real
Estate Inc.
The master servicer is Midland Loan Services, a Division of PNC
Bank, National Association, and the special servicer is LNR
Partners, LLC. Wilmington Savings Fund Society, FSB is trustee and
Citibank, N.A. is the Certificate Administrator. The certificates
follow a sequential paydown structure.
Since Fitch published its expected ratings on Feb. 3, 2025, the
balances for classes A-3 and A-4 were finalized. The initial
certificate balance of the class A-3 was expected to be in the
range of $0 to $175,000,000, and the initial aggregate certificate
balance of the class A-4 was expected to be in the range of
$285,366,000 to $460,366,000. The final class balances for classes
A-3 and A-4 are $120,000,000 and $340,366,000, respectively.
Class X-D was removed from the final structure by the issuer. As
such, the expected rating of 'BBB(EXP)sf' has been withdrawn. The
classes above reflect the final ratings and deal structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 21 loans
totaling 87.5% of the pool balance. Fitch's aggregate net cash flow
(NCF), including the pro-rated trust portion of any pari passu
loan, is $76.3 million, which represents a 15.1% decline from the
issuer's aggregate underwritten NCF of $89.9 million.
Higher Fitch Leverage: The pool exhibits higher leverage compared
to recent five-year multiborrower transactions rated by Fitch, with
a Fitch loan-to-value (LTV) ratio of 98.0%, surpassing the 2024 and
2023 averages of 95.2% and 89.7%, respectively. Additionally, the
pool's Fitch NCF debt yield (DY) of 9.9% is below the 2024 and 2023
averages of 10.2% and 10.6%.
Investment Grade Credit Opinion Loans: Four loans representing
16.6% of the pool balance received investment-grade credit
opinions. Herald Center (6.5% of pool) received an investment-grade
credit opinion of 'BBB-sf*' on a standalone basis. Queens Center
(6.2% of pool) received an investment-grade credit opinion of
'BBB-sf*' on a standalone basis. CBM Portfolio (2.7% of pool)
received an investment-grade credit opinion of 'A-sf*' on a
standalone basis. The Spiral (1.3% of pool) received an investment
grade credit opinion of 'AA-sf*'. The pool's total credit opinion
percentage is higher than both the 2024 average of 12.6% and the
2023 average of 14.6% for Fitch-rated five-year multiborrower
transactions. Excluding the credit opinion loans, the pool's Fitch
LTV and DY are 103.3% and 9.5%, respectively.
High Loan Concentration: The pool is slightly more concentrated
than recently rated Fitch transactions. The largest 10 loans
represent 62.5% of the pool, which is worse than both the 2024
five-year multiborrower average of 60.2% but better than 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 21.4.
Geographic Concentration: The pool has an effective MSA count of
5.5. The pool's effective MSA count is below the 2024 and 2023
average of 9.8 and 10.7, respectively. The top three MSA
concentrations are New York-Newark-Jersey City, NY-NJ-PA (39.7%),
Houston-The Woodlands-Sugar Land, TX (7.2%) and
Fayetteville-Springdale-Rogers, AR-MO (6.8%).
Retail Mall Concentration: The transaction's mall concentration
consists of three mall properties (16.9% of the pool) all of which
are within the top 10 by loan cutoff balance. Mall properties
account for 58.4% of the pool's retail exposure. The overall retail
exposure for this transaction is 28.9%, which is above the 2024
average of 24.4% but better than the 2023 average of 31.6%. The
second and third largest property types are multifamily (27.0% of
the pool) and self-storage (13.2% of the pool). Overall, the pool
has better property type diversity compared with recent Fitch-rated
five-year multiborrower transactions. The pool's effective property
type count is 5.0 compared with the 2024 and 2023 averages of 4.3
and 4.1.
Shorter-Duration Loans: Loans with five-year terms constitute 100%
of the pool, whereas Fitch-rated multiborrower transactions have
historically included mostly loans with 10-year terms. Fitch's
historical loan performance analysis shows that five-year loans
have a modestly lower probability of default than 10-year loans,
all else equal. This is mainly attributable to the shorter window
of exposure to potentially adverse economic conditions. Fitch
considered its loan performance regression in its analysis of the
pool.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% NCF Decline:
'AA-sf'/'A-sf'/'BBB-sf'/'BB+sf'/'BBsf'/'B-sf'/
BENCHMARK 208-B1: Fitch Lowers Rating on 2 Tranches to B-sf
-----------------------------------------------------------
Fitch Ratings has downgraded five and affirmed eight classes of
Benchmark 2018-B1 Mortgage Trust (BMARK 2018-B1). Negative Rating
Outlooks were assigned to classes B, X-B, C, D and X-D following
their downgrades. The Outlooks for affirmed classes A-M and X-A
have been revised to Negative from Stable.
Fitch has also downgraded seven and affirmed seven classes of
Benchmark 2018-B3 Mortgage Trust (BMARK 2018-B3). Negative Outlooks
were assigned to classes C, D, X-D and E-RR following their
downgrades. The Outlooks for affirmed classes A-S, X-A, B and X-B
have been revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
BENCHMARK 2018-B3
A-4 08161BAX1 LT AAAsf Affirmed AAAsf
A-5 08161BAY9 LT AAAsf Affirmed AAAsf
A-AB 08161BAZ6 LT AAAsf Affirmed AAAsf
A-S 08161BBA0 LT AAAsf Affirmed AAAsf
B 08161BBB8 LT AA-sf Affirmed AA-sf
C 08161BBC6 LT BBB-sf Downgrade A-sf
D 08161BAA1 LT BBsf Downgrade BBB-sf
E-RR 08161BAC7 LT Bsf Downgrade BB-sf
F-RR 08161BAE3 LT CCCsf Downgrade Bsf
G-RR 08161BAG8 LT CCsf Downgrade CCCsf
H-RR 08161BAJ2 LT Csf Downgrade CCsf
X-A 08161BBD4 LT AAAsf Affirmed AAAsf
X-B 08161BBE2 LT AA-sf Affirmed AA-sf
X-D 08161BAN3 LT BBsf Downgrade BBB-sf
Benchmark 2018-B1
Mortgage Trust
A-4 08162PAW1 LT AAAsf Affirmed AAAsf
A-5 08162PAX9 LT AAAsf Affirmed AAAsf
A-M 08162PAZ4 LT AAAsf Affirmed AAAsf
A-SB 08162PAV3 LT AAAsf Affirmed AAAsf
B 08162PBA8 LT Asf Downgrade AA-sf
C 08162PBB6 LT BBB-sf Downgrade A-sf
D 08162PAG6 LT B-sf Downgrade BB-sf
E 08162PAJ0 LT CCCsf Affirmed CCCsf
F-RR 08162PAL5 LT CCsf Affirmed CCsf
X-A 08162PAY7 LT AAAsf Affirmed AAAsf
X-B 08162PAA9 LT Asf Downgrade AA-sf
X-D 08162PAC5 LT B-sf Downgrade BB-sf
X-E 08162PAE1 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Increased 'Bsf' Loss Expectations: Deal-level 'Bsf' rating case
losses are 11.79% in BMARK 2018-B1 and 9.72% in BMARK 2018-B3
compared to 8.63% and 8.56%, respectively, at the prior rating
action. The BMARK 2018-B1 transaction has 15 Fitch Loans of Concern
(FLOCs; 48.7% of the pool), including four loans in special
servicing (12.6%). The BMARK 2018-B3 transaction has 10 FLOCs
(34.9%), including two loans in special servicing (4.2%).
BMARK 2018-B1: The downgrades in the BMARK 2018-B1 transaction
reflect higher pool loss expectations since the prior rating
action, driven by continued underperformance of larger FLOCs
including 90 Hudson (8.4%), Valencia Town Center (6.4%) and
Worldwide Plaza (6.0%).
The Negative Outlooks in BMARK 2018-B1 reflect a high office
concentration of 32.2%, the majority of which were considered B
quality at issuance and possible further downgrades should
performance on the aforementioned FLOCs continue to deteriorate
beyond current expectations and/or recovery prospects on the
specially serviced loans worsen.
BMARK 2018-B3: The downgrades in the BMARK 2018-B3 transaction
reflect higher overall pool losses since the prior rating action,
driven by a continued value decline on the 315 West 36th Street
loan (3.7%) and performance deterioration of FLOCs, including 6240
Wilshire (7.65), InterContinental San Francisco (5.3%), Village on
the Park Southgate (2.2%) and One Mill Run (1.8%).
The Negative Outlooks in BMARK 2018-B3 reflect a high concentration
of office loans (41.9%) and potential further downgrades if
performance of the aforementioned FLOCs do not stabilize and/or
workouts are prolonged for the specially serviced loans resulting
in higher than expected losses.
Largest Contributors to Loss: The largest increase in loss
expectations since the prior rating action and the largest
contributor to loss in the BMARK 2018-B1 transaction is the
Valencia Town Center loan (6.4%), which is secured by the leasehold
interest in a 395,483-sf mixed-use property located in Santa
Clarita, CA. The largest tenant, Princess Cruise Lines (PCL; 73.3%
of the NRA at issuance), has listed their entire space for
sublease, but continues to pay rent and perform under their current
lease obligation that expires in March 2026. The PCL lease is
guaranteed by their parent company, Carnival Corporation.
As of September 2024, NOI DSCR remained stable at 2.66x due to
PCL's continued rent payments. A cash flow sweep has been triggered
with the January 2025 reserve balance reported at $20.1 million.
Fitch's 'Bsf' rating case loss of 44.9% (prior to concentration
adjustments) reflects a "sum of the parts" analysis to ascertain
the aggregate individual values of the leased fee and leasehold
interests based on market occupancy and rental rate assumptions to
lease-up the vacated office space that are lower than the
assumptions used at the prior review reflecting deteriorating
submarket fundamentals.
The loss also factors in a high probability of default given the
continued concerns with the large portion of dark space, lack of
leasing activity for the dark space, elevated availability rates in
the submarket and leasehold interest in the collateral with
escalating ground rent payments that account for a large portion of
total expenses. Fitch also performed an additional sensitivity
scenario, which assumes a 100% loss to account for the possibility
of the borrower failing to maintain ground rent payments due to the
lack of cash flow following the anticipated vacancy of PCL. This
sensitivity scenario contributed to the downgrades and Negative
Outlooks.
The second largest increase in loss expectations since the prior
rating action in the BMARK 2018-B1 transaction is the 90 Hudson
loan (8.4%), which is secured by a 432,284-sf office property
located in Jersey City, NJ that was built in 1999.
The largest tenant at the property, Lord Abbett & Co (60.6% of the
NRA), vacated at lease expiration in December 2024. CoStar reports
that 326,093 sf (68.9% of the NRA) is listed as available for lease
in the building reflecting a 31% occupancy. In addition, the second
largest tenant, Charles Komar & Sons (36.9%; expires December
2031), has listed 53,047 sf as available for sublease according to
Costar. The loan is currently cash managed and reported $9.1
million ($20.98psf) in total reserves as of the January 2025 loan
level reserve report.
Fitch's 'Bsf' rating case loss of 32.4% (prior to concentration
adjustments) reflects a 30% stress to the YE 2023 NOI due to the
Lord Abbett & Co vacancy and factors a higher probability of
default given the elevated vacancy level and weak submarket
fundamentals (CoStar reports an availability rate of 27.9% for the
Hudson Waterfront office submarket).
The third largest increase in loss expectations since the prior
rating action in the BMARK 2018-B1 transaction is the Worldwide
Plaza loan (6.0%), which is secured by a 2.0 million-sf office
property located in Manhattan, NY on 8th Avenue between 49th and
50th streets. The loan transferred to special servicing in
September 2024 due to imminent monetary default.
The property's second largest tenant, Cravath Swaine & Moore (30.0%
of the NRA), vacated at lease expiration in August 2024 resulting
in occupancy falling to 62.8% as of September 2024. In addition,
largest tenant Nomura (currently 34.3% of the NRA; lease expiration
on Sept. 30, 2032) downsized to its current 705k sf (34.4%) from
819k sf (40.0%). Nomura has a one-time termination right in 2027
with a notice required by July 2025. A modification is currently
being finalized.
Fitch's 'Bsf' rating case loss of 6.9% (prior to concentration
adjustments) reflects an 8% cap rate, with a 40% stress to the YE
2023 NOI, reflecting a lower sustainable Fitch net cash flow
assuming an 80% stabilized occupancy and an $80 psf rental rate
assumption on vacant space which equates to an average rental rate
of $61 psf for the collateral. The losses also reflect the senior
position of the securitized loan.
The largest increase in loss expectations since the prior rating
action and the largest contributor to expected losses in the BMARK
2018-B3 transaction is the 315 West 36th Street loan (3.7%), which
is secured by a 143,479-sf office building with ground-floor retail
located in Midtown Manhattan, proximate to Penn Station and the
Port Authority Bus Terminal. Floors 11 and above in the building
are residential and not part of the collateral. The loan
transferred to special servicing in June 2023 for payment default.
Foreclosure was filed in September 2023.
As of September 2024, the property was 2% occupied. WeWork had
previous occupied approximately 93% of the property, until they
ceased paying rent in April 2023 and vacated the space.
Fitch's 'Bsf' rating case loss of 76.0% (prior to concentration
adjustments) reflects a discount to the most recent appraisal
value, which is approximately 27.1% below the value at the prior
review and 79.2% below the value at issuance; the updated stressed
value equates to $147.2 psf.
The second largest increase in loss expectations since the prior
rating action in the BMARK 2018-B3 transaction is the One Mill Run
loan (1.8%), which is secured by a 174,323-sf office property
located in Hilliard, OH.
The property has continued to underperform with the reported
September 2024 occupancy and NOI DSCR of 71% and 0.78x,
respectively, which compares with 71% and 0.55x at YE 2023 and 68%
and 1.24x at YE 2022. According to CoStar, approximately 49% of the
NRA is listed as available for lease, including the entire space of
the largest tenant, Caresource Management Group (12%; expires
January 2027 Additionally, the property has concentrated rollover,
with 45.6% of the NRA scheduled to expire through the end of 2026,
based on the September 2024 rent roll.
Fitch's 'Bsf' rating case loss of 32.2% (prior to concentration
adjustments) reflects a 10% cap rate and 20% stress to the YE 2023
NOI and factors a higher probability of default given the concerns
with the continued underperformance, high availability and
concentrated rollover.
The third largest increase in loss expectations since the prior
rating action in the BMARK 2018-B3 transaction is the Village on
the Park Southgate loan (2.2%), which is secured by a 357-unit
multifamily property built in 1976 and located in Southgate, MI.
The loan was 60 days delinquent as of the February 2025 reporting.
As of September 2024, the property was 85% occupied with NOI DSCR
of 1.27x which compares with occupancy and NOI DSCR of 89% and
1.00x in September 2023.
Fitch's 'Bsf' rating case loss of 25.1% (prior to concentration
add-ons) reflects an 8.75% cap rate and factors in the delinquent
loan status.
Increased Credit Enhancement (CE): As of the January 2025
distribution date, the aggregate balances of the BMARK 2018-B1 and
BMARK 2018-B3 transactions have been reduced by 28.9% and 25.1%,
respectively, since issuance.
Two loans (7.0% of the pool) in the BMARK 2018-B1 transaction are
fully defeased. Seven loans (7.7%) in the BMARK 2018-B3 transaction
are fully defeased. The BMARK 2018-B1 transaction has 12 (55.0%)
full-term, interest-only (IO) loans and 26 (45.0%) loans that are
currently amortizing. The BMARK 2018-B3 transaction has 12 (45.2%)
full-term, IO loans and 25 (54.8%) loans that are currently
amortizing.
Cumulative interest shortfalls for the BMARK 2018-B1 and BMARK
2018-B3 transactions are $1,804,462 and $1,390,512, respectively;
in the two transactions, they are affecting the non-rated class
G-RR or NR-RR.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the high CE, senior position in the capital structure and expected
continued amortization and loan repayments, but may occur if
deal-level losses increase significantly and/or interest shortfalls
occur or are expected to occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if performance and/or valuation of the FLOCs/specially
serviced loans, most notably 90 Hudson, Valencia Town Center and
Worldwide Plaza in BMARK 2018-B1, and 315 West 36th Street,
InterContinental San Francisco, Village on the Park Southgate and
One Mill Run in BMARK 2018-B3, deteriorate further or fail to
stabilize.
Downgrades for the 'BBBsf', 'BBsf' and 'Bsf' categories are likely
with higher-than-expected losses from continued underperformance of
the FLOCs, particularly the aforementioned loans with deteriorating
performance and/or with greater certainty of losses on the
specially serviced loans, or with prolonged workouts of the loans
in special servicing.
Downgrades to distressed ratings would occur should additional
loans be transferred to special servicing or default, as losses are
realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'AAsf' and 'Asf' category may be
possible with significantly increased CE from paydowns and/or
defeasance, coupled with stable-to-improved pool-level loss
expectations and improved performance and/or valuation on the
FLOCs/specially serviced loans. This includes 90 Hudson, Valencia
Town Center and Worldwide Plaza in BMARK 2018-B1, and 315 West 36th
Street, InterContinental San Francisco, Village on the Park
Southgate and One Mill Run in BMARK 2018-B3. Classes would not be
upgraded above 'AA+sf' if there is likelihood for interest
shortfalls.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration.
Upgrades to the 'BBsf' and 'Bsf' category rated classes are not
likely until the later years in a transaction and only if the
performance of the remaining pool is stable, recoveries on the
FLOCs are better than expected and there is sufficient CE to the
classes.
Upgrades to distressed ratings are not expected and would only
occur with better-than-expected recoveries on specially serviced
loans and/or significantly higher values on FLOCs.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BNPP IP CLO 2014-II: S&P Lowers Class E Notes Rating to 'D (sf)'
----------------------------------------------------------------
S&P Global Ratings lowered its rating on the class E notes from
BNPP IP CLO 2014-II Ltd., a U.S. CLO managed by BNP Paribas Asset
Management Inc., to 'D (sf)' from 'CC (sf)'.
The rating action follows our review of the transaction's
performance using data from the Jan. 21, 2025, trustee report.
Since S&P's last rating action in November 2022, the class E notes
received some paydowns, and the class E notes balance--after the
Jan. 30, 2025, note payment date--stands at $17.34 million, which
is 105.06% of its original balance. However, the remaining assets
left in the transaction, as per the January 2025 trustee report
(including the par balance of the defaults and some equity), is
$7.94 million. Even assuming a full recovery of defaults, this is
still significantly less than the total amount due to the class E
notes.
The lowered rating reflects the fact that there is not enough
remaining collateral to repay the class E notes in full.
S&P said, "We will continue to review whether, in our view, the
rating assigned to the notes remain consistent with the credit
enhancement available to support them, and we will take rating
actions as we deem necessary."
BRAVO RESIDENTIAL 2025-NQM2: Fitch Assigns Bsf Rating on B-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to BRAVO Residential
Funding Trust 2025-NQM2 (BRAVO 2025-NQM2).
Entity/Debt Rating Prior
----------- ------ -----
BRAVO 2025-NQM2
A-1A LT AAAsf New Rating AAA(EXP)sf
A-1B LT AAAsf New Rating AAA(EXP)sf
A-1 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 BBB-sf 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
SA LT NRsf New Rating NR(EXP)sf
FB LT NRsf New Rating NR(EXP)sf
AIOS LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
Transaction Summary
The BRAVO 2025-NQM2 notes are supported by 796 loans with a total
balance of approximately $369 million as of the cutoff date.
Approximately 23% of the loans in the pool were originated by OCMBC
Inc. (d/b/a LoanStream), 14% by Deephaven Mortgage LLC (Deephaven),
and the remaining loans by multiple originators, each of which
originated less than 10% of the mortgage loans. Approximately 47%
of the loans will be serviced by Citadel Servicing Corp. (Citadel,
primarily subserviced by ServiceMac), 39% by NewRez LLC (dba
Shellpoint Mortgage Servicing [Shellpoint]) and 14% by Selene
Finance LP (Selene).
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 9.5% above a long-term sustainable level, (versus
11.1% on a national level as of 3Q24). Affordability is the worst
it has been in decades driven by both high interest rates and
elevated home prices. Home prices had increased by 3.8% yoy
nationally as of November 2024, despite modest regional declines,
but are still being supported by limited inventory.
Non-Qualified Mortgage Credit Quality (Mixed): The collateral
consists of 796 loans totaling approximately $369 million and
seasoned at about 10 months in aggregate, as calculated by Fitch
(one month, per the transaction documents). The borrowers have a
strong credit profile, with a 735 model FICO; a 43% debt-to-income
ratio (DTI), accounting for Fitch's approach of mapping debt
service coverage ratio (DSCR) loans to DTI; and moderate leverage,
with a 78% sustainable loan-to-value ratio (sLTV).
Of the pool, 61.9% of loans are owner-occupied, while 38.1% are an
investor property or a second home, including loans to foreign
nationals or loans with non-confirmed residency status.
Additionally, 11.2% of the loans were originated through a retail
channel. Of the loans, 60.0% are non-qualified mortgages (non-QMs),
1.9% are safeharbor QM (SHQM).
Loan Documentation (Negative): Approximately 88.8% of the pool
loans were underwritten to less than full documentation, as
determined by Fitch, and 43.9% 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, 27.9% of the loans are a DSCR product, which includes
0.4% No Ratio, 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, 1.19%
of the loans were originated to foreign nationals.
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, A1B,
A-2 and A-3, prior to the payment of any current interest and
interest carryover amounts due to class B-3 notes on such payment
date. Class B-3 notes will not be reimbursed for any amounts 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.
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.
On or after the March 2029 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 100-bp 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 for timely interest payments to senior notes during
stressed delinquency and cash flow periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 41.2% at 'AAA'. The
analysis indicates that there is some potential for rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class, excluding those being
assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by multiple third-party review firms. The third-party due
diligence described in Form 15E focused on credit, compliance, and
property valuation review.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments to its analysis:
- A 5% PD credit was applied at the loan level for all loans graded
either 'A' or 'B';
- Fitch lowered its loss expectations by approximately 48bps as a
result of the diligence review.
ESG Considerations
BRAVO 2025-NQM2 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to increased operational risk
considering the Tier 2 R&W framework with an unrated counterparty,
which has a negative impact on the credit profile, and is relevant
to the rating[s] in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BRAVO RESIDENTIAL 2025-NQM2: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to BRAVO Residential
Funding Trust 2025-NQM2 (BRAVO 2025-NQM2).
Entity/Debt Rating
----------- ------
BRAVO 2025-NQM2
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
AIOS LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
Transaction Summary
Fitch expects to rate the residential mortgage-backed notes to be
issued by BRAVO Residential Funding Trust 2025-NQM2 (BRAVO
2025-NQM2) as indicated above. The notes are supported by 796 loans
with a total balance of approximately $369 million as of the cutoff
date.
Approximately 23% of the loans in the pool were originated by OCMBC
Inc. (d/b/a LoanStream), 14% by Deephaven Mortgage LLC (Deephaven),
and the remaining loans by multiple originators, each of which
originated less than 10% of the mortgage loans. Approximately 47%
of the loans will be serviced by Citadel Servicing Corp. (Citadel)
[primarily subserviced by ServiceMac], 39% by NewRez LLC (dba
Shellpoint Mortgage Servicing [Shellpoint]) and 14% by Selene
Finance LP (Selene).
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 9.5% above a long-term sustainable level, (versus
11.1% on a national level as of 3Q24). Affordability is the worst
it has been in decades driven by both high interest rates and
elevated home prices. Home prices had increased by 3.8% yoy
nationally as of November 2024, despite modest regional declines,
but are still being supported by limited inventory.
Non-Qualified Mortgage Credit Quality (Mixed): The collateral
consists of 796 loans totaling approximately $369 million and
seasoned at about ten months in aggregate, as calculated by Fitch
(one month, per the transaction documents). The borrowers have a
strong credit profile, with a 735 model FICO; a 43% debt-to-income
ratio (DTI), accounting for Fitch's approach of mapping debt
service coverage ratio (DSCR) loans to DTI; and moderate leverage,
with a 78% sustainable loan-to-value ratio (sLTV).
Of the pool, 61.9% of loans are owner-occupied, while 38.1% are an
investor property or a second home, including loans to foreign
nationals or loans with non-confirmed residency status.
Additionally, 11.2% of the loans were originated through a retail
channel. Of the loans, 60.0% are non-qualified mortgages (non-QMs),
1.9% are safe-harbor QM (SHQM).
Loan Documentation (Negative): Approximately 88.8% of the pool
loans were underwritten to less than full documentation, as
determined by Fitch, and 43.9% 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, 27.9% of the loans are a DSCR product, which includes
0.4% No Ratio, 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, 1.19%
of the loans were originated to foreign nationals.
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 class B-3 notes on such payment
date. Class B-3 notes will not be reimbursed for any amounts 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.
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.
On or after the March 2029 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 100-bp 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 for timely interest payments to senior notes during
stressed delinquency and cash flow periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 41.2% at 'AAA'. The
analysis indicates that there is some potential for rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class, excluding those being
assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by multiple third-party review firms. The third-party due
diligence described in Form 15E focused on credit, compliance, and
property valuation review. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustments to
its analysis:
- A 5% PD credit was applied at the loan level for all loans graded
either 'A' or 'B';
- Fitch lowered its loss expectations by approximately 48bps as a
result of the diligence review.
ESG Considerations
BRAVO 2025-NQM2 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to increased operational risk
considering the Tier 2 R&W framework with an unrated counterparty,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BX TRUST 2025-DIME: Fitch Assigns 'Bsf' Rating on Class F Certs
---------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to BX
Trust 2025-DIME, Commercial Mortgage Pass-Through Certificates,
Series 2025-DIME:
- $490,600,000 class A 'AAAsf'; Outlook Stable;
- $55,500,000 class B 'AA-sf'; Outlook Stable;
- $59,400,000 class C 'A-sf'; Outlook Stable;
- $83,800,000 class D 'BBB-sf'; Outlook Stable;
- $128,400,000 class E 'BB-sf'; Outlook Stable;
- $84,800,000 class F 'Bsf'; Outlook Stable;
- $38,000,000a class JRR 'B-sf'; Outlook Stable;
- $9,500,000a class KRR 'B-sf'; Outlook Stable.
(a) Horizontal risk retention interest representing at least 5.0%
of the estimated fair value of all classes.
Transaction Summary
The certificates represent the beneficial ownership interest in a
trust that holds a $950.0 million, two-year, floating-rate,
interest-only mortgage loan with three one-year extension options.
The mortgage is secured by the borrower's fee simple interest in a
portfolio of 57 industrial facilities, comprising approximately 7.6
million sf located across seven states and eight markets.
The borrower sponsor, Blackstone Real Estate Partners X, acquired
the properties through a series of transactions over the past two
years for a total cost of approximately $1.25 billion.
The mortgage loan was used to provide delayed acquisition financing
for the portfolio, pay off existing asset level debt for 13
properties within the portfolio, and fund estimated closing costs
of $23.1 million.
The loan was co-originated by Goldman Sachs Bank USA, German
American Capital Corporation, Barclays Capital Real Estate Inc. and
Bank of Montreal. KeyBank National Association, a national banking
association, is the servicer, with K-Star Asset Management LLC as
the special servicer. Computershare Trust Company, N.A. is acting
as the trustee and certificate administrator. Park Bridge Lender
Services LLC, a New York limited liability company, is acting as
operating advisor.
The certificates will follow a pro-rata paydown for the initial 30%
of the loan amount and a standard senior-sequential paydown
thereafter. To the extent no mortgage loan event of default (EOD)
is continuing, voluntary prepayments will be applied pro rata
between the mortgage loan components.
KEY RATING DRIVERS
Net Cash Flow: Fitch estimates stressed net cash flow (NCF) for the
portfolio at $58.8 million. This is 7.8% lower than the issuer's
NCF. Fitch applied a 7.25% cap rate to derive a Fitch value of
approximately $811.0 million.
High Fitch Leverage: The $950.0 million whole loan equates to debt
of approximately $124 psf with a Fitch stressed loan-to-value (LTV)
ratio and debt yield of 117.1% and 6.2%, respectively. The loan
represents approximately 69.5% of the portfolio appraised value of
$1.37 billion. 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 57 properties, 55 primarily industrial,
and two office properties (7.6 million sf) located across seven
states and eight metropolitan statistical areas (MSAs). The three
largest state concentrations by NRA are Texas (3,275,320 sf; 19
properties), Florida (1,364,864 sf; 12 properties) and Illinois
(886,535 sf; six properties). The three largest MSAs by both NRA
and allocated loan amount (ALA) are Dallas-Fort Worth, TX (42.8% of
NRA; 32.0% of ALA), Chicago, IL (11.6% of NRA; 13.6% of ALA) and
Phoenix, AZ (11.5% of NRA; 10.5% of ALA). The portfolio also
exhibits significant tenant diversity, as it features over 155
distinct tenants, with no tenant occupying more than 7.8% of NRA.
Institutional Sponsorship: Founded in 1985, Blackstone is the
world's largest real estate investor, with 3,000 employees in 27
offices. As of 3Q24, Blackstone had acquired assets under
management (AUM) of $325 billion in commercial real estate.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
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/Bsf/B-sf/B-sf;
- 10% NCF Decline: AA-sf
/BBB+sf/BBB-sf/BBsf/Bsf/CCCsf/CCCsf/CCCsf.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet 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/Bsf/B-sf/B-sf;
- 10% NCF Increase: AAAsf / AA+sf/A+sf/BBB+sf/BBsf/B+sf/B+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 PricewaterhouseCoopers 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.
CANTOR COMMERCIAL 2017-C8: Fitch Affirms CCCsf Rating on 2 Tranches
-------------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of the Cantor Commercial Real
Estate's CFCRE 2017-C8 Mortgage Trust (CFCRE 2017-C8) Commercial
Mortgage Pass-Through Certificates. Following the affirmations, the
Rating Outlooks for classes E and X-E remain Negative. The Outlooks
for classes D and X-D have been revised to Negative from Stable
following their affirmations.
Entity/Debt Rating Prior
----------- ------ -----
CFCRE 2017-C8
A-3 12532CAZ8 LT AAAsf Affirmed AAAsf
A-4 12532CBA2 LT AAAsf Affirmed AAAsf
A-M 12532CBB0 LT AAAsf Affirmed AAAsf
A-SB 12532CAY1 LT AAAsf Affirmed AAAsf
B 12532CBC8 LT AA+sf Affirmed AA+sf
C 12532CBD6 LT Asf Affirmed Asf
D 12532CAA3 LT BBB-sf Affirmed BBB-sf
E 12532CAC9 LT Bsf Affirmed Bsf
F 12532CAE5 LT CCCsf Affirmed CCCsf
X-A 12532CBE4 LT AAAsf Affirmed AAAsf
X-B 12532CBF1 LT AA+sf Affirmed AA+sf
X-C 12532CBG9 LT Asf Affirmed Asf
X-D 12532CAJ4 LT BBB-sf Affirmed BBB-sf
X-E 12532CAL9 LT Bsf Affirmed Bsf
X-F 12532CAN5 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Increase in 'Bsf' Loss Expectations: Deal-level 'Bsf' rating case
loss increased to 6.6% from 6.3% at Fitch's prior rating action.
Fitch identified 11 loans (32.5% of the pool) as Fitch Loans of
Concern (FLOCs), including two loans (7.1%) in special servicing.
The Negative Outlooks to classes D, E, X-D, and X-E reflect higher
pool loss expectations, primarily resulting from further
performance deterioration of FLOCs including Pershing Square (8.4%
of pool), Euless Town Center (2.1%), Flats East Bank Phase I
(4.1%), Hickory Corners (1.7%) and Center West (1.9%) in addition
to outsized anticipated losses for the 340 Bryant (3.0%) asset. 67%
of the office loans, representing 19.4% of the pool, have an
exposure to a single tenant, which introduces some binary risk.
However, these loans remain stable and are performing as expected.
Largest Contributors to Loss Expectations: The largest contributor
to expected losses in the pool is 340 Bryant (3.0%), a 62,270 sf,
four-story creative office building located in the heart of the
SOMA district of San Francisco, CA. The asset transferred to
special servicing in September 2022 due to monetary default after
the largest tenant WeWork (76.6% of the NRA) vacated their space in
2021, ahead of their February 2028 lease expiration. The remaining
tenant Logitech (23% of the NRA) vacated at their April 2023 lease
expiration, leaving the building entirely vacant and resulting in
cashflow insufficient to service the debt since 2022.
The property is being marketed for sale/lease to a variety of
investors and users in the office and self-storage sectors.
According to CoStar, the property is located in the Rincon/South
Beach office submarket of the San Francisco MSA which has a vacancy
rate of 27.3%, and a higher availability rate of 33.2%.
Fitch's loss expectations of 68% (prior to concentration add-ons)
reflects a 20% stress to the most recent appraisal value, which is
approximately 75% below the value at issuance and equates to a
stressed value of $167 psf.
The second largest contributor to expected losses in the pool and
the largest increase in loss since the prior rating action, is the
Pershing Square loan (8.4%), which is secured by a
153,381-square-foot property comprised of 25% retail and 75% office
space, situated in the "Historic Core" neighborhood of Downtown Los
Angeles. The loan has experienced a decrease in occupancy, dropping
to 71% as of January 2025 from 90% at YE 2020. The NOI has declined
39% over the same period resulting in a drop in NOI DSCR to 1.28x
as of YE 2023, from 2.09x in YE 2020. Near-term rollover includes
28% of leases through 2025; the office portion of the rent roll is
granular, with no lease greater than 10% of the NRA.
Fitch's 'Bsf' rating case loss of 12.9% (prior to concentration
adjustments) reflects a 9.75% cap rate, and a 10% stress to the YE
2023 NOI to reflect lease rollover concerns.
The third largest contributor to loss expectations in the pool is
the Center West loan (1.9%), which is secured by leasehold interest
on a 351,789-sf office building located in Los Angeles, CA.
Occupancy has remained below 35% for the past three years, and was
most recently reported at 32.4% as of October 2024 resulting in
cash flow insufficient to cover debt service. The NOI DSCR has
consistently remained below 1.0x, reaching 0.63x at YE 2023, down
from 1.92x in 2020 and 2.15x at issuance.
Fitch's 'Bsf' ratings case loss of 44.4% (prior to concentration
add-ons) reflects an 10% cap rate, a 10% stress to the annualized
September 2024 NOI and factors an increased probability of default
to account for the loan's heightened maturity default concerns.
Increase to Credit Enhancement: As of the January 2025 distribution
date, the pool's aggregate principal balance has paid down by 19.2%
to $520.97 million from $644.7 million at issuance. Five loans
(7.7% of the pool) are fully defeased. There are six (26.8% of
pool) full-term, interest-only loans; and 32 (73.2%) loans that are
currently amortizing. Four (9.7% of pool) loans have a maturity
date in 2026, while the rest have a maturity date in 2027 with a
concentration in Q2 2027 (62.7% of the pool). Cumulative interest
shortfalls and realized losses of $75,493 and $2.69 million,
respectively, are impacting the non-rated classes G and RRI.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior 'AAAsf' rated classes are not expected due to
the position in the capital structure and expected continued
amortization and loan repayments, but may occur if deal-level
losses increase significantly and/or interest shortfalls occur or
are expected to occur.
Downgrades to classes rated in the 'AAsf' and 'Asf' categories
could occur if deal-level losses increase significantly from
outsized losses on larger FLOCs or more loans than expected
experience performance deterioration or default at or before
maturity.
Downgrades to the 'BBBsf' and 'Bsf' categories are possible with
higher than expected losses from continued underperformance of the
FLOCs, in particular office loans with deteriorating performance or
with greater certainty of losses on FLOCs. Loans of particular
concern include Pershing Square, Center West, Hickory Corners, and
Euless Town Center.
Downgrades to classes with distressed ratings would occur if
additional loans transfer to special servicing and/or default or as
losses are realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the 'AAsf' and 'Asf' rated classes could occur with
improvements in CE from paydowns and/or defeasance, coupled with
stable-to-improved pool-level loss expectations and improved
performance on the FLOCs. Classes would not be upgraded above
'AA+sf' if there were likelihood for interest shortfalls.
Upgrades to the 'BBBsf' rated classes would be limited based on
sensitivity to concentrations or the potential for future
concentration.
Upgrades to the 'Bsf' rated classes are not likely until the later
years in a transaction and only if the performance of the remaining
pool is stable, recoveries on the FLOCs, FLOCs are better than
expected and there is sufficient CE to the classes.
Upgrades to distressed ratings are not expected and would only
occur with better than expected recoveries from the specially
serviced 340 Bryant asset 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.
CANYON CLO 2022-2: Moody's Gives (P)B3 Rating to $250,000 F-R Notes
-------------------------------------------------------------------
Moody's Ratings has assigned provisional ratings to two classes of
CLO refinancing notes (the Refinancing Notes) to be issued by
Canyon CLO 2022-2, Ltd. (the Issuer):
US$256,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2038, Assigned (P)Aaa (sf)
US$250,000 Class F-R Junior Secured Deferrable Floating Rate Notes
due 2038, Assigned (P)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 non-senior
secured loans.
Canyon CLO Advisors L.P. (the Manager) will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, and the other
classes of secured notes a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; 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: 63
Weighted Average Rating Factor (WARF): 2975
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 45.00%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
CASTLELAKE AIRCRAFT 2025-1: Fitch Assigns 'BBsf' Rating on C Notes
------------------------------------------------------------------
Fitch Ratings has assigned the following ratings to the issued
notes by Castlelake Aircraft Structured Trust 2025-1 (CLAS
2025-1):
Notes Rating
----- ------
A notes 'Asf'
B notes 'BBBsf'
C notes 'BBsf'
The Rating Outlook is Stable.
Transaction Summary
The notes issued by CLAS 2025-1 are secured by lease payments
(rent/maintenance) and disposition proceeds on a pool of 36
passenger aircraft operated by third-party lessees. Proceeds from
the notes will be used to acquire assets from the seller, fund the
initial expense and maintenance reserve accounts, and pay
transaction fees and expenses related to the offering.
As the servicer, Castlelake Aviation Holdings (Ireland) Limited
(Castlelake) will be responsible for managing the aircraft,
including aircraft leasing, maintenance and disposition. This is
the third public Fitch-rated Castlelake transaction, and the fourth
public transaction issued since 2018 and serviced by Castlelake.
KEY RATING DRIVERS
Asset Quality and Tiering: The pool is largely mid-life with a
weighted average age of 12.6 years. The distribution of aircraft
ages is quite broad; the youngest aircraft is less than a year old
and the oldest is 19 years old. A320-200s make up the largest
portion of the pool by maintenance adjusted base value (MABV)
(36%). They have an average age of 14 years, with an average
remaining lease term of eight years.
Aircraft models are desirable with Tier 1 narrow-body aircraft
representing 84% of the pool by MABV, Tier 2 representing 5%, and
Tier 3 aircraft representing 11%. The age-adjusted Tier percentages
are 60%, 24%, and 16% for Tiers 1, 2 and 3, respectively. The pool
includes three A320Ns, one A321N, and one 737 MAX-8 aircraft (all
latest technology, best-in-class aircraft), constituting 20% of the
pool by MABV.
Pool Concentration: The pool is well diversified across regions and
among lessees. In addition, the pool is larger than many comparable
transactions. There are 36 aircraft in the pool with an effective
aircraft count, weighted by aircraft value, of 32. Emerging
Asia-Pacific, with eight leases, has the highest concentration (25%
of MABV), followed by Developed North America (24%) and Emerging
South and Central America (22%). The other regions make up the
remaining share (29%).
Lessee concentration is limited. American Airlines, the largest
lessee in the pool, represents only 8% (three aircraft) and is in a
favorable jurisdiction, followed by Avianca (7%, three aircraft).
Lessee Credit Risk: There are 28 lessees in the pool. By value, 3%
are leased to credits that Fitch considers investment grade, 11% to
'BB' lessees, 25% to 'B' lessees, and 62% to 'CCC' to 'CC' credits.
The weighted average (WA) credit rating by Fitch Value is between
'B' and 'B-', which is similar to other aircraft ABS transactions.
All of the assets are on-lease and current.
Operational and Servicing Risk: Fitch has found Castlelake to be an
effective servicer with a demonstrated track record in remarketing,
underwriting, procuring and managing aircraft maintenance, as well
as portfolio management. The team's experience and the servicing of
its managed fleet provide evidence of this.
Transaction Structure: The Fitch Value (lower of mean and median of
HLBVs for aircraft less than 15 years of age and a
maintenance-adjusted value for aircraft over 15 years of age; in
aggregate the aircraft are currently $153 million above half-time)
of $861.4 million results in LTVs of 77.8%, 90.5%, and 95.2% for
the A, B and C notes, respectively. Using MABV, class leverage is
acceptable at 67.0%, 78.0%, and 82.0%, respectively. Notes amortize
straight line over 13 years for the A and B notes and seven years
straight line for the C note. There is also a partial rapid
amortization mechanism that increases the amortization rate in
years six and seven if there is excess cash.
The transaction is structured with sequential pay with class A
interest and principal paid senior to class B and class C interest
and principal. Concentration risk toward the end of the transaction
is mitigated through a mechanism that results in a cash sweep if
the aircraft count drops below eight aircraft.
Rating Cap of 'Asf': Fitch limits aircraft operating lease ratings
to a maximum of 'Asf'. For further details, please refer to Fitch's
"Global Structured Finance Rating Criteria" and "Aircraft Operating
Lease ABS Rating Criteria" at www.fitchratings.com.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Credit Stress Sensitivity: The central scenario assumes future
lessees are 'B' credits. Fitch ran a sensitivity assuming future
lessees are rated 'CCC' to test the performance of the transaction
in a more stressed environment, considering the historical
volatility and cyclicality of the commercial aviation industry. The
lower assumed lessee credit quality decreased gross cash flows due
to increased downtime resulting from aircraft repossessions and
remarketing.
Expenses also rose due to repossessions and transition costs.
These, in turn, combined to impact the net cash flow. The model
implied ratings for all classes dropped one notch.
Combined Credit Stress and Gross Rental Cash Flow Sensitivity: The
combined down sensitivities of credit (CCC future lessees) and
haircutting gross rental cash flows (5% under performance) resulted
in a one-to-two-notch decrease in the model implied ratings for
each class of notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Residual Stress Sensitivity: Fitch considered the impact of a 10%
over-performance in residual value realization from sales of
aircraft at the end of their 20-year leasable lives. Under this
scenario, the model implied ratings of the B and C notes each
increased by one notch. Given the 'Asf' rating cap, the A note
would not be subject to an upgrade.
CRITERIA VARIATION
Fitch applied a variation from its "Aircraft Operating Lease ABS
Rating Criteria" to deviate downward from the Model Implied Rating
by two notches for the class C notes. The ultimate ratings were
informed by the sensitivity analysis, the sensitivity of the
ratings to model assumptions and conventions, repayment timing and
tranche thickness.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CBAMR LLC 2021-15: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to CBAMR
2021-15, LLC.
Entity/Debt Rating
----------- ------
CBAMR 2021-15, LLC
A-1-R LT AAAsf New Rating
A-2-R LT AAAsf New Rating
B-R LT AAsf New Rating
C-1-R LT A+sf New Rating
C-2-R LT Asf New Rating
D-1-R LT BBBsf New Rating
D-2-R LT BBB-sf New Rating
E-R LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
Transaction Summary
CBAMR 2021-15, LLC (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that initially closed in
December 2021. The transaction will be managed by Carlyle CLO
Management L.L.C. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first-lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.73 versus a maximum covenant, in accordance with
the initial expected matrix point of 26. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
94.73% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 72.75% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.4%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 47.5% 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 the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1-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 'A-sf' for class C-1-R, between
'B+sf' and 'BBB+sf' for class C-2-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-1-R,
'AA+sf' for class C-2-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 CBAMR 2021-15,
LLC.
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.
CHURCHILL MIDDLE V: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Churchill Middle Market
CLO V LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by Churchill Asset Management LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Churchill Middle Market CLO V LLC
Class A-1, $435.00 million: AAA (sf)
Class A-2, $30.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $48.75 million: A (sf)
Class D (deferrable), $41.25 million: BBB- (sf)
Class E (deferrable), $45.00 million: BB- (sf)
Subordinated notes, $93.20 million: Not rated
COMM 2014-UBS5: DBRS Confirms C Rating on Class E Certs
-------------------------------------------------------
DBRS Limited downgraded its credit ratings on four classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-UBS5
issued by COMM 2014-UBS5 Mortgage Trust as follows:
-- Class C to BBB (sf) from A (low) (sf)
-- Class PEZ to BBB (sf) from A (low) (sf)
-- Class D to C (sf) from CCC (sf)
-- Class X-B2 to C (sf) from CCC (sf)
Morningstar DBRS also confirmed its credit ratings on the following
classes:
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B1 at AA (high) (sf)
-- Class B at AA (sf)
-- Class E at C (sf)
In addition, Morningstar DBRS changed the trends on Classes X-B1,
B, C, and PEZ to Stable from Negative. The trends on Classes A-M
and X-A are Stable, whereas Classes D, E, and X-B2 have credit
ratings that do not typically carry a trend in commercial
mortgage-backed securities (CMBS) credit ratings.
The credit rating downgrade on the Class D certificate reflects
Morningstar DBRS' loss projections for the remaining loans in the
pool. As the pool continues to wind down, Morningstar DBRS looked
to a recoverability analysis, the results of which suggest that
even in a conservative scenario, realized losses would be contained
to the Class D certificate. However, the transaction is more
exposed to adverse selection and an increased propensity for
interest shortfalls given that only 11 loans remain in the pool,
eight of which (representing 73.6% of the current pool balance) are
in special servicing. During the prior credit rating action in
March 2024, Morningstar DBRS flagged the majority of those loans
(most of which are secured by office collateral) for increased
refinance risk. Morningstar DBRS' analysis suggested that
performance declines from issuance and lower end-user demand would
likely complicate borrowers' efforts to secure replacement
financing. To date, the trust has incurred losses of approximately
$60.0 million, depleting the entirety of the nonrated Class G
certificate in addition to reducing the Class F balance by more
than 60.0%.
In addition, as of the January 2025 remittance, cumulative unpaid
interest totaled $7.8 million, up from $5.9 million at the last
credit rating action. Interest payments on the Class D certificate
(which has not received full interest since the July 2024
remittance) have been shorted by approximately $650,000 to date and
are accruing by more than $160,000 per month. Morningstar DBRS'
tolerance for unpaid interest is limited to one to two remittance
periods at the AA (sf) and A (sf) credit rating categories and
three to four remittance periods at the BBB (sf) credit rating
category. Although the Class C certificate continues to receive
full interest due, the servicer could elect to withhold those
payments if the workout periods for the specially serviced loans
continue to extend, further supporting the credit rating downgrade
on the Class C certificate.
The largest contributors to Morningstar DBRS' loss expectations are
the Town Park Ravine I, II, III (Prospectus ID#10; 11.6% of the
pool) and Harwood Center (Prospectus ID#15; 8.2% of the pool)
loans. The Town Park Ravine I, II, III loan is secured by a
three-property, 367,090-square-foot (sf) suburban office park in
Kennesaw, Georgia. The loan transferred to the special servicer in
September 2024 for maturity default, after the borrower failed to
pay off the loan. The borrower has indicated its intent to
relinquish control of the property and is in discussions with the
lender to facilitate a transition. According to the September 2024
appraisal, the property's value has declined to $32.4 million from
the issuance appraised value of $57.5 million, reflecting a
loan-to-value (LTV) ratio of 115.0%. The Harwood Center loan is
secured by an office building in downtown Dallas. The loan became
real estate owned in November 2021. The property was most recently
appraised in March 2024 at a value of $64.8 million (reflecting a
total exposure LTV ratio in excess of 120.0%), below the April 2023
and issuance appraised values of $69.8 million and $124.0 million,
respectively. Morningstar DBRS considered a liquidation scenario
for both loans by applying a haircut to the most recent appraised
values for the underlying collateral, resulting in projected losses
of nearly $15.0 million and $12.0 million, respectively.
The largest loan in the pool, Summit Rancho Bernardo (Prospectus
ID#4; 17.4% of the pool), is secured by a 203,613-sf Class A office
property in San Diego. Although the property is primarily leased to
Apple Inc. (Apple) (96.6% of the net rentable area (NRA); lease
expiration in January 2028) and Google LLC (3.4% of the NRA; lease
expiration in August 2026), the borrower was unable to repay the
loan upon maturity in September 2024. The borrower stated that
efforts to refinance the loan were unsuccessful, largely because of
the inclusion of a termination option in Apple's lease. The loan
was recently modified, extending the maturity date to September
2025. According to an appraisal dated September 2024, the property
was valued at $62.4 million, well below the issuance appraised
value of $94.0 million. Although operating performance remains
strong, the property is exposed to considerable tenant
concentration risk. Should Apple choose to exercise its early
termination option, or not renew its lease, backfilling vacant
space at the property may prove to be challenging, especially when
considering the relatively soft submarket fundamentals (per Reis,
the Interstate 15 Corridor submarket had an average vacancy rate of
20.3% as of Q3 2024) and general challenges for office properties
in today's environment. Given these factors and the significant
value decline from issuance, Morningstar DBRS liquidated the loan
based on a haircut to the most recent appraised value, resulting in
a projected loss slightly above $8.0 million.
The State Farm Portfolio loan (Prospectus ID#7; 15.0% of the pool)
is pari passu with notes held in the COMM 2014-UBS3 and COMM
2014-UBS4 transactions, both of which are rated by Morningstar
DBRS, and the non-Morningstar DBRS-rated MSBAM 2014-C16
transaction. The loan is secured by a portfolio of 14
cross-collateralized and cross-defaulted office properties in 11
different states. The loan recently returned to the master servicer
in January 2025; however, credit risk remains increased as all of
the underlying assets are leased but not occupied by the dark
single tenant State Farm Mutual Automobile Insurance Company, with
all but two of the leases running through 2028. 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. The servicer approved a partial release for one
property in Tulsa, Oklahoma. Although the continued rent payments
are expected to continue to amortize the outstanding debt,
Morningstar DBRS believes the current value deficiency is
significant given the dark status of the properties and the
tertiary locations that will likely mean low investor demand. As
such, Morningstar DBRS considered a liquidation scenario based on a
conservative haircut to the issuance appraised value, which
resulted in a projected loss of almost $12.0 million.
Notes: All figures are in U.S. dollars unless otherwise noted.
DIAMOND ISSUER 2021-1: Fitch Affirms 'BB-sf' Rating on Cl. C Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Diamond Issuer LLC Secured Cellular Site Revenue Variable Funding
Notes, Series 2025-1. Fitch has also affirmed the ratings on
Diamond Issuer LLC Fixed Rate Cellular Site Revenue Notes, Series
2021-1. The Rating Outlooks remain Stable.
Fitch has assigned final ratings and Rating Outlooks as follows:
- $100,000,000 series 2025-1, class A-1, 'Asf'; Outlook Stable.
In addition, Fitch has affirmed the following classes:
- $306,000,000 series 2021-1, class A, at 'Asf'; Outlook Stable;
- $60,000,000 series 2021-1, class B, at 'BBB-sf'; Outlook Stable;
- $69,000,000 series 2021-1, class C, at 'BB-sf'; Outlook Stable.
Transaction Summary
The transaction is being affirmed in connection with the issuance
of variable funding notes from the issuer. These notes have a
maximum balance of $100 million, $45.5 million of which is
committed and can be drawn on based on existing cash flow growth
from the in-place collateral assets. Additionally, $16.3 million
can be drawn based on a predetermined asset pool that may be added
to the trust as additional collateral, and $38.2 million can be
drawn on subject to rating agency confirmation.
The transaction is an issuance of notes backed by mortgages
representing approximately 90% of the annualized run rate net cash
flow (ARRNCF) on the tower sites, and guaranteed by the direct
parent of the borrower issuer.
This guarantee is secured by a pledge and first-priority-perfected
security interest in 100% of the equity interest of the borrowers,
who own or lease 1,079 wireless communication sites, including
towers and the tenant leases, as well as mortgages on applicable
sites. It also covers capacity use and service agreements,
associated rights, remedies and proceeds, including an exclusive
and perpetual relationship with FirstEnergy Corp.'s (FE) 10 utility
subsidiaries to sublease FE transmission and communication towers,
and FE controlled property.
The ratings reflect a structured finance analysis of the cash flows
from the ownership interest in cellular sites not an assessment of
the corporate default risk of the ultimate parent, Diamond
Communications LLC (not rated by Fitch), which is also the
transaction manager. This transaction is the sixth ABS transaction
managed by Diamond.
KEY RATING DRIVERS
Net Cash Flow and Trust Leverage: The Fitch Net Cash Flow (NCF) on
the pool is $41.8 million, implying a 2.5% haircut to issuer net
cash flow based on the in-place collateral pool. Including the
expected draw on the variable funding notes, the debt multiple
relative to Fitch's NCF on the rated classes is 11.5x. This
compares to the debt/issuer NCF leverage of 11.2x, including the
permitted draw on the VFN and associated cash flow necessary to
draw.
Including the 155 additional tower assets that may be contributed
to the transaction, NCF increases by approximately $2.2 million,
which implies a 5.9% haircut to the issuer net cash flow for this
component of the potential collateral pool. Including all available
draws on the variable funding notes absent rating agency
confirmation, the debt multiple relative to Fitch's NCF on the
rated classes is 11.3x, which compares to issuer leverage of
11.0x.
Prior to the issuance of the variable funding notes, the issuer
leverage was 10.1x as of January 2025.
Credit Risk Factors: The major factors impacting Fitch's
determination of cash flow and MPL include the large and diverse
collateral pool, creditworthy customer base with limited historical
churn, market position of the operator, capability of the operator,
limited operational requirements, high barriers to entry and
transaction structure.
Technology-Dependent Credit: Due to the specialized nature of the
collateral and the potential impact of technological changes on
long-term demand for tower space, the senior classes of this
transaction, like most wireless tower transactions, do not achieve
ratings above 'Asf'.
The securities have a rated final payment date 30 years after
closing, and the long-term tenor of the securities increases the
risk that an alternative technology — rendering obsolete the
current transmission of wireless signals through cellular sites —
will be developed. Wireless service providers (WSPs) currently
depend on towers to transmit their signals and continue to invest
in this technology.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow as a result of higher site expenses, lease
churn, lease amendments, or the development of an alternative
technology for the transmission of wireless signal could lead to
downgrades.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Increasing cash flow without an increase in corresponding debt,
from contractual lease escalators, new tenant leases, lease
amendments or lower site expenses could lead to upgrades.
However, upgrades are unlikely for these transactions given the
provision for the issuer to issue additional notes, which rank pari
passu or subordinate to existing notes, without the benefit of
additional collateral. In addition, the transaction is capped in
the 'Asf' category given the risk of technological obsolescence.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
Diamond Issuer LLC Secured Cellular Site Revenue Variable Funding
Notes, Series 2025-1 and Diamond Issuer LLC Fixed Rate Cellular
Site Revenue Notes, Series 2021-1 have an ESG Relevance Score of
'4' for Transaction & Collateral Structure due to several factors,
including the issuer's ability to issue additional notes, which has
a negative impact on the credit profile and is relevant to the
rating 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.
DRYDEN 64 CLO: Moody's Cuts Rating on $12MM Class F Notes to Caa3
-----------------------------------------------------------------
Moody's Ratings has taken a variety of rating actions on the
following notes issued by Dryden 64 CLO, Ltd.:
US$30M Class C Mezzanine Secured Deferrable Floating Rate Notes,
Upgraded to Aa1 (sf); previously on May 17, 2024 Upgraded to Aa3
(sf)
US$12M Class F Junior Secured Deferrable Floating Rate Notes,
Downgraded to Caa3 (sf); previously on May 17, 2024 Downgraded to
Caa2 (sf)
Moody's have also affirmed the ratings on the following notes:
US$390M (Current outstanding amount US$251,310,651) Class A Senior
Secured Floating Rate Notes, Affirmed Aaa (sf); previously on May
1, 2018 Assigned Aaa (sf)
US$64.5M Class B Senior Secured Floating Rate Notes, Affirmed Aaa
(sf); previously on Mar 28, 2023 Upgraded to Aaa (sf)
US$37.5M Class D Mezzanine Secured Deferrable Floating Rate Notes,
Affirmed Baa2 (sf); previously on May 17, 2024 Upgraded to Baa2
(sf)
US$30M Class E Junior Secured Deferrable Floating Rate Notes,
Affirmed Ba3 (sf); previously on May 1, 2018 Assigned Ba3 (sf)
Dryden 64 CLO, Ltd., issued in May 2018, is a collateralised loan
obligation (CLO) backed by a portfolio of mostly high-yield senior
secured US loans. The portfolio is managed by PGIM, Inc. The
transaction's reinvestment period ended in April 2023.
RATINGS RATIONALE
The rating upgrade on the Class C notes is primarily a result of
the significant deleveraging of the senior notes following
amortisation of the underlying portfolio since the last rating
action in May 2024. The Class A notes have been paid down by
approximately 28.29% or $110.3 million since then. As a result of
the deleveraging, over-collateralisation (OC) has increased.
According to the trustee report dated December 2024 [1] the Class C
OC ratio is reported at 121.89% compared to April 2024 [2] level of
120.23%. Moody's note that the January 2025 principal payments are
not reflected in the reported OC ratios.
The deleveraging and OC improvements primarily resulted from high
prepayment rates of leveraged loans in the underlying portfolio.
Most of the prepaid proceeds have been applied to amortise the
liabilities. All else held equal, such deleveraging is generally a
positive credit driver for the CLO's rated liabilities.
The rating downgrade on the Class F notes reflects the specific
risks to the junior notes posed by par loss observed in the
underlying CLO portfolio since the last rating action in May 2024.
While the transaction doesn't have an explicit Class F OC ratio,
its implicit level has decreased following the loss of par to
101.96% from 102.39% in April 2024 [2].
The affirmations on the ratings on the Class A, B, D 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 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: USD429.54m
Defaulted Securities: USD12.3m
Diversity Score: 82
Weighted Average Rating Factor (WARF): 2688
Weighted Average Life (WAL): 3.7 years
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.24%
Weighted Average Recovery Rate (WARR): 47.17%
The default probability derives from the credit quality of the
collateral pool and Moody's expectations of the remaining life of
the collateral pool. The estimated average recovery rate on future
defaults is based primarily on the seniority of the assets in the
collateral pool. In each case, historical and market performance
and a collateral manager's latitude to trade collateral are also
relevant factors. Moody's incorporates these default and recovery
characteristics of the collateral pool into its cash flow model
analysis, subjecting them to stresses as a function of the target
rating of each CLO liability it is analysing.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Counterparty Exposure:
The rating action took into consideration the notes' exposure to
relevant counterparties, using the methodology "Moody's Approach to
Assessing Counterparty Risks in Structured Finance" published in
October 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.
Additional uncertainty about performance is due to the following:
-- Portfolio amortisation: The main source of uncertainty in this
transaction is the pace of amortisation of the underlying
portfolio, which can vary significantly depending on market
conditions and have a significant impact on the notes' ratings.
Amortisation could accelerate as a consequence of high loan
prepayment levels or collateral sales by the collateral manager or
be delayed by an increase in loan amend-and-extend restructurings.
Fast amortisation would usually benefit the ratings of the notes
beginning with the notes having the highest prepayment priority.
-- Recovery of defaulted assets: Market value fluctuations in
trustee-reported defaulted assets and those Moody's assumes have
defaulted can result in volatility in the deal's
over-collateralisation levels. Further, the timing of recoveries
and the manager's decision whether to work out or sell defaulted
assets can also result in additional uncertainty. Moody's analysed
defaulted recoveries assuming the lower of the market price or the
recovery rate to account for potential volatility in market prices.
Recoveries higher than Moody's expectations would have a positive
impact on the notes' ratings.
In addition to the quantitative factors that Moody's explicitly
modelled, qualitative factors are part of the rating committee's
considerations. These qualitative factors include the structural
protections in the transaction, its recent performance given the
market environment, the legal environment, specific documentation
features, the collateral manager's track record and the potential
for selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
EFMT 2025-CES1: Fitch Assigns 'Bsf' Final Rating on Class B2 Certs
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Fitch Ratings has assigned final ratings to EFMT 2025-CES1.
EFMT 2025-CES1 uses Fitch's new Interactive RMBS Presale feature.
To access the interactive feature, click the link at the top of the
presale report's first page, log into dv01 and explore Fitch's
loan-level loss expectations.
Entity/Debt Rating Prior
----------- ------ -----
EFMT 2025-CES1
A1A LT AAAsf New Rating AAA(EXP)sf
A1B LT AAAsf New Rating AAA(EXP)sf
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAsf New Rating AA(EXP)sf
A3 LT Asf New Rating A(EXP)sf
M1 LT BBBsf New Rating BBB(EXP)sf
B1 LT BBsf New Rating BB(EXP)sf
B2 LT Bsf New Rating B(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
Transaction Summary
Fitch has rated the residential mortgage-backed certificates backed
by 100% closed-end second lien (CES) loans on residential
properties to be issued by EFMT 2025-CES1 as indicated above. This
is the second transaction rated by Fitch that includes 100% CES
loans off the EFMT shelf.
The pool consists of 4,032 unseasoned, performing CES loans with a
current outstanding balance (as of the cutoff date) of $268.9
million. The entirety of the pool is originated and serviced by
Nationstar Mortgage LLC (dba Mr. Cooper).
Interest and principal distributions follow a sequential structure.
Losses are allocated in reverse sequence, starting with the most
subordinate class.
The servicer, Mr. Cooper, will not be advancing delinquent monthly
payments of principal and interest (P&I). The collateral comprises
100% fixed-rate loans.
Class A-1A, A-1B, A-2 and A-3 certificates regarding any
distribution date prior to the March 2029 distribution date will
have an annual rate equal to the lower of (i) the applicable fixed
rate set forth for such class of certificates; and (ii) the net
weighted average coupon (WAC) for such distribution date. On and
after March 2029, the pass-through rate will be a per annum rate
equal to the lower of (i) the sum of (a) the applicable fixed rate
set forth in the table above for such class of certificates, and
(b) the step-up rate (1.0%) and (ii) the net WAC rate for the
related distribution date.
The pass-through rate on class M-1, B-1, and B-2 certificates
regarding any distribution date and the related accrual period will
be an annual rate equal to the lower of (i) the applicable fixed
rate set forth for such class of certificates and (ii) the net WAC
for such distribution date. The pass-through rate on class B-3
certificates with respect to any distribution date and the related
accrual period will be an annual rate equal to the net WAC for such
distribution date.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Fitch views the home
price values of this pool as 11.3% above a long-term sustainable
level (compared with the national level of 11.1% as of 3Q24, down
0.5% since the prior quarter, based on Fitch's updated view of
sustainable home prices). Housing affordability is the worst it has
been in decades, driven by both high interest rates and elevated
home prices. Despite modest regional declines, home prices have
increased 3.8% yoy nationally as of Nov. 2024, but are being
supported by limited inventory.
High-Quality Prime Mortgage Pool (Positive): The pool consists of
4,032 performing, fixed-rate loans totaling $268.9 million. These
loans are secured by CES on primarily one- to four-family
residential properties (including planned unit developments [PUDs])
and townhouses. The loans were made to borrowers with strong credit
profiles and relatively low leverage.
The loans are seasoned at an average of five months, according to
Fitch, and three months, per the transaction documents. The pool
has a weighted average (WA) original FICO score of 738, as
determined by Fitch, indicative of very high credit-quality
borrowers. About 34.9% of the loans, as determined by Fitch, have a
borrower with an original FICO score equal to or above 750. The
original WA combined loan-to-value ratio (CLTV) of 67.6%, as
determined by Fitch, translates to a sustainable loan-to-value
ratio (sLTV) of 76.2%.
The transaction documents stated a WA original LTV of 16.6% and a
WA CLTV of 62.5%. The LTVs represent moderate borrower equity in
the property and reduced default risk, compared with a borrower
CLTV of over 80%. Of the pool loans, 100.0% were originated by a
retail channel. Based on Fitch's documentation review, it considers
100.0% of the loans to be fully documented.
Of the pool, 100.0% of the loans are owner occupied. Single-family
homes, PUDs, townhouses and single-family attached dwellings
constitute 100.0% of the pool. The pool consists of 100% cashout
refinances, consistent with other CES transactions.
None of the loans in the pool have a current balance over $1.0
million.
Of the pool of loans, 14.0% are concentrated in California. The
largest MSA concentration is the Chicago MSA (3.9%), followed by
the New York MSA (3.8%) and the Atlanta MSA (3.5%). The top three
MSAs account for 11.2% of the pool. As a result, no probability of
default (PD) penalty was applied for geographic concentration.
Fitch's prime loan loss model was used for the analysis of this
pool, as most of the loans are fully documented with high FICOs.
Second Lien Collateral (Negative): The collateral pool consists
entirely of CES loans originated by Mr. Cooper. Fitch assumed no
recovery and 100% loss severity (LS) on second lien loans, based on
the historical behavior of the loans in economic stress scenarios.
Fitch assumes second lien loans default at a rate comparable to
first lien loans. After controlling for credit attributes, no
additional penalty was applied.
Sequential Structure with No Advancing of Delinquent P&I (Mixed):
The structure is sequential, in which principal is distributed
first to the A-1A and A-1B classes pro-rata, then sequentially to
the A-2, A-3, M-1, B-1, B-2 and B-3 classes. Interest is
prioritized in the principal waterfall and any unpaid interest
amounts are paid prior to principal being paid.
The transaction has monthly excess cash flows to first repay any
realized losses incurred, then cover unpaid cap carryover interest
shortfalls.
A realized loss will occur if, after giving effect to the
allocation of the principal remittance amount and monthly excess
cash flow on any distribution date, the aggregate collateral
balance is less than the aggregate outstanding balance of the
outstanding classes. The allocation of realized losses will occur
in reverse sequence. Losses will be first allocated to class B-3.
Once the A-2 class is written off, class A-1B will take losses
prior to class A-1A (A-1A will only take losses once A-1B is
written off).
The transaction will have subordination and excess spread,
providing credit enhancement (CE) and protection from losses.
180-Day Chargeoff Feature/Best Execution (Positive): Regarding any
mortgage loan that becomes 180 days MBA delinquent, the servicer
will review, and may charge off the mortgage loan (based on an
equity analysis review performed by the servicer) if the review
indicates no significant recovery is likely.
Fitch views the servicer's equity analysis to determine the best
execution strategy for the liquidation of severely delinquent loans
as a positive. The servicer and controlling holder act in the best
interest of the certificate holders to limit losses on the
transaction. If the servicer decides to write off the losses at 180
days, it compares favorably to a delayed liquidation scenario,
whereby the loss occurs later in the life of the transaction and
less excess is available.
In its cash flow analysis, Fitch assumed the loans would be written
off at 180 days, as this is the most likely scenario in a stressed
case when there is limited equity in the home.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the
model-projected 42.3%, at 'AAA'. The analysis indicates there is
some potential rating migration, with higher MVDs for all rated
classes compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class, excluding those being
assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Digital Risk. The third-party due diligence described
in Form 15E focused on three areas: compliance review, credit
review and valuation review. Fitch considered this information in
its analysis. Based on the results of the 100% due diligence
performed on the pool, Fitch reduced the overall 'AAAsf' expected
loss by 0.72%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
Digital Risk was engaged to perform the review. Loans reviewed
under this engagement were given compliance, and credit 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 that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG Considerations
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.
EFMT 2025-INV1: S&P Raises Class B-2 Notes Rating to 'B (sf)'
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On Feb. 20, 2025, S&P Global Ratings assigned preliminary ratings
to EFMT 2025-INV1 based on the application of its relevant in-use
criteria at the time, "Methodology And Assumptions For Rating U.S.
RMBS Issued 2009 And Later," published Feb. 22, 2018 (the previous
U.S. residential mortgage-backed securities [RMBS] criteria).
S&P said, "Subsequently, on Feb. 21, 2025, we published our U.S.
and Canada residential mortgage-backed securities (RMBS) criteria
supplement following the conclusion of our request for comment
(RFC) for "Global Methodology And Assumptions: Assessing Pools Of
Residential Loans," (the Global RMBS criteria) to expand the scope
to include the U.S. The application of our global framework to U.S.
residential mortgage loans resulted in--and coincided with--certain
changes in our rating analysis of U.S. RMBS issued in 2009 and
later, which supersedes the previous U.S. RMBS criteria.
"As a result of the criteria supplement release, we concurrently
placed the preliminary ratings on classes A-2, A-3, M-1, B-1, and
B-2 from EFMT 2025-INV1 under criteria observation (UCO) when we
assigned them." S&P has reassessed the transaction under its
updated Global RMBS criteria and associated U.S. and Canada
criteria supplement and removed the UCO placement, and updated its
preliminary ratings as follows:
EFMT 2025-INV1 Preliminary Ratings(i)
Class A-1, $153,227,000: affirmed at 'AAA (sf)'
Class A-2, $22,984,000: to 'AA+ (sf)' from 'AA-(sf)'
Class A-3, $33,632,000: to 'A+ (sf)' from 'A- (sf)'
Class M-1, $18,569,000: to 'BBB+ (sf)' from 'BBB- (sf)'
Class B-1, $14,024,000: to 'BB (sf)' from 'BB- (sf)'
Class B-2, $9,739,000: to 'B (sf)' from 'B- (sf)'
Class B-3, $7,532,363: No change - NR
Class A-IO-S, notional(ii): No change - NR
Class X, notional(iii): No change - NR
Class R, not applicable: No change – NR
(i)The collateral and structural information in this report is
based on information as of Feb. 21, 2025, and reflects the pricing
coupons. The preliminary ratings address the ultimate payment of
interest and principal and do not address payment of the cap
carryover amounts.
(ii) Notional amount equals the loans' aggregate stated principal
balance as of the cutoff date.
NR--Not rated.
Our updated preliminary ratings are primarily driven by changes in
our loss estimates for the pool, which include a reduction in the
pool-level R&W loss coverage adjustment factor to 1.05x from 1.10x
based on the regrouping of the specific considerations that
determine the factor, specifically the greater emphasis given to
mitigants such as third-party due diligence on 100% of the pool,
our assessment of Ellington Financial Inc. as aggregator and the
diversification of contributing originators.
Loss estimates (%) Updated Previous
'AAA' loss coverage 30.10 38.15
'AAA' foreclosure frequency 53.16 64.86
'AAA' loss severity 56.58 58.82
'BBB' loss coverage 8.75 11.65
'BBB' foreclosure frequency 27.01 34.85
'BBB' loss severity 32.39 33.43
'B' loss coverage 1.80 2.85
'B' foreclosure frequency 8.04 12.61
'B' loss severity 22.22 22.60
The preliminary ratings and loss estimates stated above supersede
those originally published in the presale EFMT 2025-INV1 published
Feb. 20, 2025.
ELMWOOD CLO XI: S&P Assigns BB-(sf) Rating on Class E-R Notes
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S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-1R, D-2R, and E-R replacement debt from Elmwood CLO XI
Ltd./Elmwood CLO XI LLC, a CLO originally issued in September 2021
that is managed by Elmwood Asset Management LLC. At the same time,
S&P withdrew its ratings on the original class A, B, C, D, and E
debt following payment in full on the Feb. 19, 2025, 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 reinvestment period was extended to Jan. 20, 2030.
-- The non-call period was extended to Jan. 20, 2027.
-- The replacement class A-R, B-R, C-R, and E-R debt was issued at
a lower spread over three-month CME term SOFR than the original
notes.
-- The original class D debt was replaced by the class D-1R and
D-2R debt.
Additional subordinated notes totaling $2.86 million were issued,
and the stated maturity of the original subordinated notes was
extended to Jan. 20, 2038.
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
Elmwood CLO XI Ltd./Elmwood CLO XI LLC
Class A-R,$320.00 million: AAA(sf)
Class B-R,$60.00 million: AA(sf)
Class C-R (deferrable),$30.00 million: A(sf)
Class D-1R (deferrable),$30.00 million: BBB-(sf)
Class D-2R (deferrable),$2.50 million: BBB-(sf)
Class E-R (deferrable),$17.50 million: BB-(sf)
Ratings Withdrawn
Elmwood CLO XI Ltd./Elmwood CLO XI LLC
Class A to NR from 'AAA(sf)'
Class B to NR from 'AA(sf)'
Class C (deferrable) to NR from 'A(sf)'
Class D (deferrable) to NR from 'BBB-(sf)'
Class E (deferrable) to NR from 'BB-(sf)'
Other Debt
Elmwood CLO XI Ltd./Elmwood CLO XI LLC
Subordinated notes, $45.86 million: NR
NR--Not rated.
FIRSTKEY HOMES 2021-SFR1: DBRS Confirms B(high) Rating on G Certs
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DBRS, Inc. reviewed 57 classes from eight U.S. single-family rental
transactions. Of the 57 classes reviewed, Morningstar DBRS
confirmed 37 credit ratings, upgraded 18 credit ratings, and
discontinued two credit ratings due to full repayment of the
outstanding bond balances.
FirstKey Homes 2021-SFR1 Trust
Single-Family Rental Pass-Through Certificate
- Class A confirmed at AAA (sf)
- Class B upgraded to AAA (sf) from AA (high) (sf)
- Class C upgraded to AA (high) (sf) from A (high) (sf)
- Class D upgraded to A (high) (sf) from BBB (high) (sf)
- Class E1 upgraded to A (sf) from BBB (sf)
- Class E2 upgraded to A (low) (sf) from BBB (low) (sf)
- Class E upgraded to A (low) (sf) from BBB (low) (sf)
- Class F1 upgraded to BBB (low) (sf) from BB (sf)
- Class F2 upgraded to BBB (low) (sf) from BB (sf)
- Class F3 confirmed at BB (low) (sf)
- Class F confirmed at BB (low) (sf)
- Class G confirmed at B (high) (sf)
New Residential Mortgage Loan Trust 2022-SFR2
Single-Family Rental Pass-Through Certificate
- Class A confirmed at AAA (sf)
- Class B confirmed at AA (high) (sf)
- Class C confirmed at A (high) (sf)
- Class D confirmed at A (low) (sf)
- Class E-1 confirmed at BBB (sf)
- Class E-2 confirmed at BBB (low) (sf)
- Class F confirmed at BB (low) (sf)
PATH 2022-1 Trust
Single-Family Rental Pass-Through Certificates
- Class C discontinued
- Class D discontinued
- Class E-1 upgraded to A (high) (sf) from BBB (high) (sf)
- Class E-2 upgraded to BBB (sf) from BBB (low) (sf)
- Class F confirmed at BB (low) (sf)
- Class G confirmed at B (sf)
Tricon American Homes 2018-SFR1 Trust
- Class A confirmed at AAA (sf)
- Class B confirmed at AAA (sf)
- Class C upgraded to AA (high) (sf) from AA (low) (sf)
- Class D upgraded to AA (low) (sf) from A (sf)
- Class E upgraded to A (high) (sf) from A (low) (sf)
Tricon American Homes 2019-SFR1 Trust
-- TAH 2019-SFR1, Class A confirmed at AAA (sf)
-- TAH 2019-SFR1, Class B confirmed at AAA (sf)
-- TAH 2019-SFR1, Class C confirmed at AAA (sf)
-- TAH 2019-SFR1, Class D upgraded to AA (sf) from AA (low) (sf)
-- TAH 2019-SFR1, Class E upgraded to A (sf) from A (low) (sf)
-- TAH 2019-SFR1, Class F upgraded to BBB (sf) from BBB (low)
(sf)
Tricon American Homes 2020-SFR2 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B upgraded
to AAA (sf) from AA (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class C upgraded
to AA (low) (sf) from A (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed A (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-1
confirmed at BBB (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-2
confirmed at BBB (low) (sf)
Tricon Residential 2021-SFR1 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B
confirmed at AA (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class C
confirmed at AA (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed at A (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-1
confirmed at BBB (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-2
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class F
confirmed at BB (sf)
-- Single-Family Rental Pass-Through Certificate, Class G
confirmed at B (high) (sf)
Progress Residential 2024-SFR1 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B
confirmed at AA (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class C
confirmed at AA (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed at BBB (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-1
confirmed at BBB (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-2
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class F
confirmed at BB (sf)
The credit rating confirmations reflect asset performance and
credit-support levels that are consistent with the current credit
ratings. 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 discontinued credit
ratings reflect the full repayment of principal to the
bondholders.
Morningstar DBRS' credit rating actions are based on the following
analytical considerations:
-- Key performance measures as reflected in month-over-month
changes in vacancy and delinquency, quarterly analysis of the
actual expenses, credit enhancement increases since deal inception,
and bond paydown factors.
Notes: All figures are in U.S. dollars unless otherwise noted.
FLATIRON RR 22: Moody's Assigns Ba3 Rating to $19.6MM Cl. E-R Notes
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Moody's Ratings has assigned ratings to five classes of refinancing
notes (the "Refinancing Notes") issued by Flatiron RR CLO 22 LLC
(the "Issuer").
Moody's rating actions is as follows:
US$256,000,000 Class A-R Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$46,400,000 Class B-R Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$20,200,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$25,800,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$19,600,000 Class E-R Senior Secured Deferrable Floating Rate
Notes due 2034, Assigned Ba3 (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 methodologies 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.
Flatiron RR LLC (the "Manager") will continue to direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's remaining
reinvestment period.
The Issuer previously issued one class of subordinated notes, which
will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extensions of the non-call period;
changes to certain collateral quality tests.
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: $398,561,177
Diversity Score: 78
Weighted Average Rating Factor (WARF): 3100
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.50%
Weighted Average Life (WAL): 5.45 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case.
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.
FORTRESS CREDIT XXIV: S&P Assigns BB- (sf) Rating on Class E Notes
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S&P Global Ratings assigned its ratings to Fortress Credit BSL XXIV
Ltd./Fortress Credit BSL XXIV LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by FC BSL CLO Manager V 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
Fortress Credit BSL XXIV Ltd./Fortress Credit BSL XXIV LLC
Class A, $166.00 million: AAA (sf)
Class A-L loans, $84.00 million: AAA (sf)
Class B, $44.00 million: AA (sf)
Class C (deferrable), $28.00 million: A (sf)
Class D-1 (deferrable), $24.00 million: BBB (sf)
Class D-2 (deferrable), $6.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $41.70 million: NR
NR--Not rated.
FS RIALTO 2025-FL10: Fitch Assigns B-sf Final Rating on 3 Tranches
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Fitch Ratings has assigned final ratings and Rating Outlooks to FS
Rialto 2025-FL10 Issuer, LLC as follows:
- $579,867,000c class A 'AAAsf'; Outlook Stable;
- $134,111,000c class A-S 'AAAsf'; Outlook Stable;
- $68,971,000c class B 'AA-sf'; Outlook Stable;
- $54,921,000c class C 'A-sf'; Outlook Stable;
- $34,486,000c class D 'BBBsf'; Outlook Stable;
- $17,881,000c class E 'BBB-sf'; Outlook Stable;
- $33,208,000ad class F 'BB-sf'; Outlook Stable;
- $0ad class F-E 'BB-sf'; Outlook Stable;
- $0abd class F-X 'BB-sf'; Outlook Stable;
- $22,991,000ad class G 'B-sf'; Outlook Stable;
- $0ad class G-E 'B-sf'; Outlook Stable;
- $0abd class G-X 'B-sf'; Outlook Stable.
The following class is not rated by Fitch:
- $75,357,515d class H.
(a) Exchangeable Notes. The class F and class G notes are
exchangeable notes. Each class of exchangeable notes may be
exchanged for the corresponding classes of exchangeable notes, 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.
(b) Notional amount and interest only (IO).
(c) Privately placed and pursuant to Rule 144A.
(d) Horizontal risk retention interest, estimated to be 12.875% of
the notional amount of the notes.
The approximate collateral interest balance as of the cutoff date
is $1,021,793,515 and does not include future funding.
The ratings are based on information provided by the issuer as of
Feb. 19, 2025.
Transaction Summary
The notes are collateralized by 23 loans secured by 59 commercial
properties with an aggregate principal balance of $1,021,793,515 as
of the cut-off date, including two delayed-close collateral
interests totaling $117.7 million, #1 Aston Park and #13 EDEN at
Kendall West, which are expected to close within 90 days after the
closing date. Should those assets not close within the 90 days,
those proceeds will flow into the reinvestment account and be used
to purchase new, unidentified assets, subject to the eligibility
criteria.
The loans were contributed to the trust by FS CREIT Finance
Holdings LLC, a wholly owned subsidiary of FS Credit REIT. The
master servicer is Wells Fargo Bank, National Association and the
special servicer is Rialto Capital Advisors, LLC. The trustee is
Wilmington Trust, National Association, and the note administrator
is Computershare Trust Company, N.A. The notes will follow a
sequential paydown structure.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 20 loans
totaling 90.5% of the pool by balance. Fitch's resulting aggregate
trust net cash flow (NCF) of $68.9 million represents a 10.0%
decline from the issuer's underwritten NCF of $76.5 million.
Aggregate cash flows include only the pro-rated trust portion of
any pari passu loan.
Lower Fitch Leverage: Leverage compared to Recent CLO Transactions.
The pool's Fitch weighted average (WA) trust loan-to-value (LTV) of
131.4% is lower than the 2023 CRE CLO and 2024 YTD CRE CLO averages
of 171.2% and 140.7%, respectively. Additionally, the pool's Fitch
NCF Debt Yield (DY) of 7.4% is higher than the 2023 CRE CLO and
2024 YTD CRE CLO averages of 5.6% and 6.5%, respectively.
Lower Pool Concentration: Lower concentration by loan size. The
pool is more diversified compared to recent CLO transactions. The
pool has an effective loan count of 21.3, which is higher than the
2023 CRE CLO and 2024 YTD CRE CLO effective loan count averages of
19.8 and 16.9, respectively. The top 10 loans accounting for 58.7%
of the pool. This is lower than the 2023 CRE CLO and 2024 YTD CRE
CLO averages of 91.1% and 96.3%, respectively.
Lower Property Type Concentration: The pool has an effective
property count of 3.2 which is higher than the 2023 CRE CLO and
2024 YTD CRE CLO averages of 1.7. Loans secured by multifamily
properties represent 45.6% of the pool which is lower than the 2023
CRE CLO and 2024 YTD CRE CLO averages of 82.6% and 78.4%,
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' / 'Asf' / 'BBBsf' / 'BB+sf' /
'BBsf' / 'B-sf' / 'CCCsf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / 'AAsf' / 'Asf' / 'BBB+sf' /
'BBBsf' / 'BBsf' / 'Bsf'.
SUMMARY OF FINANCIAL ADJUSTMENTS
This transaction utilizes note protection tests to provide
additional credit enhancement (CE) to the investment-grade
noteholders, if needed. The note protection tests comprise an
interest coverage test and a par value test at the 'BBB-' level
(class E) in the capital structure. Should either of these metrics
fall below a minimum requirement then interest payments to the
retained notes are diverted to pay down the senior most notes. This
diversion of interest payments continues until the note protection
tests are back above their minimums.
As a result of this structural feature, Fitch's analysis of the
transaction included an evaluation of the liabilities structure
under different stress scenarios. To undertake this evaluation,
Fitch used the cash flow modeling referenced in the Fitch criteria
"U.S. and Canadian Multiborrower CMBS Rating Criteria". Different
scenarios were run where asset default timing distributions and
recovery timing assumptions were stressed.
Key inputs, including Rating Default Rate (RDR) and Recovery Rating
Rate (RRR), were based on the CMBS multiborrower model output in
combination with CMBS analytical insight. The cash flow modeling
results showed that the default rates in the stressed scenarios did
not exceed the available CE in any stressed scenario.
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 PricewaterhouseCoopers 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.
GLS AUTO 2025-1: DBRS Gives Prov. BB Rating on Class E Notes
------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the classes of
notes to be issued by GLS Auto Receivables Issuer Trust 2025-1 (the
Issuer) as follows:
-- $85,000,000 Class A-1 Notes at (P) R-1 (high) (sf)
-- $160,710,000 Class A-2 Notes at (P) AAA (sf)
-- $83,670,000 Class A-3 Notes at (P) AAA (sf)
-- $101,330,000 Class B Notes at (P) AA (sf)
-- $94,960,000 Class C Notes at (P) A (sf)
-- $93,910,000 Class D Notes at (P) BBB (low) (sf)
-- $46,960,000 Class E Notes at (P) BB (sf)
The provisional credit ratings are based on Morningstar DBRS'
review of the following analytical considerations:
(1) Transaction capital structure, proposed credit ratings, and
form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve fund, and excess
spread. Credit enhancement levels are sufficient to support the
Morningstar DBRS-projected expected cumulative net loss (CNL)
assumption under various stress scenarios.
(2) 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 payment of timely interest on a monthly basis and the
payment of principal by the legal final maturity date.
(3) The quality and consistency of provided historical static pool
data for Global Lending Services LLC (GLS or the Company)
originations and performance of the GLS auto loan portfolio.
(4) The credit quality of the collateral and performance of GLS'
auto loan portfolio, as of the Statistical Calculation Date:
-- The pool will include approximately 85.7% used and 14.3% new
vehicles, 85.1% of which are from franchise dealers.
-- The loans in the pool will have a weighted-average FICO of 580
and a weighted-average annual percentage rate of 20.88%.
(5) The Morningstar DBRS CNL assumption is 18.90% based on the
Cutoff Date pool composition.
(6) The capabilities of GLS with regard to originations,
underwriting, and servicing.
-- Morningstar DBRS has performed an operational review of GLS and
considers the entity to be an acceptable originator and servicer of
subprime automobile loan contracts. The transaction also has an
acceptable backup servicer.
(7) The consistent operational history of GLS and the overall
strength of the Company and its management team.
-- The GLS senior management team has considerable experience
within the auto finance industry, with most of the executives
having been with the Company for most of its 13-year history.
(8) Morningstar DBRS used the static pool approach exclusively
because GLS has enough data to generate a sufficient amount of
static pool projected losses.
-- Morningstar DBRS was conservative in the loss forecast analysis
performed on the static pool data.
(9) The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary "Baseline Macroeconomic Scenarios for Rated
Sovereigns December 2024 Update," published on December 19, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
(10) The legal structure and presence of legal opinions that are
expected to address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with GLS, 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."
GLS 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 for the
purchase of late-model vehicles and (2) refinancing of existing
automotive financing.
The credit ratings on the Class A-1, Class A-2, and Class A-3 Notes
reflect 54.35% of initial hard credit enhancement provided by the
subordinated notes in the pool (47.75%), the reserve account
(1.00%), and OC (5.60%). The credit ratings on the Class B, C, D,
and E Notes reflect 40.00%, 26.55%, 13.25%, and 6.60% 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.
GSF 2023-1: Fitch Affirms 'BB-sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has affirmed the ratings for GSF 2023-1 LLC classes
A-1, A-2, A-S, B, C, D, E, and X.
Entity/Debt Rating Prior
----------- ------ -----
GSF 2023-1
A-1 362945AA5 LT AAAsf Affirmed AAAsf
A-2 362945AC1 LT AAAsf Affirmed AAAsf
A-S 362945AE7 LT AAAsf Affirmed AAAsf
B 362945AG2 LT AA-sf Affirmed AA-sf
C 362945AJ6 LT A-sf Affirmed A-sf
D 362945AL1 LT BBB-sf Affirmed BBB-sf
E 362945AQ0 LT BB-sf Affirmed BB-sf
X 362945AN7 LT A-sf Affirmed A-sf
Transaction Summary
This is the transaction's third reinvestment and comprises the
addition of 10 loans totaling $201.5 million. Following this
addition, the pool will consist of 20 closed loans ($462.9 million)
and one delayed close loan ($34.3 million) for a total of $497.2
million. All of the loans are fixed rate, and none have future
funding facilities.
KEY RATING DRIVERS
Fitch Net Cash Flow: Fitch performed cash flow analyses on 15 loans
totaling 85.2% of the pool by balance. Fitch's resulting aggregate
trust net cash flow (NCF) of $45.1 million represents a 16.55%
decline from the issuer's underwritten NCF of $54.0 million.
Aggregate cash flows include only the pro-rated trust portion of
any pari passu loan.
Lower Leverage Than Recent CLO Transactions: The pool's Fitch
loan-to-value (LTV) 106.6% is lower than the 2024 CRE CLO Fitch LTV
of 140.7% and the 2023 CRE CLO Fitch LTV of 171.2%. Additionally,
the pool's Fitch debt yield (DY) is 9.0% is higher than the 2024
CRE CLO Fitch DY of 6.5% and the 2023 CRE CLO Fitch DY of 5.5%
Lower Interest Rates Than Recent CLO Transactions: The pool's
weighed average note rate is 7.1%, lower than the 2024 YTD CRE CLO
note rate of 7.9% and lower than the 2023 CRE CLO average of 8.6%
Additionally, the pool's issuer term debt service coverage ratio
(DSCR) is 1.12x, which is higher than the 2024 CRE CLO Fitch Term
DSCR of 0.75x and higher than the 2023 CRE CLO Fitch Term DSCR of
0.66x.
Pool Concentration by Loan Size: The pool contains 21 loans with an
effective loan count of 16.5, which translates to a higher loan
count concentration compared to recent CLO transactions. The pool's
effective loan count of 16.5 is lower than the 16.9 average for the
2024 CRE CLOs and lower than the 19.8 average for the 2023 CRE
CLOs. The top 10 loans which account for 68.6% of the pool by
balance, is lower than the 2024 YTD CRE CLO average of 70.5%, and
higher than the 62.5% average for 2023 CRE CLOs.
Amortization Compared to Recent CLO Transactions: The pool will
feature 0.2% paydown from securitization to maturity. This is lower
than the 2024 YTD CRE CLO average of 0.6% and lower than the 2023
CRE CLO average of 1.7%.
Property Type Concentration: GSF 2023-1 has an effective property
count of 4.4, which is higher than the 2024 YTD CRE CLO average of
1.5 and the 2023 CRE CLO average of 1.7. Loans secured by retail
properties represent 36.2%, which is higher relative to prior CLOs.
The 2024 YTD CRE CLO average retail exposure is 1.2%.
Geographic Concentration: GSF 2023-1 has an effective geographic
count of 9.7, which is higher than the 2024 YTD CRE CLO average of
9.0, and lower than 10.1 for the 2023 CRE CLOs. Loans located in
the Boston MSA account for 20.8% of the pool.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
A-1 & A-2/ A-S / B / C / D / E
- Original Rating: 'AAAsf /'AAAsf /'AA-sf/'A-sf/'BBB-sf/'BB-sf;
- 10% Decline to Fitch NCF: 'AA+sf /AAsf / Asf / BBBsf / BBsf
/B-sf
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
A-1 & A-2/ A-S / B / C / D / E
- Original Rating: 'AAAsf /'AAAsf /'AA-sf/'A-sf/'BBB-sf/'BB-sf;
- 10% Increase to Fitch NCF: 'AAAsf / AAAsf / AAsf / Asf / BBBsf /
BBsf.
SUMMARY OF FINANCIAL ADJUSTMENTS
There were no variances from Fitch criteria.
Cash flow modeling was not employed in this transaction, with the
concurrence of the committee. The deal does not employ CRE CLO
features that would cause us to cash flow model. For example, the
transaction's structure does not contain any note protection tests
(interest coverage or overcollateralization) nor is there an
interest payment diversion within the retained classes (or anywhere
in the structure).
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 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.
HAYFIN US XII: S&P Assigns Prelim BB- (sf) Rating on CL. E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1R, A-JR, B-R, C-1R, D-R, and E-R replacement debt and proposed
new class C-JR debt from Hayfin US XII Ltd./Hayfin US XII LLC, a
CLO originally issued in January 2021 that is managed by Hayfin
Capital Management LLC.
The preliminary ratings are based on information as of Feb. 21,
2025. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
S&P said, "On the March 4, 2025, 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 and proposed new 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 and proposed new 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-1R, A-JR, B-R, C-1R, C-JR, D-R, and E-R
debt are expected to be issued at a lower spread than the original
notes. The new floating spread is expected to replace the current
fixed and floating spreads.
-- New class C-JR debt is expected to be issued.
-- The stated maturity will be extended four years.
-- The reinvestment period will be extended four years.
-- The non-call period will be extended four years.
-- The weighted average life test date will be extended 4.917
years.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Hayfin US XII Ltd/Hayfin US XII LLC
Class A-1R, $207.96 million: AAA (sf)
Class A-JR, $13.87 million: AAA (sf)
Class B-R, $41.60 million: AA (sf)
Class C-1R (deferrable), $20.80 million: A (sf)
Class C-JR (deferrable), $3.46 million: A (sf)
Class D-R (deferrable), $17.34 million: BBB (sf)
Class E-R (deferrable), $13.85 million: BB- (sf)
Other Debt
Hayfin US XII Ltd/Hayfin US XII LLC
Subordinated notes, $34.13 million: Not rated
JP MORGAN 2025-1: DBRS Finalizes B(low) Rating on B5 Certs
----------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the Mortgage
Pass-Through Certificates, Series 2025-1 (the Certificates) issued
by the J.P. Morgan Mortgage Trust 2025-1 (JPMMT 2025-1):
-- $458.5 million Class A-1 at AAA (sf)
-- $372.1 million Class A-2 at AAA (sf)
-- $372.1 million Class A-3 at AAA (sf)
-- $372.1 million Class A-3-X at AAA (sf)
-- $279.1 million Class A-4 at AAA (sf)
-- $279.1 million Class A-4-A at AAA (sf)
-- $279.1 million Class A-4-X at AAA (sf)
-- $93.0 million Class A-5 at AAA (sf)
-- $93.0 million Class A-5-A at AAA (sf)
-- $93.0 million Class A-5-X at AAA (sf)
-- $223.3 million Class A-6 at AAA (sf)
-- $223.3 million Class A-6-A at AAA (sf)
-- $223.3 million Class A-6-X at AAA (sf)
-- $148.8 million Class A-7 at AAA (sf)
-- $148.8 million Class A-7-A at AAA (sf)
-- $148.8 million Class A-7-X at AAA (sf)
-- $55.8 million Class A-8 at AAA (sf)
-- $55.8 million Class A-8-A at AAA (sf)
-- $55.8 million Class A-8-X at AAA (sf)
-- $45.0 million Class A-9 at AAA (sf)
-- $45.0 million Class A-9-A at AAA (sf)
-- $45.0 million Class A-9-X at AAA (sf)
-- $41.3 million Class A-11 at AAA (sf)
-- $41.3 million Class A-11-X at AAA (sf)
-- $41.3 million Class A-12 at AAA (sf)
-- $41.3 million Class A-13 at AAA (sf)
-- $41.3 million Class A-13-X at AAA (sf)
-- $41.3 million Class A-14 at AAA (sf)
-- $41.3 million Class A-14-X at AAA (sf)
-- $41.3 million Class A-14-X2 at AAA (sf)
-- $41.3 million Class A-14-X3 at AAA (sf)
-- $41.3 million Class A-14-X4 at AAA (sf)
-- $458.5 million Class A-X-1 at AAA (sf)
-- $9.2 million Class B-1 at AA (low) (sf)
-- $9.2 million Class B-1-A at AA (low) (sf)
-- $9.2 million Class B-1-X at AA (low) (sf)
-- $8.5 million Class B-2 at A (low) (sf)
-- $8.5 million Class B-2-A at A (low) (sf)
-- $8.5 million Class B-2-X at A (low) (sf)
-- $4.9 million Class B-3 at BBB (low) (sf)
-- $2.4 million Class B-4 at BB (low) (sf)
-- $972.8 thousand Class B-5 at B (low) (sf)
Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-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, B-1-X, and B-2-X
are interest-only (IO) certificates. The class balances represent
notional amounts.
Classes A-1. 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, 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 (Class A-9-A) with respect to loss
allocation.
The AAA (sf) credit ratings on the Certificates reflect 5.75% 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 3.85%, 2.10%, 1.10%, 0.60%, and
0.40% of credit enhancement, respectively.
Other than the specified classes above, Morningstar DBRS does not
rate any other classes in this transaction.
The transaction is a securitization of a portfolio of first-lien
fixed-rate prime residential mortgages funded by the issuance of
the Mortgage Pass-Through Certificates, Series 2025-1 (the
Certificates). The Certificates are backed by 373 loans with a
total principal balance of $486,422,052 as of the Cut-Off Date
(January 1, 2025).
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 three months. Approximately 94.5% of the loans are
traditional, nonagency, prime jumbo mortgage loans. The remaining
5.5% 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.
United Wholesale Mortgage, LLC (UWM) originated 37.0% of the pool.
Various other originators, each comprising less than 10%,
originated the remainder of the loans. The mortgage loans will be
serviced by Shellpoint (59.9%), UWM (37.0%) and Fay Servicing
(3.1%). For the UWM serviced loans, Cenlar will act as the
subservicer. For the JPMorgan Chase Bank, N.A. (JPMCB)-serviced
loans, Shellpoint will act as interim servicer until the loans
transfer to JPMCB on the servicing transfer date (March 1, 2025).
For certain Servicers in this transaction, 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.
Nationstar Mortgage LLC (Nationstar) will act as the Master
Servicer. Citibank, N.A. (Citibank; rated AA (low) with a Stable
trend by Morningstar DBRS) will act as Securities Administrator and
Delaware Trustee. Computershare Trust Company, N.A. (Computershare)
will act as Custodian. Pentalpha Surveillance LLC (Pentalpha) will
serve as the Representations and Warranties (R&W) Reviewer.
As of the Closing Date, C.U.P Holdings LLC, or one of its
affiliates, will retain an eligible vertical interest in the
transaction consisting of an uncertificated interest (the EU/UK
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
Certificates (other than the Class X and Class A-R Certificates)
and the Retained Interest to satisfy the credit risk retention
requirements in Articles 6(3) of the EU Securitization Regulation
and 6(3) of the UK Securitization Regulation.
Notes: All figures are in US dollars unless otherwise noted.
JP MORGAN 2025-BMS: Moody's Assigns Ba1 Rating to Cl. E Certs
-------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to seven classes of
CMBS securities, issued by J.P. Morgan Chase Commercial Mortgage
Securities Trust 2025-BMS, Commercial Mortgage Pass-Through
Certificates, Series 2025-BMS:
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 Ba1 (sf)
Cl. HRR, Definitive Rating Assigned Ba2 (sf)
Cl. X-CP*, Definitive Rating Assigned Aaa (sf)
*Reflects Interest-Only Classes.
RATINGS RATIONALE
The certificates are collateralized by a single loan backed by a
first lien on the Borrower's fee interests in in two four-story,
Class-A, single-tenant office properties known as "Bay Meadows
Station 1" ("Station 1") and "Bay Meadows Station 5" ("Station 5",
and together, the "Properties" or the "Portfolio") that are located
in San Mateo, CA and contain a total of 442,111 SF of rentable
area. 100% of the net rentable area of the Properties is leased to
Roblox Corporation ("Roblox"). Moody's analysis is based on the
quality of the Properties, the amount of subordination supporting
each rated class, among other structural characteristics.
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 and Moody's
Approach to Rating Structured Finance Interest- Only (IO)
Securities. 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 considers a range
of qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's makes 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 1.41X and Moody's first
mortgage actual stressed DSCR is 1.12X. Moody's DSCR is based on
Moody's stabilized net cash flow.
The whole loan first mortgage balance of $270,000,000 represents a
Moody's LTV ratio of 96.2% based on Moody's Value. Adjusted Moody's
LTV ratio for the first mortgage balance is 89.4% (compared to
89.0% at Moody's provisional ratings) 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 consider those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The property's overall
quality grade is 1.50.
Notable strengths of the transaction include: superior asset
quality and location, long-term NNN lease with no rollover during
the term, tenant headquarters and commitment, and experienced
sponsorship with significant equity.
Notable concerns of the transaction include: single tenant
concentration, soft office market fundamentals, single asset
transaction, and full term IO.
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
January 2025.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
JP MORGAN 2025-CES1: DBRS Finalizes B(high) Rating on B-2 Certs
---------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the Mortgage
Pass-Through Certificates, Series 2025-CES1 (the Certificates)
issued by J.P. Morgan Mortgage Trust 2025-CES1 (JPMMT 2025-CES1 or
the Issuer) as follows:
-- $226.7 million Class A-1A at AAA (sf)
-- $20.7 million Class A-1B at AAA (sf)
-- $247.4 million Class A-1 at AAA (sf)
-- $26.2 million Class A-2 at AA (high) (sf)
-- $17.3 million Class A-3 at A (high) (sf)
-- $15.5 million Class M-1 at BBB (high) (sf)
-- $10.8 million Class B-1 at BB (high) (sf)
-- $5.8 million Class B-2 at B (high) (sf)
Class A-1 is an exchangeable certificate. This class can be
exchanged for proportionate shares of the depositable certificates
(Classes A-1A and A-1B) as specified in the offering documents.
The AAA (sf) credit rating reflects 25.80% of credit enhancement
provided by the subordinated notes. The AA (high) (sf), A (high)
(sf), BBB (high) (sf), BB (high) (sf), and B (high) (sf) credit
ratings reflect 17.95%, 12.75%, 8.10%, 4.85%, and 3.10% 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, prime
and near-prime, closed-end second-lien (CES) residential mortgages
funded by the issuance of the Certificates. The Certificates are
backed by 3,417 mortgage loans with a total principal balance of
$333,442,357 as of the Cut-Off Date (December 31, 2024).
The portfolio, on average, is six-months seasoned, though seasoning
ranges from two to 18 months. Borrowers in the pool represent prime
and near-prime credit quality -- with a weighted-average (WA)
Morningstar DBRS-calculated FICO score of 740, Issuer-provided
original combined loan-to-value ratio (CLTV) of 66.3%, and the vast
majority of the loans originated with full documentation standards.
All loans are current and vast majority of the loans (approximately
99.6% of the pool) have never been 30+ days delinquent since
origination.
JPMMT 2025-CES1 represents the third CES securitization under the
JPM shelf. loanDepot.com, LLC (loanDepot; 25.6%), Guild Mortgage
Company LLC (18.5%), Deephaven Mortgage LLC (17.6%), and AmeriSave
Mortgage Corporation (15.3%) are the top originators for the
mortgage pool. The remaining originators each comprise less than
10.0% of the mortgage loans.
NewRez LLC doing business as Shellpoint Mortgage Servicing (68.9%),
loanDepot.com, LLC (25.6%), and PennyMac Loan Services (5.5%) are
the Servicers of the loans in this transaction.
Wilmington Savings Fund Society, FSB will act as the Securities
Administrator and Owner Trustee. Computershare Trust Company, N.A.
(rated BBB (high) with a Stable trend by Morningstar DBRS) will act
as the Custodian.
On or after the earlier of (1) January 2028 or (2) the date when
the unpaid principal balance of the mortgage loans is reduced to
30% of the Cut-Off Date balance, PMIT I LLC (Optional Redemption
Holder), or an entity majority owned by the Optional Redemption
Holder, may redeem all of the outstanding Certificates at a price
equal to (1) the class balances of the related Certificates; (2)
accrued and unpaid interest (including any cap carryover amounts);
and (3) unpaid expenses. The proceeds will be distributed to the
certificateholders in accordance with the priority of
distributions.
Although all the mortgage loans were originated to satisfy the
Consumer Financial Protection Bureau's Ability-to-Repay (ATR)
rules, they were made to borrowers who generally do not qualify for
agency, government, or private-label nonagency prime jumbo products
for various reasons. In accordance with the Qualified Mortgage
(QM)/ATR rules, 22.6% of the loans are designated as non-QM, 19.5%
are designated as QM Rebuttable Presumption, and 53.6% are
designated as QM Safe Harbor. Approximately 4.4% of the mortgages
are loans made to investors for business purposes or were
originated by a CDFI designated originator and were not subject to
the QM/ATR rules.
There will not be any advancing of delinquent principal or interest
on any mortgages by the Servicers or any other party to the
transaction. In addition, the related servicer is not obligated to
make advances in respect of homeowner association fees, taxes, and
insurance, installment payments on energy improvement liens, and
reasonable costs and expenses incurred in the course of servicing
and disposing of properties unless a determination is made that
there will be material recoveries.
For this transaction, any loan that is 180 days delinquent under
the Mortgage Bankers Association delinquency method, upon review by
the related Servicer, may be considered a Charged-Off Loan. With
respect to a Charged-Off Loan, the total unpaid principal balance
will be considered a realized loss and will be allocated reverse
sequentially to the Noteholders. If there are any subsequent
recoveries for such Charged-Off Loans, the recoveries will be
included in the interest remittance amount and principal remittance
amount and applied in accordance with the respective distribution
waterfall. In addition, any class principal balances of
Certificates that have been previously reduced by allocation of
such realized losses may be increased by such recoveries
sequentially in order of seniority. Morningstar DBRS' analysis
assumes reduced recoveries upon default on loans in this pool.
This transaction incorporates a sequential-pay cash flow structure
with a pro rata principal distribution among the senior Class A-1A
and A-1B tranches. Principal proceeds and excess interest can be
used to cover interest carryforwards on the Certificates, but such
interest carryforwards on Class M-1 and more subordinate bonds will
not be paid from principal proceeds until the Class A-1A, A-1B,
A-2, and A-3 Certificates are retired. For this transaction, the
Class A-1A, A-1B, A-2, A-3, and M-1 fixed rates step up by 100
basis points on and after the distribution date in February 2029.
On any Distribution Date, interest and principal otherwise payable
to the Class B-3 may also be used to pay any Cap Carryover
Amounts.
Approximately 16.1% of the mortgage pool contains loans secured by
mortgage properties that are located within certain disaster areas
(such as those impacted by the Greater Los Angeles wildfires) where
FEMA has designated for federal assistance. The Mortgage Loan
Seller has ordered post-disaster inspections (PDI) for any property
located in a known FEMA designated disaster zone. Loans secured by
properties known to be materially damaged will not be included in
the final transaction collateral pool. To the extent that a PDI was
ordered prior to closing but notice of material damages were not
available until after closing, the sponsor will repurchase the
related loan/loans. The transaction documents also include
representations and warranties regarding the property conditions,
which state that the properties have not suffered damage that would
have a material and adverse impact on the values of the properties
(including events such as fire, windstorm, flood, earth movement,
and hurricane).
The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary, "Baseline Macroeconomic Scenarios for Rated
Sovereigns December 2024 Update," published on December 19, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse coronavirus pandemic scenarios, which were
first published in April 2020.
Notes: All figures are in US dollars unless otherwise noted.
JP MORGAN 2025-VIS1: S&P Raises Class B-2 Notes Rating to 'B (sf)'
------------------------------------------------------------------
On Feb. 20, 2025, S&P Global Ratings assigned preliminary ratings
to J.P. Morgan Mortgage Trust 2025-VIS1 based on the application of
its relevant in-use criteria at the time, "Methodology And
Assumptions For Rating U.S. RMBS Issued 2009 And Later," published
Feb. 22, 2018 (the previous U.S. residential mortgage-backed
securities [RMBS] criteria).
S&P said, "Subsequently, on Feb. 21, 2025, we published our U.S.
and Canada residential mortgage-backed securities (RMBS) criteria
supplement following the conclusion of our request for comment
(RFC) for "Global Methodology And Assumptions: Assessing Pools Of
Residential Loans," (the Global RMBS criteria) to expand the scope
to include the U.S. The application of our global framework to U.S.
residential mortgage loans resulted in--and coincided with--certain
changes in our rating analysis of U.S. RMBS issued in 2009 and
later, which supersedes the previous U.S. RMBS criteria."
As a result of the criteria supplement release, S&P concurrently
placed the preliminary ratings on classes A-2, A-3, M-1, B-1, and
B-2 from JPMMT 2025-VIS1 under criteria observation (UCO) when it
assigned them. S&P has reassessed the transaction under its updated
Global RMBS criteria and associated U.S. and Canada criteria
supplement and removed the UCO placement, and updated its
preliminary ratings as follows:
JPMMT 2025-VIS1 Preliminary Ratings(i)
Class A-1A, $199,725,000: affirmed at 'AAA (sf)'
Class A-1B, $37,263,000: affirmed at 'AAA (sf)'
Class A-1, $236,988,000: affirmed at 'AAA (sf)'
Class A-2, $36,703,000: to 'AA+ (sf)' from 'AA-(sf)'
Class A-3, $44,342,000: to 'A+ (sf)' from 'A- (sf)'
Class M-1, $20,867,000: to 'BBB+ (sf)' from 'BBB- (sf)'
Class B-1, $15,650,000: to 'BB (sf)' from 'BB- (sf)'
Class B-2, $10,992,000: to 'B (sf)' from 'B- (sf)'
Class B-3, $7,080,730: No change - NR
Class A-IO-S, $155,806,425(ii): No change - NR
Class XS, $372,622,730(iii): No change - NR
Class A-R, not applicable: No change – NR
(i)The collateral and structural information in this report reflect
the preliminary private placement memorandum dated Feb. 20, 2025.
The preliminary ratings address the ultimate payment of interest
and principal and do not address payment of the cap carryover
amounts.
(ii)The notional amount equals the aggregate unpaid principal
balance of the mortgage loans serviced by Shellpoint Mortgage
Servicing and Selene Finance as of the cutoff date.
(iii)This class will receive certain excess amounts, including
prepayment premiums and default interest.
NR--Not rated.
S&P said, "Our updated preliminary ratings are primarily driven by
changes in our loss estimates for the pool, which include a
reduction in the pool-level R&W loss coverage adjustment factor to
1.00x from 1.03x based on the regrouping of the specific
considerations that determine the factor, specifically the greater
emphasis given to mitigants such as third-party due diligence on
100% of the pool, our assessment of J.P. Mogan Chase Bank N.A. as
aggregator, and the diversification of contributing originators."
Loss estimates (%) Updated Previous
'AAA' loss coverage 24.00 29.90
'AAA' foreclosure frequency 46.36 55.30
'AAA' loss severity 51.82 54.07
'BBB' loss coverage 6.70 8.70
'BBB' foreclosure frequency 23.27 29.15
'BBB' loss severity 28.78 29.85
'B' loss coverage 1.25 1.95
'B' foreclosure frequency 6.68 10.00
'B' loss severity 18.85 19.50
The preliminary ratings and loss estimates stated above supersede
those originally published in the presale J.P. Morgan Mortgage
Trust 2025-VIS1 published Feb. 20, 2025.
MF1 LLC 2022-B1: DBRS Confirms B(low) Rating on 3 Classes
---------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
commercial mortgage-backed notes issued by MF1 2022-B1 LLC (the
Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class B Notes at AAA (sf)
-- Class C Notes at A (high) (sf)
-- Class D Notes at A (low) (sf)
-- Class E Notes at BBB (high) (sf)
-- Class F Notes at BBB (low) (sf)
-- Class G Notes at BB (high) (sf)
-- Class G-E Notes at BB (high) (sf)
-- Class G-X Notes at BB (high) (sf)
-- Class H Notes at BB (low) (sf)
-- Class H-E Notes at BB (low) (sf)
-- Class H-X Notes at BB (low) (sf)
-- Class I Notes at B (low) (sf)
-- Class I-E Notes at B (low) (sf)
-- Class I-X Notes at B (low) (sf)
Morningstar DBRS also changed the trends on Class G, Class G-E,
Class G-X, Class H, Class H-E, Class H-X, Class I, Class I-E, and
Class I-X to Negative from Stable. The trends on all other classes
remain Stable.
The trend changes reflect the increased credit risk to the
transaction resulting from the higher loan-level loss expectations
for several of the larger loans in the transaction. Morningstar
DBRS notes that many borrowers are facing execution risk with their
respective business plans because of a combination of factors,
including decreased property values, increased construction costs,
slower rent growth, and increased debt service costs stemming from
the current elevated interest rate environment as all loans have
floating interest rates. As a result of lagging business plans and
loan exit strategies, the borrowers of 16 loans, representing 58.1%
of the current trust balance, have received loan modifications
and/or forbearances. The terms of the modifications vary from loan
to loan, however, common terms include interest deferrals via hard
and soft pay structures, the purchase of new interest rate cap
agreements, and funding interest reserves. Additionally, the
transaction faces a heighted maturity risk as 24 loans,
representing 82.2% of the current trust balance, will mature in
2025. While all of the loans have built-in extension options,
Morningstar DBRS notes that, based on current collateral
performance, most loans will not qualify to exercise those options
and therefore will likely need to be modified.
The credit rating confirmations reflect the overall credit support
to the transaction with an unrated, first-loss piece of $99.5
million as well as three below-investment-grade bonds; Class G,
Class H, and Class I; totaling $115.3 million. Additionally, all
loans but one are secured by multifamily properties. Multifamily
properties have historically proven to be better able to retain
property value and cash flow compared with other property types.
While some individual borrowers are proceeding with their business
plans to increase property cash flow and property value, the
headwinds and challenges noted above continue to pressure select
borrowers. 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. 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 33 floating-rate mortgage loans
secured by 76 mostly transitional properties with a cut-off balance
of $1.625 billion. Most loans were in a period of transition with
plans to stabilize performance and improve values of the underlying
assets. The transaction had a 24-month reinvestment period that was
originally scheduled to expire in November 2024, however, in
December 2024, the lender and lone investor in the transaction
agreed to an extension of the Reinvestment Period through the
December 2026 Payment Date. As of the January 2025 remittance, the
pool comprised 30 loans secured by 66 properties with a cumulative
trust balance of $1.625 billion. Since the previous Morningstar
DBRS credit rating action in June 2024, one loan, representing 3.1%
of the current pool balance, has been added to the trust. Over the
same period, four loans with a former cumulative trust balance of
$162.5 million were paid in full.
Leverage across the pool is generally stable compared with issuance
metrics with the current weighted-average (WA) as-is appraised
value loan-to-value ratio (LTV) of 68.4% (compared with the closing
LTV of 68.3%) and WA stabilized LTV of 60.0% (compared with the
closing WA stabilized LTV 61.2%). Morningstar DBRS recognizes that
select property values may be inflated as the majority of the
individual property appraisals were completed in 2021 or 2022 and
may not reflect the current rising interest rate or widening
capitalization rate environments. In the analysis for this review,
Morningstar DBRS applied upward LTV adjustments across 12 loans,
representing 45.2% of the current trust balance, generally
reflective of higher cap rate assumptions compared with the implied
cap rates based on the original appraisals.
As of the January 2025 remittance, no loans are specially serviced
and 29 loans, representing 93.4% of the pool, are being monitored
on the servicer's watchlist. The loans have been flagged for low
debt service coverage ratios (DSCRs) and upcoming loan maturity.
Three loans, comprising 12.8% of the pool, were previously
specially serviced due to maturity default after their borrowers
were unable to exercise extension options. All three loans were
transferred back to the master servicer in January 2025 with
one-year maturity extensions granted.
The largest of these loans, 175 West 87th Street (Prospectus ID#3;
6.1% of the pool), is secured by a 266-unit multifamily property in
the Upper West Side of Manhattan, New York. The loan matured in
July 2024 and had been categorized as a performing matured balloon
loan from October 2024 to January 2025. The property did not meet
the performance-based extension tests and, according to the
collateral manager's Q3 2024 update, the borrower and lender were
in discussions to extend the loan. Through January 2025, the lender
had advanced $20.4 million of loan future funding to the borrower,
including $6.3 million since Q3 2023 as the borrower continued to
implement its capital expenditure (capex) plan over the prior year.
As of August 2024, the property's occupancy rate of 78.9% was
similar to the May 2023 occupancy rate of 80.8% and the closing
occupancy rate of 77.8%. According to YE2023 reporting, the
property generated net cash flow (NCF) of $3.2 million, which
results in a DSCR of 0.27 times (x) and a debt yield of 1.8% based
on the currently funded whole loan balance. In its current
analysis, Morningstar DBRS applied upward as-is and as-stabilized
LTV adjustments of approximately 90.0% and 70.0%%, respectively, as
well as an increased probability of default (POD) to the loan to
reflect the increased business plan execution risk. The resulting
loan expected loss remains below the WA expected loss for the
overall pool.
The Tides at Country Club loan (Prospectus ID#7; 3.9% of the pool),
is secured by a 582-unit multifamily community in Mesa, Arizona.
The loan transferred to special servicing in August 2023 for
payment default. According to the collateral manager's Q3 2024
update, in June 2024, the loan was assumed by Geringer Capital and
subsequently modified. As a condition of the modification, the loan
was paid down by $3.0 million, a contingency reserve was
established, and the requirement to purchase a new interest rate
cap agreement was waived. The loan's maturity date was extended to
August 2025, and in January 2025, the loan was returned to the
master servicer. The new sponsor's business plan is to implement a
$5.2 million capital improvement plan and renovate 354 units in
order to increase rental rates and stabilize the property. As of
January 2025, $4.4 million of future funding has been released,
with 60 units renovated. The property was 83.8% occupied as of
August 2024, with an average rental rate of $1,233 per renovated
unit and $1,119 per unit overall. The achieved renovated rental
rate is $446 lower than the issuer's original estimated rate of
$1,679 per unit and $211 lower than Morningstar DBRS stabilized
rent estimate of $1,444 per unit. While Morningstar DBRS did not
make any LTV or POD adjustments, the loan's expected loss remains
above the pool average, primarily because of its suburban location
in a weak MSA Group.
The Highland Park loan (Prospectus ID#13, 2.8% of the pool),
secured by a 373-unit multifamily property in the Columbia Heights
neighborhood of Washington, D.C, transferred to special servicing
in October 2024 for maturity default. Given the low in-place cash
flow, the property did not meet the performance-based extension
tests and, according to the collateral manager's Q3 2024 update,
the borrower and lender were in discussions regarding a loan
modification to extend the loan. The loan transferred back to the
master servicer in January 2025, with an amended maturity date of
July 2025, however, the terms of the amendment are currently
pending. The loan did not include any future funding, as the
borrower's business plan focused on stabilizing the property's
occupancy rate and increasing rental rates. As of July 2024, the
property was 93.6% occupied with an average rental rate of $2,367
per unit, which represented a 12.2% increase over issuance rates
and was in line with the Morningstar DBRS stabilized rent estimate
but remained below the Issuer's stabilized estimate of $3,244 per
unit. In its current analysis, Morningstar DBRS also applied upward
as-is and as-stabilized LTV adjustments of approximately 85.0% and
75.0%, respectively, as well as an increased POD to the loan to
reflect the increased business plan execution risk. The resulting
loan expected loss is approximately 1.5x greater than the pool
average.
Through January 2025, the collateral manager had advanced
cumulative loan future funding of $119.8 million to 17 of the
outstanding individual borrowers, including $12.5 million since the
previous Morningstar DBRS credit rating action. The loans with the
largest future funding advances to date are the Reserve at Brandon
(Prospectus ID#8; 3.6% of the pool balance; $21.1 million of future
funding advanced), which is secured by a 982-unit multifamily
property in Brandon, Florida, and the previously mentioned 175 West
8th Street loan ($20.4 million of future funding advanced). The
advanced funds have been used by the borrowers to complete planned
capex across the properties. An additional $73.3 million of loan
future funding allocated to 12 loans remains outstanding. These
funds are also scheduled to primarily be used toward capex with
select amounts allocated to individual borrowers for debt service
shortfalls and/or property performance-based earn out reserves.
Notes: All figures are in U.S. dollars unless otherwise noted.
MILFORD PARK: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Milford
Park CLO, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Milford Park CLO, Ltd.
A-R LT NRsf New Rating
B 59966PAC6 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 59966PAE2 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating
D 59966PAG7 LT PIFsf Paid In Full BBB-sf
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E 59967DAA6 LT PIFsf Paid In Full BB-sf
E-R LT BB+sf New Rating
F-R LT NRsf New Rating
X-R LT NRsf New Rating
Transaction Summary
Milford Park CLO, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Blackstone Liquid
Credit Strategies LLC which originally closed in June 2022. The
secured notes will be refinanced in whole on Feb. 21, 2025. 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. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
95.14% first-lien senior secured loans and has a weighted average
recovery assumption of 74.97%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after
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-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
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, 'A+sf'
for class D-1-R, 'A-sf' for class D-2-R, and 'BBB+sf' for class
E-R
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information. Overall, Fitch's assessment of the asset pool
information relied upon for its rating analysis according to its
applicable rating methodologies indicates that it is adequately
reliable
ESG Considerations
Fitch does not provide ESG relevance scores for Milford Park CLO,
Ltd.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
MILL CITY 2019-GS1: Fitch Assigns 'B+sf' Rating on Class B5A Notes
------------------------------------------------------------------
Fitch Ratings has assigned new ratings to Mill City Mortgage Loan
Trust 2019-GS1.
Entity/Debt Rating
----------- ------
MCMLT 2019-GS1
A1B2 LT NRsf New Rating
A1 LT NRsf New Rating
A2 LT NRsf New Rating
A3 LT NRsf New Rating
A4 LT NRsf New Rating
M1 LT NRsf New Rating
M2 LT NRsf New Rating
M3 LT NRsf New Rating
M3A LT NRsf New Rating
M3B LT NRsf New Rating
B1A LT AA+sf New Rating
B1B LT AA+sf New Rating
B1 LT AA+sf New Rating
B2A LT AA+sf New Rating
B2B LT AA+sf New Rating
B2 LT AA+sf New Rating
B3A LT AA+sf New Rating
B3B LT A+sf New Rating
B3 LT A+sf New Rating
B4A LT A-sf New Rating
B4B LT BB+sf New Rating
B4 LT BB+sf New Rating
B5A LT B+sf New Rating
B5B LT NRsf New Rating
B5 LT NRsf New Rating
B6A LT NRsf New Rating
B6B LT NRsf New Rating
B6 LT NRsf New Rating
R LT NRsf New Rating
COLLAT LT NRsf New Rating
RISK LT NRsf New Rating
X LT NRsf New Rating
XS LT NRsf New Rating
Transaction Summary
MCMLT 2019-GS1 is supported by reperforming (RPL) and seasoned
performing (SPL) collateral. The transaction was originally issued
in 2019 and was not rated by Fitch initially. Since the initial
issuance, performance has been strong, with the overall deal and
collateral paid down more than 40%, total losses less than 1.5% of
the original issuance balance, and meaningful home price
appreciation.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Fitch views the home
price values of this pool as 12.1% above a long-term sustainable
level (vs. 11.1% on a national level as of 3Q24), down 0.5% since
last quarter, based on Fitch's updated view on sustainable home
prices. Housing affordability is the worst it has been in decades,
driven by both high interest rates and elevated home prices. Home
prices have increased 3.8% yoy nationally as of Nov. 2024 despite
modest regional declines but are still being supported by limited
inventory).
Distressed Performance History and RPL Credit Quality (Negative):
The collateral consists of 1,339 seasoned performing and
re-performing first and second lien loans, totaling $227.4 million.
The collateral is seasoned at approximately 212 months in
aggregate, as calculated by Fitch, with over 92% of the pool by
unpaid principal balance originated before 2010. The remaining 8%
of pool was originated between 2010 and 2017.
As of the latest remittance date, 11.1% of the pool is currently
delinquent. Additionally, 14.9% of the pool, as calculated by
Fitch, is current but has had delinquencies within the last 24
months. Fitch increased its loss expectation to account for
currently delinquent loans and loans with prior delinquencies.
Additionally, 87.8% of loans have a prior modification.
The borrowers have a weak credit profile (635 Fitch FICO and 41.3%
debt-to-income [DTI]) and moderate leverage (74.1% sustainable
loan-to-value [sLTV]). At issuance, broker price opinion (BPOs) and
automated valuation models (AVMs) were provided for updated
property values. The BPO values provided at issuance were
approximately 3% higher than the original values. Fitch did not
receive any additional updated property values and credit scores as
part of its analysis.
As a result, Fitch indexed off the updated values used at issuance
(based off its most recent CoreLogic Case-Shiller Home Price Index)
and applied a 5% haircut. Fitch observes that the mark-to-market
combined LTV (MtM cLTV) is down roughly 20 points from issuance,
reflecting significant borrower equity buildup. In addition, Fitch
looked at the most recent FICO scores where available and applied a
conservative adjustment for loans missing values. The AAAsf
expected loss is 26.3%.
Strong Performance Since Issuance (Positive): This transaction was
originally issued in 2019 and has performed well since issuance.
Cumulative losses to date stand at approximately $5.6 million or
1.46% of the original collateral balance, which is significantly
lower than Fitch's current base case loss expectations, and none of
the bonds have incurred a writedown due to overcollateralization
and excess spread absorbing the collateral losses. The current deal
factor is 58.2%.
The deal has a serious delinquency pipeline (60+ days including
foreclosure, real estate owned and bankruptcy) of 7.4%, which is up
4.2% from issuance. The transaction, however, has also factored
down more than 40% resulting in significant credit enhancement
buildup since issuance for the rated bonds. Overall, Fitch's loss
expectation for the 'AAAsf' stress is 26.30%, in line with other
seasoned deals in the RPL/SPL sector.
Moderate Operational Risk (Neutral): CarVal has an established
operating history acquiring RPL single family residential loans and
is assessed as an 'Average' aggregator by Fitch. Shellpoint
Mortgage Servicing (Shellpoint) and Fay Servicing, LLC (Fay) are
the named servicers for the transaction and are rated by Fitch as
RPS2 and 'RSS2-.
In addition, Fitch considers the representation, warranty and
enforcement (RW&E) mechanism construct for this transaction to be
generally consistent with a Tier 2 framework due to the inclusion
of knowledge qualifiers without claw back provision, presence of
sunsets and weak enforcement mechanism. Given the seasoning of the
transaction, the reps are passed their respective sunset date
(Sept. 2020) and all potential repurchases will be funded through
the Breach Reserve Account, which currently is approximately
$451,000. Fitch increased its 'AAAsf' loss expectation by
approximately 174bps to account for potential increase in defaults
and losses arising from weaknesses in the reps.
A third-party due diligence review was performed on 86.1% of the
outstanding loans (by loan count). The review was performed by
SitusAMC and Clayton; both of which are assessed as 'Acceptable'
third-party review (TPR) firms per Fitch. The due diligence scope
consisted primarily of a regulatory compliance review that covered
applicable federal, state and local high-cost loan and/or predatory
laws, as well as the Truth In Lending Act and Real Estate
Settlement Procedures Act (TILA-RESPA). The due diligence results
indicate moderate operational risk, with 19.6% of the total pool
having a material defect and therefore having a final grade of 'C'
or 'D'.
While this concentration of material exceptions is higher than that
of other Fitch-rated RPL deals, adjustments were applied only to
loans with missing or incomplete final HUD-1 documents that are
subject to compliance testing for predatory lending regulations as
well as loans missing mortgage notes and modification agreements.
Overall, Fitch adjusted its loss expectation by approximately
120bps at the 'AAAsf' rating stress.
Updated due diligence consisting of tax, title review and custodial
review was not provided for the analysis but was mitigated through
the performance of the deal and the active role of servicers and
custodians in the transaction.
Sequential-Pay Structure and No Servicer P&I Advancing (Positive):
The transaction's cash flow is based on a sequential-pay structure
whereby the subordinated classes do not receive principal until the
senior classes are repaid in full. Losses are allocated in
reverse-sequential order. Due to the sequential structure, the
transaction has amortized since issuance and the credit enhancement
percentage for the classes Fitch is assigning ratings to has
increased significantly.
The transaction is structured to reallocate principal to pay
interest on the notes. However, due to Fitch's delinquency
stresses, there are modeled interest shortfalls for the B1A to B3A
classes in the 'AAAsf' stresses and therefore the highest
achievable rating is 'AA+sf'. Under Fitch's updated criteria
approach, Fitch only expects timely interest for the 'AAAsf'
notes.
The servicers will not be advancing delinquent monthly payments of
principal and interest, which reduces liquidity to the trust. P&I
advances made on behalf of loans that become delinquent and
eventually liquidate reduce liquidation proceeds to the trust. Due
to the lack of advancing, the loan-level loss severities (LS) are
less for this transaction than for those where the servicer is
obligated to advance P&I. However, Fitch expects a greater
percentage of principal to be allocated to interest in high-stress
scenarios, leading to a higher required credit enhancement.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 42.3% at '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 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 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 adjustment(s)
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 that were determined to be in violation of state or federal
high cost regulations were given a 200% LS over-ride.
Loans with a missing modification agreement received a three-month
liquidation timeline extension.
In total, these adjustments increased the 'AAAsf' loss by
approximately 120bps.
ESG Considerations
MCMLT 2019-GS1 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to operational considerations
related to diligence results and rep and warranty framework, which
has a negative impact on the credit profile, and is relevant to the
rating[s] in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
MKT 2020-525M: DBRS Cuts Class E Certs Rating to B
--------------------------------------------------
DBRS Limited downgraded its credit ratings on five classes of
Commercial Mortgage Pass-Through Certificates, Series 2020-525M
issued by MKT 2020-525M Mortgage Trust as follows:
-- Class X-A to A (low) (sf) from A (high) (sf)
-- Class C to BBB (high) (sf) from A (sf)
-- Class D to BB (sf) from BBB (sf)
-- Class E to B (sf) from BB (low) (sf)
-- Class F to B (low) (sf) from B (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
The trends on Classes A, B, C, D, E, and F were changed to Stable
from Negative. The trend on Class X-A remains Stable.
The credit rating downgrades for Classes X-A, C, D, E and F are
reflective of increased risks for the transaction, largely driven
by the market disruption in San Francisco and the occupancy
declines for the collateral property over the past few years, with
further declines expected in the near to moderate term. The
underlying mortgage loan is backed by a San Francisco office
property, 525 Market Street. The trust debt comprises $270 million
in senior A notes and $212 million in junior B notes; the whole
loan totals $682.0 million inclusive of all senior debt and
subordinate debt. Classes D, E and F are fully backed by
subordinate debt. As of the most recent reporting, the property's
occupancy rate has declined by over 25% from the issuance level and
the borrower expects further decline as tenants with leases
expiring in the next two years are not expected to renew.
The credit rating confirmations reflect Morningstar DBRS' view that
the underlying collateral remains one of the most desirable Class A
office assets within the submarket, with the subject transaction
benefitting from strong sponsorship and the expectation that the
in-place cash flows will remain comfortably above the debt service
obligation through the concentration of expected roll in the next
few years. Moreover, the subject continues to benefit from the
occupancy of the investment-grade tenant Amazon.com Services, Inc.
(Amazon; 39.0% of the net rentable area (NRA)), leases expiring
between January 2028 and February 2030). Amazon has been at the
property since 2018 and expanded its space three times since the
initial lease signing.
In the analysis for this review, Morningstar DBRS considered a
stressed value for the collateral property to gauge the potential
impact of the occupancy decline over the near term. Morningstar
DBRS determined that, even in the analyzed value stress scenario,
Classes A and B remained insulated against liquidated losses.
Although the punitive value scenario was considered, Morningstar
DBRS did not update its loan-to-value (LTV) Sizing Benchmarks based
on that value given the mitigating factors in the strong
sponsorship, remaining sufficient cash flow to cover debt service
(a factor that significantly reduces term risk) and the expectation
that leasing gains should be ultimately achievable over the
remainder of the 10-year loan term. As per Reis, office properties
within the North Financial District submarket reported a high
average vacancy rate of 21.5% in Q3 2024, rising from the average
vacancy rate of 15.3% in the prior year; the five-year forecast
vacancy rate is expected to decline to 11.9%. Given those factors
and the credit rating downgrades for the classes lower in the
capital stack, most of which are fully backed by subordinate debt,
the trends were changed from Negative to Stable for all classes.
The loan is secured by the fee, leasehold, and sub leasehold
interests in 525 Market Street, a 38-story, 1.1 million-square-foot
(sf) Class A office tower in San Francisco's central business
district. Built in 1973, the LEED Platinum-certified property is
primarily configured for office use, with first-floor retail space.
The 10-year fixed-rate loan is interest only (IO) for the full
term. The loan is sponsored by a joint venture between New York
State Teachers' Retirement System (advised by J.P. Morgan Asset
Management) and RREEF America REIT II, Inc., a Maryland
corporation. The sponsor recently invested approximately $25.0
million for the build out of a new amenity space at the property
known as The Cove, which features a co-working space, food and
beverage services, and a fitness studio. The sponsor reports that
the addition of this space was part of the success in the signing
of two new tenants, Goodwin Proctor (5.7% of the NRA, lease expires
in December 2035) and Jenner & Block LLP (2.8% of the NRA, lease
expires in May 2036) within the past six months.
The loan was added to the servicer's watchlist in November 2024
because of declining occupancy, most recently reported at 70.9%
occupied as per the September 2024 rent roll, compared with the
YE2023 and issuance occupancy rates of 85.6% and 97.3,
respectively. The reported debt service coverage ratio (DSCR)
during the same time periods were reported at 2.26 times (x),
2.76x, and 2.96x, respectively. Leases representing approximately
20% of the NRA are expected to rollover in the next 24 months,
including confirmed dark tenants Wells Fargo Bank (10.8% of the
NRA, leases expiring between June 2025 and May 2026) and Willis
Insurance Services (2.7% of the NRA, lease expiring in June 2025).
When removing the dark tenants, Morningstar DBRS estimated an
in-place DSCR of 1.52x, assuming no further leasing occurs. There
is a cash flow sweep event that activates in the event the debt
yield falls below 5.5%; the debt yield based on the YE2023
financial statement was 8.3% but is expected to fall below the
required threshold when the pending tenant exits are realized. As
per the loan documents from issuance, during the trigger period,
the borrower is required to fund ongoing reserves of taxes and
insurance, replacement reserves, tenant rollover, and Amazon
rollover accounts. All excess cash remaining after disbursements of
the required reserve deposits will accumulate and be held as
additional collateral for the loan; excess cash is expected to
continue to sweep until the debt yield threshold has been satisfied
for two consecutive quarters.
Notes: All figures are in U.S. dollars unless otherwise noted.
NATIONAL COLLEGIATE 2007-A: Fitch Affirms Bsf Rating on Cl. C Notes
-------------------------------------------------------------------
Fitch Ratings has affirmed all ratings for the outstanding notes of
National Collegiate Trust 2007-A (NCT 2007-A). The Rating Outlooks
remain at Stable.
Entity/Debt Rating Prior
----------- ------ -----
The National Collegiate Trust 2007-A
A 63543YAA5 LT AAAsf Affirmed AAAsf
B 63543YAB3 LT BBBsf Affirmed BBBsf
C 63543YAC1 LT Bsf Affirmed Bsf
Transaction Summary
The affirmation of NCT 2007-A's class A, B and C bonds reflects
credit enhancement (CE) levels commensurate to Fitch's stresses at
the relevant rating scenarios and stable asset performance since
last review.
KEY RATING DRIVERS
Collateral Performance: NCT 2007-A are collateralized by private
student loans originated by Bank of America (AA-/F1+/Stable) under
First Marblehead Corp.'s GATE Program, including originations by
CHELA Funding II, LLC. As of the last payment date in December
2024, the outstanding pool balance was $6.4 million, with a pool
factor of 6.7%.
Fitch has maintained its assumption of a constant default rate
(CDR) at 3.50%. A base-case recovery rate of 30% was assumed for
NCT 2007-A, which was determined to be appropriate based on
historical transaction performance.
Payment Structure: CE is provided by overcollateralization (OC; the
excess of the trust's asset balance over the bond balance) and
excess spread. For NCT 2007-A, there is currently no cash released
from the trust, due to a turbo trigger currently in effect (pool
balance less than 15%).
Liquidity support is provided to NCT 2007-A by a reserve account
sized at about USD one million.
Operational Capabilities: Pennsylvania Higher Education Assistance
Agency (PHEAA) services 100% of NCT 2007-A. Fitch believes all
servicers are acceptable servicers of private student loans given
their track record.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
NCT 2007-A Current Ratings: 'AAAsf'/'BBBsf'/'Bsf'.
Expected impact on the note rating of increased defaults (class
A/B/C):
- Increase base case defaults by 10%: 'AAAsf'/'BBBsf'/'CCCsf';
- Increase base case defaults by 25%: 'AAAsf'/'BBBsf'/'CCCsf';
- Increase base case defaults by 50%: 'AAAsf'/'BBB-sf'/'CCCsf'.
Expected impact on the note rating of reduced recoveries (class
A/B/C):
- Reduce base case recoveries by 10%: 'AAAsf'/'BBBsf'/'CCCsf';
- Reduce base case recoveries by 20%: 'AAAsf'/'BBBsf'/'CCCsf';
- Reduce base case recoveries by 30%: 'AAAsf'/'BBBsf'/'CCCsf'.
Expected impact on the note rating of increased defaults and
reduced recoveries (class A/B/C):
- Increase base case defaults and reduce base case recoveries each
by 10%: 'AAAsf'/'BBBsf'/'CCCsf';
- Increase base case defaults and reduce base case recoveries each
by 25%: 'AAAsf'/'BBBsf'/'CCCsf';
- Increase base case defaults and reduce base case recoveries each
by 50%: 'AAAsf'/'BB+sf'/'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
NCT 2007-A Current Ratings: 'AAAsf'/'BBBsf'/'Bsf'.
- Decrease base case defaults by 50%: 'AAAsf'/'AAAsf'/'BBB+sf';
- Increase base case recoveries by 30%: 'AAAsf'/'A+sf'/'B+sf';
- Decrease base case defaults and increase base case recoveries
each by 50%: 'AAAsf'/'AAAsf'/'A-sf'.
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.
NEUBERGER BERMAN XX: Fitch Assigns 'BB-sf' Rating on Cl. E-R3 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Neuberger
Berman CLO XX, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Neuberger Berman
CLO XX, Ltd.
X-R3 LT AAAsf New Rating
A-RR 64130TBA2 LT PIFsf Paid In Full AAAsf
A-1-R3 LT AAAsf New Rating
A-2-R3 LT AAAsf New Rating
B-R3 LT AAsf New Rating
C-R3 LT Asf New Rating
D-1-R3 LT BBB-sf New Rating
D-2-R3 LT BBB-sf New Rating
E-R3 LT BB-sf New Rating
Transaction Summary
Neuberger Berman CLO XX, Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) managed by Neuberger
Berman Investment Advisers LLC. The transaction previously reset in
June 2021. 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 current outstanding notes will be paid in
full.
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 24.05, versus a maximum covenant, in accordance with
the initial expected matrix point of 26. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
94.57% first lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 73.5% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.4%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 44% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
that of other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric.
The results under these sensitivity scenarios are as severe as
'AAAsf' for class X, between 'BBB+sf' and 'AA+sf' for class A-1-R3,
between 'BBB+sf' and 'AA+sf' for class A-2-R3, between 'BB+sf' and
'A+sf' for class B-R3, between 'B+sf' and 'BBB+sf' for class C-R3,
between less than 'B-sf' and 'BB+sf' for class D-1-R3, between less
than 'B-sf' and 'BB+sf' for class D-2-R3, and between less than
'B-sf' and 'B+sf' for class E-R3.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X, class A-1-R3
and class A-2-R3 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-R3, 'AAsf' for class C-R3, 'A+sf'
for class D-1-R3, 'A-sf' for class D-2-R3, and 'BBB+sf' for class
E-R3.
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 Neuberger Berman
CLO XX, 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.
NYT 2019-NYT: Fitch Affirms BB-sf Rating on 2 Tranches
------------------------------------------------------
Fitch Ratings has affirmed seven classes of NYT 2019-NYT Mortgage
Trust Commercial Mortgage Pass-Through Certificates. The Rating
Outlooks have been revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
NYT 2019-NYT
A 62954PAA8 LT AAAsf Affirmed AAAsf
B 62954PAG5 LT AA-sf Affirmed AA-sf
C 62954PAJ9 LT A-sf Affirmed A-sf
D 62954PAL4 LT BBB-sf Affirmed BBB-sf
E 62954PAN0 LT BB-sf Affirmed BB-sf
F 62954PAQ3 LT BB-sf Affirmed BB-sf
X-EXT 62954PAE0 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Near-term Maturity; Tenant Departure: Although current occupancy
remains stable, the second largest tenant, Covington & Burlington
(26% of NRA) with lease expiration in September 2027, has indicated
intentions to vacate in September 2025 prior to lease expiration.
The Negative Outlooks reflect concerns related to the loan's
refinanceability given the upcoming December 2025 maturity,
potential for the loan to transfer to special servicing and the
substantial outstanding debt with a Fitch's stressed debt service
coverage ratio (DSCR) of 0.66x on the total debt amount. Downgrades
are likely without stabilization of the dark Covington & Burlington
space and further declines in value contributing to difficulty in
securing financing. If the loan defaults, downgrades are also
possible without a viable workout that preserves value and
recoverability.
Occupancy for the collateral has improved to 98.4% as of the
September 2024 rent roll with Datadog (45% of NRA) backfilling
space formerly occupied by Osler Hoskin (8.6% of NRA), Goodwin
Proctor (8.5%) and Clearbridge (13.3%). Aside from the Covington &
Burlington lease expiration, no leases expire until 2028 and 65% of
leases expire in 2032 and beyond. The most recent servicer-reported
YTD September 2024 net cash flow (NCF) DSCR was 0.88x, compared to
1.21x as of YE 2023 and 2.61x as of YE 2022 for the interest-only
(IO), floating-rate loan.
The updated Fitch sustainable NCF of $43.1 million, which is 3.1%
below Fitch's issuance NCF of $44.5 million, reflects leases in
place as of the most recently available September 2024 rent roll.
Fitch's lower NCF from issuance is largely attributed to higher
vacancy and leasing cost assumptions that reflect softening office
market conditions. Fitch increased the cap rate to 7.75% from 7.50%
at Fitch's prior review based on comparable properties and the
deteriorating office outlook.
Leasehold Interest and Tax Impact: The land underneath the New York
Times Building is owned by the City of New York. The collateral is
subject to a 99-year ground lease through Dec. 31, 2100 with no
renewal options. Instead of traditional ground lease payments, the
agreement has retail and office payments in lieu of taxes (PILOT),
theater surcharges and percentage rent payments.
The ground lease contains a one-time purchase option on Dec. 31,
2032 for $10.00, which is expected to be exercised. If the sponsor
exercises the purchase option, there is a potential risk that
property taxes could revert to market levels, exceeding the current
PILOT obligation, which could impact the refinanceability of the
loan.
Collateral Quality: The collateral represents 738,385 sf, comprised
of 709,678 sf of office, 23,044 sf of ground floor retail, and
5,663 sf of storage/other space, of the 1.3 million sf New York
Times Building located at 242 W. 41st Street in New York. The
collateral office space includes 23 office condominium units
spanning floors 28 through 52. Fitch assigned the property a
quality grade of 'A-' at issuance. The property was completed in
2007 incorporating various environmentally sustainable features
promoting increased energy efficiency while more than 80% of the
submarket's inventory was constructed prior to 2000.
Accessible Location: The subject occupies the entire block along
Eighth Avenue in between West 40th and West 41st Streets in the
Times Square neighborhood of the New York CBD. The collateral
features immediate access to public transportation, with the Port
Authority Bus Terminal located directly across the street, and the
Times Square subway station within a five-minute walk.
Institutional Sponsorship: The sponsors of the loan are owned by
affiliates of Brookfield Property Partners, a global leader in real
estate investment and management. Brookfield Property Partners is a
publicly listed (NYSE: BPY) real estate company of Brookfield Asset
Management. BPY's portfolio includes an ownership interest in
approximately 132 office properties totaling 92 million sf and 109
retail properties totaling 110 million sf.
Loan Structure: The mortgage is $515.0 million floating-rate, whole
loan secured by a first-lien mortgage on the leasehold interest of
the borrower. The loan is IO for the entire term. The initial
maturity date was Dec. 9, 2020; however, the borrower has exercised
their fifth 12-month extension option through December 2025 and has
no options remaining.
High Aggregate Leverage: The $515.0 million mortgage loan has a
Fitch DSCR, loan-to-value (LTV) and debt yield (DY) of 0.96x, 92.5%
and 8.4%, respectively, and debt of $697 psf. The total debt
package includes a $120.0 million B-note and $115.0 million
mezzanine loan, resulting in a total debt Fitch DSCR, LTV and DY of
0.66x, 134.7% and 5.8%, respectively.
Full-Term, IO Loan; December 2025 maturity: The loan is IO for the
entire seven-year, fully extended loan term. The borrower has
previous exercised all extension options and the final loan
maturity is Dec. 9, 2025.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Considering current debt levels, downgrades are likely without
stabilization in occupancy and/or further declines in collateral
value which would increase challenges in securing financing.
Downgrades would consider Fitch's updated sustainable performance
expectations considering any update on the Covington & Burlington
space, viable workout options if the loan defaults at maturity and
an updated valuation, if available.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes B through F are not likely given the upcoming
maturity and outstanding debt amount but are possible with
stabilization of occupancy at leasing rates well in excess of
current in-place and submarket rents and significant improvement in
Fitch's sustainable NCF and property value. Fitch rates class A at
'AAAsf'; therefore, an upgrade is not possible.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
OCP CLO 2021-21: S&P Assigns BB- (sf) Rating on Class E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-1R, D-2R, and E-R replacement debt from OCP CLO 2021-21 Ltd./OCP
CLO 2021-21 LLC, a CLO originally issued in June 2021 that is
managed by Onex Credit Partners LLC. At the same time, S&P withdrew
its ratings on the original class A-1, B, C, D, and E debt
following payment in full on the Feb. 21, 2025, refinancing date.
The original class A-2 debt was 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 replacement debt was issued at a lower spread over
three-month CME term SOFR than the original debt.
-- The original class D debt was replaced by two new classes of
debt, D-1R and D-2R, which are sequential in payment.
-- The reinvestment period was extended to Feb. 21, 2030.
-- The non-call period was extended to Feb. 21, 2027.
-- The legal final maturity date for the replacement debt and the
existing subordinated notes were, both, extended to Jan. 20, 2038.
-- Additional assets were purchased on the Feb. 21, 2025
refinancing date, and the target initial par amount was increased
to $600.00 million. There was no additional effective date or
ramp-up period, and the first payment date following the
refinancing is April 20, 2025.
-- The required minimum overcollateralization and interest
coverage ratios were amended.
-- 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
OCP CLO 2021-21 Ltd./OCP CLO 2021-21 LLC
Class A-R, $384.0 million: AAA (sf)
Class B-R, $72.0 million: AA (sf)
Class C-R (deferrable), $36.0 million: A+ (sf)
Class D-1R (deferrable), $36.0 million: BBB- (sf)
Class D-2R (deferrable), $6.0 million: BBB- (sf)
Class E-R (deferrable), $18.0 million: BB- (sf)
Ratings Withdrawn
OCP CLO 2021-21 Ltd./OCP CLO 2021-21 LLC
Class A-1 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C (deferrable) to NR from 'A (sf)'
Class D (deferrable) to NR from 'BBB- (sf)'
Class E (deferrable) to NR from 'BB- (sf)'
Other Debt
OCP CLO 2021-21 Ltd./OCP CLO 2021-21 LLC
Subordinated notes, $76.745 million(i): NR
(i)Balance includes additional subordinated notes issued on the
refinancing date.
NR--Not rated.
OCTAGON LTD 51: Moody's Assigns Ba3 Rating to $21.25MM E-R Notes
----------------------------------------------------------------
Moody's Ratings has assigned ratings to five classes of CLO
refinancing notes (the "Refinancing Notes") issued by Octagon 51,
Ltd. (the "Issuer").
Moody's rating action is as follows:
US$320,000,000 Class A-R Senior Secured Floating Rate Notes due
2034 (the "Class A-R Notes"), Assigned Aaa (sf)
US$60,000,000 Class B-R Senior Secured Floating Rate Notes due 2034
(the "Class B-R Notes"), Assigned Aa2 (sf)
US$25,750,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class C-R Notes"), Assigned A2 (sf)
US$33,000,000 Class D-R Mezzanine Secured Deferrable Floating Rate
Notes due 2034, (the "Class D-R Notes"), Assigned Baa3 (sf)
US$21,250,000 Class E-R Junior Secured Deferrable Floating Rate
Notes due 2034, (the "Class E-R Notes"), Assigned Ba3 (sf)
A comprehensive review of all credit ratings for the respective
transactions 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.
Octagon Credit Investors, 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 other class of secured notes, two
classes of subordinated notes, and two classes of income notes,
which will remain outstanding.
In addition to the issuance of the Refinancing Notes, the non-call
period will be extended as well.
No action was taken on the Class F notes because its expected loss
remain commensurate with its current rating, after taking into
account the CLO's latest portfolio information, its relevant
structural features and its actual over-collateralization and
interest coverage levels.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in 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: $491,130,898
Defaulted par: $4,977,439
Diversity Score: 84
Weighted Average Rating Factor (WARF): 2832
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.15%
Weighted Average Coupon (WAC): 5.21%
Weighted Average Recovery Rate (WARR): 45.99%
Weighted Average Life (WAL): 5.57 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, and lower recoveries on defaulted assets.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or 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.
OLYMPIC TOWER 2017-OT: Fitch Affirms 'Bsf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has affirmed seven classes of Olympic Tower 2017-OT
Mortgage Trust Commercial Mortgage Pass-Through Certificates
(Olympic Tower 2017-OT). The Rating Outlooks remain Negative on all
classes.
Entity/Debt Rating Prior
----------- ------ -----
Olympic Tower 2017-OT
Mortgage Trust
A 68162MAA0 LT AAsf Affirmed AAsf
B 68162MAG7 LT A-sf Affirmed A-sf
C 68162MAJ1 LT BBB-sf Affirmed BBB-sf
D 68162MAL6 LT BBsf Affirmed BBsf
E 68162MAN2 LT Bsf Affirmed Bsf
X-A 68162MAC6 LT AAsf Affirmed AAsf
X-B 68162MAE2 LT A-sf Affirmed A-sf
KEY RATING DRIVERS
The affirmations reflect the continued performance stabilization of
the property, including improved occupancy and positive leasing
momentum since Fitch's last rating action.
The Negative Outlooks reflect possible downgrades should net cash
flow (NCF) deteriorate beyond Fitch's view of sustainable
performance, including a decline in occupancy or lower than
projected sales volume for the newly opened Skims store that has a
percentage rent component.
Improving Occupancy and Fitch NCF: Overall property occupancy
increased to 93.3% (including a recently signed tenant, Rokos
Capital Management; 4.4% of net rentable area (NRA)) as of the
September 2024 rent roll, compared with 90% in December 2023, 89.8%
in December 2022 and 97.4% in December 2021. The office portion of
the property was 91.5% leased and the retail portion was 100%
leased.
While retail tenants at the property account for 22% of the NRA,
they comprise over 60% of the property's total base rent. The
overall average in-place base rent, including the new lease
executed with Eden Gallery Global, has increased to $455 psf from
$427 psf at the last rating action, but remains below the $532 psf
around the time of issuance.
Fitch's updated sustainable property NCF of $57.8 million is 9.2%
below Fitch's issuance NCF of $63.7 but 4.2% above Fitch's NCF of
$55.5 million at the last rating action, reflecting better than
expected base rents by Eden Gallery in the vacated Armani Exchange
space and a new office tenant, Rokos Capital Management, offsetting
increasing expenses, particularly real estate taxes. Fitch's
analysis incorporates additional stresses to subleased space and
tenants with near-term lease expirations, as well as higher leasing
cost assumptions.
Eden Gallery has signed a lease and opened a 20,356 sf art gallery
on three floors at the corner of 51st and Fifth Avenue, a space
previously occupied by Armani Exchange before their lease expired
in June 2024. According to the rent roll, Eden Gallery occupies
3.8% of NRA , with 1.8% of their lease expiring in 2034 and 2%
located on the second floor expiring in January 2026. The base rent
for Eden Gallery accounts for 7.2% of the total collateral rents,
the majority of which expires in November 2034.
Skims recently opened their flagship store in December 2024 after
signing a five-year lease, with one five-year option, for the
former Versace space at the property, totaling 20,000 sf (3.7%
NRA), at a significantly below-market base rental rate, which is in
excess of 75% below what Versace was initially paying at the time
of issuance. The Skims lease also includes a percentage rent
component that Fitch will continue to monitor.
Jimmy Choo (0.4% NRA, 0.9% base rent, through 2028) has subleased
its space to Bond No. 9 for the remainder of the lease term.
Fitch's analysis factored in the sublease rental rate for this
space. Furla (0.4% NRA, 5.6% base rent, through 2030) has subleased
its space to Hublot of America for the remainder of the lease term
as well. Fitch's analysis incorporated a 50% stress to the Furla
rent to account for the unknown sublease rental rate.
The servicer-reported September 2024 NCF debt service coverage
ratio (DSCR) was 1.07x, compared with 1.55x in 2023, 1.53x in 2022,
1.71x in 2021, 1.53x in 2020 and 1.63x in 2019 for the
interest-only loan.
High Quality Asset; Prime Office and Retail Location: The property
is a leasehold interest in the office and retail portions within 21
stories of a 52-story high-end mixed-use property and three
adjacent buildings located on Fifth Avenue in Midtown Manhattan.
The property consists of approximately 422,545 rentable sf of class
A office space within the Plaza submarket and 117,001 rentable sf
of retail space along Fifth Avenue, between East 51st and East 52nd
Streets. The property's public spaces re-opened in early 2019 after
a multi-million-dollar renovation. Fitch assigned the property a
quality grade of 'A-' at issuance.
The property is leased to a mix of office and retail tenants and
serves as the U.S. headquarters for the NBA (37.9% of NRA, 22.1%
base rent, through 2035), Richemont North America (25.1% NRA, 12.1%
base rent, through July 2028) and as a flagship location for its
subsidiary Cartier (10.2% NRA, 31.0% base rent, through July 2037).
The property is also home to other luxury retailers, including Tag
Heuer, Longchamp, Skims, and Bond No. 9.
Loan Structure: The loan is fixed rate interest only for the
10-year term, maturing May 2027, with a fixed rate coupon of 3.95%.
In its analysis, Fitch applied an upward loan-to-value (LTV) hurdle
adjustment due to the low coupon.
Fitch Leverage: The $760 million mortgage loan has a Fitch stressed
DSCR and loan-to-value of 0.90x and 98.6%, respectively, and debt
of $1,409 psf. The total debt package includes mezzanine financing
in the amount of $240 million that is not included in the trust.
Fitch maintained the stressed capitalization rate of 7.5%
incorporated at the prior review to factor office sector and
submarket performance concerns.
Experienced Sponsorship and Property Management: The sponsorship is
a joint venture between OMERS Administration Corporation and Crown
Acquisitions, Inc. Oxford Properties Group is the global real
estate investment, development and management arm of OMERS, and had
over $81 billion of assets under management, as of June 2024.
Oxford manages a portfolio that totals approximately 145 million
square feet of commercial space, over 3,400 hotel rooms, and nearly
10,000 residential units in Canada, Western Europe and the U.S.
Crown Acquisitions ownership interests include over 50 properties
located in major markets such as New York, Chicago, London and
Miami.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades are possible should property NCF, occupancy and/or
market conditions deteriorate beyond Fitch's view of sustainable
performance, including limited leasing progress, if new leases are
signed at rates significantly below market rates, and/or with
weaker than expected sales performance for Skims, which has a
percentage rent lease component affecting overall retail rental
revenues for the property.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are not likely given that Fitch's current ratings reflect
a longer-term view of sustainable property performance but may be
possible with significant and sustained improvement in Fitch NCF
from positive leasing momentum resulting in higher retail rental
rates than expected and improving submarket fundamentals that
support loan refinancing prospects.
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.
in the Applicable Criteria.
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.
PIKES PEAK 12: Fitch Assigns 'BB-sf' Rating on Class E-R Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Pikes
Peak CLO 12 Ltd's reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Pikes Peak CLO 12
Ltd
A-R LT AAAsf New Rating
B 72133LAF9 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 72133LAH5 LT PIFsf Paid In Full Asf
C-1R LT Asf New Rating
C-2R LT Asf New Rating
D 72133LAK8 LT PIFsf Paid In Full BBB-sf
D-1R LT BBBsf New Rating
D-2R LT BBB-sf New Rating
E 72133MAA8 LT PIFsf Paid In Full BB-sf
E-R LT BB-sf New Rating
Transaction Summary
Pikes Peak CLO 12 Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by Partners
Group US Management CLO LLC which originally closed in Feb. 2023
and will reset for the first time on Feb. 18, 2025. Net proceeds
from the issuance of the new secured notes, along with the existing
subordinated notes, will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans. The transaction is upsized from the original deal
size that was issued in 2023.
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 24.58, versus a maximum covenant, in
accordance with the initial expected matrix point of 25. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.12% first lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.01% versus a
minimum covenant, in accordance with the initial expected matrix
point of 68.9%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 45% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
that of other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.2-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-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-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-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-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 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 Pikes Peak CLO 12
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.
PIKES PEAK 6: Moody's Assigns B2 Rating to $4.575MM Cl. F-RR Notes
------------------------------------------------------------------
Moody's Ratings has assigned ratings to six classes of CLO
refinancing notes (the "Refinancing Notes") issued by Pikes Peak
CLO 6 (the "Issuer").
Moody's rating action is as follows:
US$189,100,000 Class A-RR Senior Secured Floating Rate Notes due
2034 (the "Class A-RR Notes"), Assigned Aaa (sf)
US$42,700,000 Class B-RR Senior Secured Floating Rate Notes due
2034 (the "Class B-RR Notes"), Assigned Aa1 (sf)
US$15,250,000 Class C-RR Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class C-RR Notes"), Assigned A2 (sf)
US$18,300,000 Class D-RR Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class D-RR Notes"), Assigned Baa3 (sf)
US$13,725,000 Class E-RR Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class E-RR Notes"), Assigned Ba3 (sf)
US$4,575,000 Class F-RR Mezzanine Secured Deferrable Floating Rate
Notes due 2034 (the "Class F-RR Notes"), Assigned B2 (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.
Partners Group US Management CLO LLC (the "Manager") will continue
to direct the selection, acquisition and disposition of the assets
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's remaining
reinvestment period.
The Issuer previously issued one class of subordinated notes, which
will remain outstanding.
In addition to the issuance of the Refinancing Notes, other changes
to transaction features will occur in connection with the
refinancing including extension of the non-call period and changes
to the definition of "Non-ESG Collateral Obligation".
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: $302,271,816
Defaulted par: $2,830,420
Diversity Score: 76
Weighted Average Rating Factor (WARF): 2912
Weighted Average Spread (WAS): 3.30%
Weighted Average Recovery Rate (WARR): 46.10%
Weighted Average Life (WAL): 5.50 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, deterioration in the credit quality
of the underlying portfolio, and lower recoveries on defaulted
assets.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2024.
Factors That Would Lead to an Upgrade or 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.
PRM5 TRUST 2025-PRM5: Fitch Assigns 'B-sf' Rating on Class F Notes
------------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Ratings
Outlooks to PRM5 Trust 2025-PRM5, commercial mortgage pass-through
certificates series 2025-PRM5:
- $228,600,000 class A 'AAAsf'; Outlook Stable;
- $38,500,000 class B 'AA-sf'; Outlook Stable;
- $30,200,000 class C 'A-sf'; Outlook Stable;
- $42,600,000 class D 'BBB-sf'; Outlook Stable.
- $65,200,000 class E 'BB-sf'; Outlook Stable.
- $49,900,000 class F 'B-sf'; Outlook Stable.
Fitch does not rate the following classes:
- $24,000,000 class HRR*;
- $0 class ELP;
- $0 class R.
*Horizontal risk retention interest representing approximately 5.0%
of the estimated fair value of all the classes of regular
certificates.
Entity/Debt Rating Prior
----------- ------ -----
PRM5 Trust
2025-PRM5
A LT AAAsf New Rating AAA(EXP)sf
B LT AA-sf New Rating AA-(EXP)sf
C LT A-sf New Rating A-(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
ELP LT NRsf New Rating NR(EXP)sf
F LT B-sf New Rating B-(EXP)sf
HRR LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
Transaction Summary
The certificates represent the beneficial ownership interest in a
trust that will hold a $479.0 million, three-year, fixed-rate,
interest-only (IO) commercial mortgage loan. The mortgage loan will
be comprised of two pari passu promissory notes including the
$311.35 million Note A-1 contributed by Goldman Sachs Mortgage
Company and the $167.65 million Note A-2 contributed by Citi Real
Estate Funding, Inc. The mortgage is secured by the fee simple
interests in a portfolio of 40 self-storage properties, containing
3.3 million sf and located across 13 states.
Loan proceeds were used to refinance approximately $222.8 million
of existing debt, fund upfront environmental, immediate repair and
insurance deductible reserves of $1.8 million, pay estimated
closing-related costs of $14.0 million and return $240.5 million in
equity to the sponsor.
The loan was co-originated by Goldman Sachs Bank USA and Citi Real
Estate Funding Inc. KeyBank National Association serves as the
master servicer and Torchlight Loan Services, LLC as the special
servicer. Computershare Trust Company, National Association serves
as trustee and certificate administrator. Pentalpha Surveillance
LLC acts as operating advisor. The certificates follow a
sequential-pay structure.
KEY RATING DRIVERS
Net Cash Flow: Fitch's net cash flow (NCF) for the portfolio is
estimated at $31.9 million; this is 8.3% lower than the issuer's
NCF. Fitch applied a 7.75% cap rate to derive a Fitch value of
$411.9 million for the portfolio.
High Fitch Leverage: The $479.0 million mortgage loan equates to
debt of approximately $146 psf with a Fitch stressed loan-to-value
ratio (LTV) and debt yield of 116.3% and 6.7%, respectively. The
lowest Fitch-rated tranche, class F, has a Fitch LTV and debt yield
of 115.8% and 6.7%, respectively. Fitch decreased its LTV hurdles
by 2.5% to reflect the higher in-place leverage.
Geographic Diversity: The portfolio exhibits geographic diversity,
with 40 self-storage properties located across 13 states and 23
MSAs. The largest three state concentrations account for 64.8% of
the portfolio by allocated loan amount (ALA). This includes
California (10 properties; 37.4% of ALA), Utah (eight; 15.2%) and
Florida (six; 12.2%). No other state accounts for more than 8.0% of
ALA. No single property represents more than 7.7% of ALA. Based on
ALA, the portfolio has an effective property count of 31.4 and an
effective MSA count of 9.2.
Institutional Sponsorship and Management: The borrower sponsor and
recourse carveout guarantor for the loan is Prime Storage Fund III,
LP, an affiliate of Prime Group Holdings who manages all the
properties in this portfolio. Prime Group Holdings is a
full-service, vertically integrated real estate owner-operator. The
company is focused on acquiring and adding value to self-storage
facilities located throughout North America. Prime Group's
cumulative self-storage acquisitions have totaled over 28 million
sf across 400 self-storage facilities. Prime Group owns and
operates self-storage facilities across 28 states, two Canadian
provinces and one U.S. territory.
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' /
'B-sf'
10% NCF Decline: 'AAsf' / 'A-sf' / 'BBB-sf' / 'BBsf' / 'Bsf' /
'CCCsf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes to the same one
variable, Fitch NCF:
Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB-sf' / 'BB-sf' /
'B-sf'
10% NCF Increase: 'AAAsf' / 'AA+sf' / 'A+sf' / 'BBBsf' / 'BBsf' /
'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 PricewaterhouseCoopers 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. 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.
PROVIDENT FUNDING 2025-1: Moody's Gives B2 Rating to Cl. B-5 Certs
------------------------------------------------------------------
Moody's Ratings has assigned definitive ratings to 30 classes of
residential mortgage-backed securities (RMBS) issued by Provident
Funding Mortgage Trust 2025-1, and sponsored by Provident Funding
Associates, L.P.
The securities are backed by a pool of GSE-eligible (100.0% by
balance) residential mortgages originated and serviced by Provident
Funding Associates, L.P.
The complete rating actions are as follows:
Issuer: Provident Funding Mortgage Trust 2025-1
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 Aa1 (sf)
Cl. A-14, Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-2*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-4*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-6*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-8*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-10*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-12*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-14*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-16*, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B2 (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 4.29% 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.
RAD CLO 21: Fitch Assigns 'BB-sf' Rating on Class E-2-R Notes
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the RAD
CLO 21, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
RAD CLO 21, Ltd.
A 750099AA1 LT PIFsf Paid In Full AAAsf
A-1-R LT AAAsf New Rating
A-2-R LT AAAsf New Rating
B 750099AC7 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 750099AE3 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating
D 750099AG8 LT PIFsf Paid In Full BBB-sf
D-1-R LT BBB-sf New Rating
D-2-R LT BBB-sf New Rating
E 750097AA5 LT PIFsf Paid In Full BB-sf
E-1-R LT BBsf New Rating
E-2-R LT BB-sf New Rating
Transaction Summary
RAD CLO 21, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Irradiant Partners,
LP. that originally closed in November 2023. This is the first
refinancing, with the existing secured notes to be refinanced in
whole on Feb. 14, 2025 from proceeds of the new secured notes. Net
proceeds from the issuance of the secured notes will provide
financing on a portfolio of approximately $373 million (excluding
defaults) 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 23.86, versus a maximum covenant, in accordance with
the initial expected matrix point of 26. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
96.78% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.17% versus a
minimum covenant, in accordance with the initial expected matrix
point of 67.5%.
Portfolio Composition (Positive): The largest three industries may
constitute 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 2.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between '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, between less than 'B-sf' and
'BB-sf' for class E-1-R, and between less than 'B-sf' and 'B+sf'
for class E-2-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R and class
A-2-R notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AAsf' for class C-R, 'Asf'
for class D-1-R, 'A-sf' for class D-2-R, 'BBB+sf' for class E-1-R,
and 'BBB+sf' for class E-2-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 RAD CLO 21, 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.
RADIAN MORTGAGE 2025-J1: Fitch Assigns Bsf Rating on Cl. B-5 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage backed certificates issued by Radian Mortgage Capital
Trust 2025-J1 (RMCT 2025-J1).
Entity/Debt Rating Prior
----------- ------ -----
Radian Mortgage
Capital Trust
2025-J1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1-X LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-X LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-X LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-7-X LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-X LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-11-X LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-13-X LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-15-X LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-17-X LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-19-X LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-21-X LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-23-X LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-X LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-1-A LT AAsf New Rating AA(EXP)sf
B-1-X LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-2-A LT Asf New Rating A(EXP)sf
B-2-X LT Asf New Rating A(EXP)sf
B-3 LT BBBsf New Rating BBB(EXP)sf
B-3-A LT BBBsf New Rating BBB(EXP)sf
B-3-X LT BBBsf New Rating BBB(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
B LT BBBsf New Rating BBB(EXP)sf
B-X LT BBBsf New Rating BBB(EXP)sf
AIOS LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
Transaction Summary
Fitch rates the residential mortgage-backed notes issued by Radian
Mortgage Capital Trust 2025-J1, as indicated above. The notes are
supported by 469 prime loans with a total balance of approximately
$368.2 million as of the cutoff date.
Following the publication of the presale and expected ratings, the
issuer notified Fitch of an updated tape which consisted of five
loan drops and updated cutoff balances. In addition, Radian
provided Fitch with an updated structure to reflect the new
balances. Fitch re-ran both its asset and cash flow analysis and
there was a 10bps decrease in expected losses for the 'Bsf' stress
and there were no changes to credit enhancement, coupons or
expected ratings.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Fitch views the home
price values of this pool as 11.6% above a long-term sustainable
level (versus 11.1% on a national level as of 3Q24, down 0.5% since
last quarter, based on Fitch's updated view on sustainable home
prices). Housing affordability is currently at its worst levels in
decades, driven by both high interest rates and elevated home
prices. Home prices have increased 3.8% yoy nationally as of
November 2024, notwithstanding modest regional declines, but are
still being supported by limited inventory.
High Quality Mortgage Pool (Positive): The collateral consists of
15-, 20-, 29- and 30-year, fixed-rate mortgage (FRM) fully
amortizing loans seasoned at approximately six months in aggregate,
calculated by Fitch as the difference between the cutoff date and
the origination date. The average loan balance is $785,043. The
collateral primarily comprises 60.5% prime-jumbo loans, followed by
282 agency-conforming loans accounting for 39.5% of the unpaid
principal balance (UPB).
Borrowers in this pool have strong credit profiles (a 775 average
model FICO as calculated by Fitch), in line with comparable
prime-jumbo securitizations. The sustainable loan-to-value ratio
(sLTV) is 81.4%, and the mark-to-market (MTM) combined
loan-to-value ratio (CLTV) is 71.5%. Fitch treated approximately
100% of the loans as full documentation collateral, and 100% of the
loans are qualified mortgages (QMs).
Of the pool, 87.7% are loans for which the borrower maintains a
primary residence, while 12.3% are for second homes. In addition,
52.5% of the loans were originated through a retail channel.
Expected losses in the 'AAAsf' stress amount to 6.75%, similar to
those of other comparable prime-jumbo shelves.
Shifting-Interest Structure (Mixed): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure whereby the subordinate classes receive
only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the 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
shifting-interest structure requires more CE due to the leakage to
the subordinate bonds. While there is only minimal leakage to the
subordinate bonds early in the life of the transaction, the
structure is more vulnerable to defaults at a later stage compared
with a sequential or modified-sequential structure.
To help mitigate tail risk, which arises as the pool seasons and
fewer loans are outstanding, a senior subordination floor of 1.35%
of the original balance will be maintained for the senior notes and
a junior subordination floor of 1.10% of the original balance will
be maintained for the subordinate notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the metropolitan statistical area level. Sensitivity
analysis was conducted at the state and national level to assess
the effect of higher MVDs for the subject pool as well as lower
MVDs, illustrated by a gain in home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 42.5% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. A 10% additional
decline in home prices would lower all rated classes by one full
category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all the rated classes. A 10% gain in
home prices would result in a full category upgrade for the rated
class excluding those assigned 'AAAsf' ratings.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Canopy, Opus and Phoenix. The third-party due
diligence described in Form 15E focused on credit, compliance and
property valuation review. Fitch considered this information in its
analysis and, as a result, made the following adjustment to its
analysis: a 5% credit was given at the loan level for each loan
where satisfactory due diligence was completed. This adjustment
resulted in a 30-bps reduction to the 'AAA' expected loss.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
RALI TRUST: Moody's Hikes 66 Ratings From 10 RMBS Deals
-------------------------------------------------------
Moody's Ratings has upgraded the ratings of 66 bonds from ten US
residential mortgage-backed transactions (RMBS), backed by Alt-A
and option ARM mortgages issued by RALI.
A comprehensive review of all credit ratings for the respective
transactions have been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: RALI Series 2005-QO2 Trust
Cl. A-1, Upgraded to Caa1 (sf); previously on Jun 28, 2016 Upgraded
to Caa2 (sf)
Cl. A-2, Upgraded to Caa3 (sf); previously on Dec 1, 2010
Downgraded to C (sf)
Issuer: RALI Series 2005-QO3 Trust
Cl. A-1, Upgraded to Caa1 (sf); previously on Dec 1, 2010
Downgraded to Caa3 (sf)
Cl. A-2, Upgraded to Caa3 (sf); previously on Dec 1, 2010
Downgraded to C (sf)
Issuer: RALI Series 2005-QO4 Trust
Cl. I-A-1, Upgraded to Caa1 (sf); previously on Dec 1, 2010
Downgraded to Caa3 (sf)
Cl. II-A-1, Upgraded to Caa1 (sf); previously on Dec 1, 2010
Downgraded to Caa3 (sf)
Cl. II-A-2, Upgraded to Caa3 (sf); previously on Dec 1, 2010
Downgraded to C (sf)
Cl. X-PO, Upgraded to Caa2 (sf); previously on Dec 1, 2010
Downgraded to C (sf)
Issuer: RALI Series 2005-QS12 Trust
Cl. A-1, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-2*, Upgraded to Caa1 (sf); previously on Oct 27, 2017
Confirmed at Caa2 (sf)
Cl. A-3, Upgraded to Caa1 (sf); previously on Nov 27, 2013
Downgraded to Caa2 (sf)
Cl. A-5, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-7, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-8, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-9*, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-12, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-P, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Issuer: RALI Series 2005-QS13 Trust
Cl. A-P, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-V*, Upgraded to Caa2 (sf); previously on Oct 27, 2017
Confirmed at Caa3 (sf)
Cl. I-A-1, Upgraded to Caa1 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. I-A-2*, Upgraded to Caa1 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. I-A-3, Upgraded to Caa2 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. I-A-4, Upgraded to Caa2 (sf); previously on Nov 27, 2013
Downgraded to Caa3 (sf)
Cl. I-A-5, Upgraded to Caa1 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. I-A-6, Upgraded to Caa1 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. I-A-7, Upgraded to Caa2 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. II-A-1, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. II-A-2*, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. II-A-3, Upgraded to Caa1 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. II-A-4, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Issuer: RALI Series 2005-QS16 Trust
Cl. A-1, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-2*, Upgraded to Caa1 (sf); previously on Feb 13, 2019
Upgraded to Caa3 (sf)
Cl. A-3, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-4, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-5, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-6*, Upgraded to Caa2 (sf); previously on Feb 13, 2019
Upgraded to Caa3 (sf)
Cl. A-7, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-9, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-P, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-V*, Upgraded to Caa2 (sf); previously on Oct 27, 2017
Confirmed at Caa3 (sf)
Issuer: RALI Series 2005-QS17 Trust
Cl. A-1, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-2, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-4*, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-5, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-6, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-7, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-9, Upgraded to Caa2 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-10, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-P, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa3 (sf)
Cl. A-V*, Upgraded to Caa2 (sf); previously on Oct 27, 2017
Confirmed at Caa3 (sf)
Issuer: RALI Series 2005-QS7 Trust
Cl. A-1, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-3, Upgraded to Caa1 (sf); previously on Jun 7, 2010
Downgraded to Caa2 (sf)
Cl. A-4*, Upgraded to Caa2 (sf); previously on Oct 27, 2017
Confirmed at Caa3 (sf)
Cl. A-P, Upgraded to Caa1 (sf); previously on May 31, 2012
Downgraded to Caa3 (sf)
Cl. A-V*, Upgraded to Caa1 (sf); previously on Oct 27, 2017
Confirmed at Caa2 (sf)
Cl. CB, Upgraded to Caa1 (sf); previously on Jun 7, 2010 Downgraded
to Caa2 (sf)
Issuer: RALI Series 2006-QO2 Trust
Cl. A-1, Upgraded to Caa2 (sf); previously on Dec 20, 2012
Downgraded to Ca (sf)
Cl. A-2, Upgraded to Caa2 (sf); previously on Dec 20, 2012 Upgraded
to Ca (sf)
Cl. A-3, Upgraded to Caa2 (sf); previously on Dec 20, 2012 Upgraded
to Ca (sf)
Issuer: RALI Series 2006-QS1 Trust
Cl. A-3, Upgraded to Caa1 (sf); previously on Dec 23, 2010
Downgraded to Caa3 (sf)
Cl. A-5, Upgraded to Caa2 (sf); previously on Dec 23, 2010
Downgraded to Caa3 (sf)
Cl. A-6, Upgraded to Caa2 (sf); previously on Dec 23, 2010
Downgraded to Caa3 (sf)
Cl. A-8, Upgraded to Caa2 (sf); previously on Dec 23, 2010
Downgraded to Caa3 (sf)
Cl. A-9*, Upgraded to Caa2 (sf); previously on Dec 23, 2010
Downgraded to Caa3 (sf)
Cl. A-P, Upgraded to Caa1 (sf); previously on Dec 23, 2010
Downgraded to Caa3 (sf)
Cl. A-V*, Upgraded to Caa2 (sf); previously on Oct 27, 2017
Confirmed at Caa3 (sf)
*Reflects Interest-Only Classes.
RATINGS RATIONALE
The rating actions reflect the current levels of credit enhancement
available to the bonds, the recent performance, analysis of the
transaction structures, Moody's updated loss expectations on the
underlying pools and Moody's revised loss-given-default expectation
for each bond.
Each of the bonds experiencing a rating change has either incurred
a missed or delayed disbursement of an interest payment or is
currently, or expected to become, undercollateralized, which may
sometimes be reflected by a reduction in principal (a write-down).
Moody's expectations of loss-given-default assesses losses
experienced and expected future losses as a percent of the original
bond balance.
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.
No actions were taken on the remaining rated classes in these deals
as those classes are already at the highest achievable levels
within Moody's ratings scale.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "US Residential Mortgage-backed
Securitizations: Surveillance" published in December 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds.
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.
RESIDENTIAL ASSET: Moody's Hikes Ups 16 Ratings From 8 RMBS Deals
-----------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 16 bonds from eight US
residential mortgage-backed transactions (RMBS), backed by Subprime
mortgages issued by Residential Asset Securities Corporation.
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: RASC Series 2003-KS4 Trust
Cl. M-I-1, Upgraded to Aa2 (sf); previously on Jun 10, 2024
Upgraded to A1 (sf)
Cl. M-I-2, Upgraded to Caa2 (sf); previously on Apr 9, 2012
Downgraded to C (sf)
Cl. M-I-3, Upgraded to Caa3 (sf); previously on Apr 5, 2011
Downgraded to C (sf)
Issuer: RASC Series 2005-KS11 Trust
Cl. M-3, Upgraded to Aaa (sf); previously on May 22, 2024 Upgraded
to A1 (sf)
Cl. M-4, Upgraded to Caa1 (sf); previously on Apr 6, 2010
Downgraded to C (sf)
Issuer: RASC Series 2005-KS6 Trust
Cl. M-7, Upgraded to Aaa (sf); previously on May 22, 2024 Upgraded
to A1 (sf)
Cl. M-8, Upgraded to Caa2 (sf); previously on Mar 5, 2013 Affirmed
C (sf)
Issuer: RASC Series 2005-KS7 Trust
Cl. M-7, Upgraded to Baa1 (sf); previously on May 22, 2024 Upgraded
to Caa1 (sf)
Issuer: RASC Series 2005-KS8 Trust
Cl. M-6, Upgraded to A1 (sf); previously on May 22, 2024 Upgraded
to Baa2 (sf)
Cl. M-7, Upgraded to Ca (sf); previously on Mar 5, 2013 Affirmed C
(sf)
Issuer: RASC Series 2006-KS6 Trust
Cl. M-2, Upgraded to Caa1 (sf); previously on Mar 27, 2018 Upgraded
to Ca (sf)
Issuer: RASC Series 2006-KS8 Trust
Cl. A-4, Upgraded to Aa1 (sf); previously on May 22, 2024 Upgraded
to A3 (sf)
Cl. M-1, Upgraded to Ca (sf); previously on Apr 6, 2010 Downgraded
to C (sf)
Issuer: RASC Series 2007-KS3 Trust
Cl. A-I-4, Upgraded to A1 (sf); previously on May 22, 2024 Upgraded
to Baa1 (sf)
Cl. A-II, Upgraded to Aa2 (sf); previously on May 22, 2024 Upgraded
to A1 (sf)
Cl. M-1S, Upgraded to Ca (sf); previously on Apr 6, 2010 Downgraded
to C (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, Moody's updated loss expectations on the
underlying pools and Moody's revised loss-given-default expectation
on the bonds.
Some of the bonds experiencing a rating change have either incurred
a missed or delayed disbursement of an interest payment or is
currently, or expected to become, undercollateralized, which may
sometimes be reflected by a reduction in principal (a write-down).
Moody's expectations of loss-given-default assesses losses
experienced and expected future losses as a percent of the original
bond balance.
The rest of the rating upgrades are a result of the improving
performance of the related pools, or an increase in credit
enhancement available to the bonds. Credit enhancement grew by
10.0% on average for these bonds upgraded over the past 12 months.
The rating actions also reflect the further seasoning of the
collateral and increased clarity regarding the impact of borrower
relief programs on collateral performance. Information obtained
from loan servicers in recent years has shed light on their current
strategies regarding borrower relief programs and the impact those
programs may have on collateral performance and transaction
liquidity, through servicer advancing. Moody's recent analysis has
found that in addition to robust home price appreciation, many of
these borrower relief programs have contributed to stronger
collateral performance than Moody's had previously expected, thus
supporting the upgrades.
No actions were taken on the other rated classes in these deals
because their expected losses remain commensurate with their
current ratings, after taking into account the updated performance
information, structural features, credit enhancement and other
qualitative considerations.
Principal Methodologies
The principal methodology used in these ratings was "US Residential
Mortgage-backed Securitizations: Surveillance" published in
December 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
RLGH TRUST 2021-TROT: DBRS Confirms B(low) Rating on Class G Certs
------------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2021-TROT issued by RLGH Trust
2021-TROT as follows:
-- Class A at AAA (sf)
-- Class A-Y at AAA (sf)
-- Class A-Z at AAA (sf)
-- Class A-IO at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The credit rating confirmations and Stable trends reflect the
stable performance of the collateral, which remains in line with
Morningstar DBRS expectations at issuance. The loan is
collateralized by the borrower's fee-simple and leasehold interests
in 53 properties, including 48 flex industrial properties, three
industrial properties, one 7.06-acre parcel of land, and one
unanchored retail strip center, totaling approximately 2.6 million
square feet across six business parks in the Raleigh-Durham region
of North Carolina. The $299.3 million transaction is sponsored by a
joint venture partnership between Equus Capital Partners, Ltd.
(Equus) and Corebridge Real Estate Investors (formerly AIG Global
Real Estate Investment Corp.), who contributed $132.9 million in
cash equity to acquire the portfolio and close the subject
transaction.
The two-year floating-rate, interest-only underlying loan had an
initial maturity in April 2023 and was structured with three
one-year extension options. The loan currently matures in April
2025 and has one remaining extension option with a fully extended
maturity in April 2026. The borrower is required to purchase a
replacement interest rate cap agreement in order to maintain a
minimum debt service coverage ratio (DSCR) of 1.20 times (x) as
part of each extension.
As of the January 2024 remittance report, there have been no
property releases to date. The transaction is structured with a
partial pro-rata and sequential pay structure, allowing for
pro-rata paydowns on the first 30% of the unpaid principal balance.
While property releases are permitted, they are subject to several
conditions. The release price is set at 110% of the Allocated Loan
Amount (ALA) for the initial 10% of the original loan balance, 115%
of the ALA for the portion between 10% and 20% of the original
balance, and 125% for the remaining 80%. Furthermore, upon the
release of any property, it is essential to meet established debt
yield thresholds for the remaining collateral within the trust. If
the debt yield for the trailing 12-month (T-12) period preceding
the execution of the extension falls below 8.5%, the remaining
collateral must meet the greater of the closing debt yield of 7.9%
or the T-12 debt yield figure. Conversely, if the T-12 debt yield
is equal to or exceeds 8.5%, the remaining collateral is required
to achieve the T-12 debt yield figure. The implied debt yield as of
the net cash flow in the servicer-reported year-end (YE) 2023
financials is 8.96%.
The collateral portfolio benefits from its diversified tenant
roster, with only seven of the 53 properties presently leased to
single-tenant users. At the time of issuance, the portfolio was
leased to 306 distinct tenants across various industries. According
to the December 2024 rent roll, the portfolio's occupancy rate was
98.6%, up from 95.2% at issuance. As indicated by Reis, the
Raleigh-Durham market, commonly referred to as the Research
Triangle, reported a vacancy rate of 4.9% for industrial properties
as a whole as of the third quarter of 2024, and projects that
figure to slightly decline to 4.8% by the end of 2026. Based on the
December 2024 rent roll, tenants representing approximately 21.0%
of the combined square footage across the portfolio have lease
expiration dates prior to the fully extended maturity date in April
2026. For F2023, the portfolio's net cash flow (NCF) was reported
at $25.7 million by the servicer, which reflects a debt service
coverage ratio (DSCR) of 1.21x. This compares with the Morningstar
DBRS issuance NCF figure of $21.7 million, representing a DSCR of
3.74x, and the YE2022 NCF figure reported by the servicer of $23.4
million with a DSCR of 2.22x. The cash flow growth since YE2022 can
be largely attributed to an increase of $7.6 million in expense
reimbursements since that time and a decrease in the operating
expense ratio from 28.4% in 2022 to 24.7% in 2024.
In the analysis for this review, the Morningstar DBRS value of
$289.3 million derived at issuance was considered. That figure is
based on the Morningstar DBRS NCF figure of $21.7 million and a cap
rate of 7.5%. This results in a loan-to-value (LTV) ratio of 103.4%
and compares with the issuance appraised value of $451.7 million
and an LTV of 66.2%. Morningstar DBRS maintained a total positive
qualitative adjustment of 6.0% to reflect the portfolio's stable
performance since issuance, healthy occupancy and cash flow, and
strong market fundamentals.
Notes: All figures are in U.S. dollars unless otherwise noted.
SANTANDER BANK 2023-MTG1: Fitch Affirms 'Bsf' Rating on M-5 Notes
-----------------------------------------------------------------
Fitch Ratings has taken rating actions on five classes of Santander
Bank Mortgage Credit-Linked Notes (SBCLN), Series 2023-MTG1. This
transaction was last reviewed in Nov. 2024.
Entity/Debt Rating Prior
----------- ------ -----
SBCLN 2023-MTG1
M-1 80290CBM5 LT A-sf Upgrade BBB+sf
M-2 80290CBN3 LT BBB+sf Affirmed BBB+sf
M-3 80290CBP8 LT BBBsf Affirmed BBBsf
M-4 80290CBQ6 LT BBsf Affirmed BBsf
M-5 80290CBR4 LT Bsf Affirmed Bsf
Transaction Summary
One class was upgraded and assigned a Stable Outlook.
Four classes were affirmed and retain their current Outlooks.
After this review, the Rating Outlook on three classes is Stable
and two classes is Positive.
KEY RATING DRIVERS
Counterparty Risk (Positive):
On Feb. 14, 2025, Fitch upgraded the Long-term IDR of Santander
Holdings from BBB+ to A- and placed it on Rating Outlook Stable.
This upgrade reflects Fitch's view that Santander's strong
performance can support a one-notch upgrade, therefore also placing
it one notch above the Spanish sovereign. Santander's performance
is underpinned by its broad and balanced geographic
diversification, resilient earnings, good loss-absorption capacity,
and limited asset-quality variability over various cycles.
See Fitch's Rating Action Commentary on Santander for more
information.
Stable Collateral Performance (Positive):
SBCLN 2023-MTG1 notes are general unsecured debt obligations of
Santander Bank, NA and the bonds are capped by the bank's long-term
IDR. These notes were last reviewed in Nov. 2024, during the Prime
2.0 RMBS Surveillance review. During that review, all notes were
affirmed and the two most subordinate, the M4 and M5, were assigned
a Rating Outlook of Positive. This was due to steady and strong
underlying collateral performance. Since the review, no noteworthy
changes have taken place, and expected losses, delinquencies, and
principal recoveries are generally in-line with the prior review.
The 30-day delinquency (30+ DQ%) has largely remained stable over
the past year. The current 30+DQ% is 0.8%, which is down 1 bp since
the year earlier and has remained below or around the Prime 2.0
sector average. Expected losses at 'Asf' for the pool is 1.4%,
which is down 4 bps since issuance, and no actual losses have been
realized for the pool so far.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
This defined negative stress 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 decline at the base case.
This analysis indicates some potential rating migration with higher
MVDs compared with the model projection.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth with no
assumed overvaluation. The analysis assumes positive home price
growth of 10.0%. Excluding the senior classes already rated 'AAAsf'
as well as classes that are constrained due to qualitative rating
caps, the analysis indicates there is potential positive rating
migration for all the other rated classes.
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. For enhanced disclosure of Fitch's
stresses and sensitivities, please refer to U.S. RMBS Loss
Metrics.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SEQUOIA MORTGAGE 2025-2: Fitch Assigns Bsf Final Rating on B5 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates issued by Sequoia Mortgage Trust
2025-2 (SEMT 2025-2).
Entity/Debt Rating Prior
----------- ------ -----
SEMT 2025-2
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAAsf New Rating AAA(EXP)sf
A3 LT AAAsf New Rating AAA(EXP)sf
A4 LT AAAsf New Rating AAA(EXP)sf
A5 LT AAAsf New Rating AAA(EXP)sf
A6 LT AAAsf New Rating AAA(EXP)sf
A7 LT AAAsf New Rating AAA(EXP)sf
A8 LT AAAsf New Rating AAA(EXP)sf
A9 LT AAAsf New Rating AAA(EXP)sf
A10 LT AAAsf New Rating AAA(EXP)sf
A11 LT AAAsf New Rating AAA(EXP)sf
A12 LT AAAsf New Rating AAA(EXP)sf
A13 LT AAAsf New Rating AAA(EXP)sf
A14 LT AAAsf New Rating AAA(EXP)sf
A15 LT AAAsf New Rating AAA(EXP)sf
A16 LT AAAsf New Rating AAA(EXP)sf
A17 LT AAAsf New Rating AAA(EXP)sf
A18 LT AAAsf New Rating AAA(EXP)sf
A19 LT AAAsf New Rating AAA(EXP)sf
A20 LT AAAsf New Rating AAA(EXP)sf
A21 LT AAAsf New Rating AAA(EXP)sf
A22 LT AAAsf New Rating AAA(EXP)sf
A23 LT AAAsf New Rating AAA(EXP)sf
A24 LT AAAsf New Rating AAA(EXP)sf
A25 LT AAAsf New Rating AAA(EXP)sf
AIO1 LT AAAsf New Rating AAA(EXP)sf
AIO2 LT AAAsf New Rating AAA(EXP)sf
AIO3 LT AAAsf New Rating AAA(EXP)sf
AIO4 LT AAAsf New Rating AAA(EXP)sf
AIO5 LT AAAsf New Rating AAA(EXP)sf
AIO6 LT AAAsf New Rating AAA(EXP)sf
AIO7 LT AAAsf New Rating AAA(EXP)sf
AIO8 LT AAAsf New Rating AAA(EXP)sf
AIO9 LT AAAsf New Rating AAA(EXP)sf
AIO10 LT AAAsf New Rating AAA(EXP)sf
AIO11 LT AAAsf New Rating AAA(EXP)sf
AIO12 LT AAAsf New Rating AAA(EXP)sf
AIO13 LT AAAsf New Rating AAA(EXP)sf
AIO14 LT AAAsf New Rating AAA(EXP)sf
AIO15 LT AAAsf New Rating AAA(EXP)sf
AIO16 LT AAAsf New Rating AAA(EXP)sf
AIO17 LT AAAsf New Rating AAA(EXP)sf
AIO18 LT AAAsf New Rating AAA(EXP)sf
AIO19 LT AAAsf New Rating AAA(EXP)sf
AIO20 LT AAAsf New Rating AAA(EXP)sf
AIO21 LT AAAsf New Rating AAA(EXP)sf
AIO22 LT AAAsf New Rating AAA(EXP)sf
AIO23 LT AAAsf New Rating AAA(EXP)sf
AIO24 LT AAAsf New Rating AAA(EXP)sf
AIO25 LT AAAsf New Rating AAA(EXP)sf
AIO26 LT AAAsf New Rating AAA(EXP)sf
B1 LT AA-sf New Rating AA-(EXP)sf
B1A LT AA-sf New Rating AA-(EXP)sf
B1X LT AA-sf New Rating AA-(EXP)sf
B2 LT A-sf New Rating A-(EXP)sf
B2A LT A-sf New Rating A-(EXP)sf
B2X LT A-sf New Rating A-(EXP)sf
B3 LT BBBsf New Rating BBB(EXP)sf
B4 LT BBsf New Rating BB(EXP)sf
B5 LT Bsf New Rating B(EXP)sf
B6 LT NRsf New Rating NR(EXP)sf
AIOS LT NRsf New Rating NR(EXP)sf
Transaction Summary
Fitch has assigned final ratings to the residential mortgage-backed
certificates issued SEMT 2025-2 as indicated. The certificates are
supported by 464 loans with a total balance of approximately $545.1
million as of the cutoff date. The pool consists of prime jumbo
fixed-rate mortgages acquired by Redwood Residential Acquisition
Corp. from various mortgage originators. Distributions of principal
and interest (P&I) and loss allocations are based on a
senior-subordinate, shifting-interest structure.
Following the publication of the presale and expected ratings, the
issuer notified Fitch of an updated tape, which consisted of two
loan drops and updated cutoff balances. Fitch re-ran both its asset
and cash flow analysis, and there were no changes to the loss
feedback or the expected ratings.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
464 loans totaling approximately $545.1 million and seasoned at
about five months in aggregate, as determined by Fitch. The
borrowers have a strong credit profile, with a weighted-average
Fitch model FICO score of 783 and 36.6% debt-to-income (DTI) ratio,
and moderate leverage, with a 81.8% sustainable loan-to-value
(sLTV) ratio and 72.6% mark-to-market combined loan-to-value (cLTV)
ratio.
Overall, the pool consists of 91.8% in loans where the borrower
maintains a primary residence, while 8.2% are of a second home;
76.2% of the loans were originated through a retail channel.
Additionally, 100.0% of the loans are designated as qualified
mortgage (QM) loans.
Updated Sustainable Home Prices (Negative): Fitch views the home
price values of this pool as 10.8% above a long-term sustainable
level (vs. 11.1% on a national level as of 3Q24, down 0.5% since
last quarter, based on Fitch's updated view on sustainable home
prices.) Housing affordability is the worst it has been in decades
driven by both high interest rates and elevated home prices. Home
prices have increased 3.8% yoy nationally as of November 2024
despite modest regional declines but are still being supported by
limited inventory.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure, whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years.
The lockout feature helps maintain subordination for a longer
period should losses occur later in the life of the transaction.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained.
After the credit support depletion date, principal will be
distributed sequentially, first to the super-senior classes (A-9,
A-12 and A-18) concurrently on a pro rata basis and then to the
senior-support A-21 certificate.
SEMT 2025-2 will feature the servicing administrator (RRAC),
following initial reductions in the class A-IO-S strip and
servicing administrator fees, obligated to advance delinquent P&I
to the trust until deemed nonrecoverable. Full advancing of P&I is
a common structural feature across prime transactions in providing
liquidity to the certificates, and absent the full advancing, bonds
can be vulnerable to missed payments during periods of adverse
performance.
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 42.0% 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'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC, Clayton, and Consolidated Analytics. The
third-party due diligence described in Form 15E focused on credit,
compliance, and property valuation. Fitch considered this
information in its analysis and, as a result, Fitch made the
following adjustment to its analysis: a 5% reduction to its loss
analysis. This adjustment resulted in a 24bp reduction to the
'AAAsf' expected loss.
ESG Considerations
SEMT 2025-2 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in SEMT 2025-2. It includes strong R&W and transaction due
diligence and strong aggregator, which resulted in a reduction in
the expected losses. This has a positive impact on the credit
profile and is relevant to the ratings in conjunction with other
factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
SIXTH STREET XIV: Fitch Assigns 'BB+sf' Rating on Class E-R2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Sixth
Street CLO XIV, Ltd. refinancing transaction.
Entity/Debt Rating
----------- ------
Sixth Street
CLO XIV, Ltd.
X LT NRsf New Rating
A-1R2 LT NRsf New Rating
A-2R2 LT AAAsf New Rating
B-R2 LT AAsf New Rating
C-R2 LT Asf New Rating
D-1R2 LT BBB-sf New Rating
D-2R2 LT BBB-sf New Rating
E-R2 LT BB+sf New Rating
F-R2 LT NRsf New Rating
Subordinated LT NRsf New Rating
Transaction Summary
Sixth Street CLO XIV, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by Sixth Street CLO
XIV Management, LLC. It originally closed in September 2019 and
underwent its first refinancing in December 2021. The second
refinancing is scheduled for Feb. 20, 2025. The net proceeds from
the issuance of the new secured and subordinated notes will finance
a portfolio of approximately $400 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'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
97.05% first-lien senior secured loans and has a weighted average
recovery assumption of 75.17%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2-R2, between
'BB+sf' and 'A+sf' for class B-R2, between 'B+sf' and 'BBB+sf' for
class C-R2, between less than 'B-sf' and 'BB+sf' for class D-1-R2,
between less than 'B-sf' and 'BB+sf' for class D-2-R2, and between
less than 'B-sf' and 'B+sf' for class E-R2.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2-R2 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-R2, 'AAsf' for class C-R2, 'A-sf'
for class D-1-R2, 'A-sf' for class D-2-R2, and 'BBB+sf' for class
E-R2.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authorityregistered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to 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 Sixth Street CLO
XIV, 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.
SIXTH STREET XIV: S&P Assigns B- (sf) Rating on Class F-R2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the replacement class
A-1-R2 debt and the new class X and F-R2 debt from Sixth Street CLO
XIV Ltd./Sixth Street CLO XIV LLC, a CLO formerly known as TICP CLO
XIV Ltd. and managed by Sixth Street CLO XIV Management LLC that
was originally issued in September 2019 and underwent a refinancing
in December 2021. At the same time, S&P withdrew its ratings on the
class A-1-R, A-2-R, B-R, C-R, and D-R debt following payment in
full on the Feb. 20, 2025, 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 reestablished and will end in January
2027.
-- The reinvestment period was reestablished and will end in
January 2030.
-- The stated maturity was extended to January 2038.
-- The new class X debt was issued in connection with this
refinancing. This debt will be paid down using interest proceeds
beginning with the payment date in July 2025.
-- The new class F-R2 debt was issued in connection with this
refinancing.
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
Sixth Street CLO XIV Ltd./Sixth Street CLO XIV LLC
Class X, $4.00 million: AAA (sf)
Class A-1-R2, $244.00 million: AAA (sf)
Class F-R2 (deferrable), $0.20 million: B- (sf)
Ratings Withdrawn
Sixth Street CLO XIV Ltd./Sixth Street CLO XIV LLC
Class A-1-R to NR from 'AAA (sf)'
Class A-2-R to NR from 'AA (sf)'
Class B-R to NR from 'A (sf)'
Class C-R to NR from 'BBB- (sf)'
Class D-R to NR from 'BB- (sf)'
Other Debt
Sixth Street CLO XIV Ltd./Sixth Street CLO XIV LLC
Class A-2-R2, $11.00 million: NR
Class B-R2, $45.00 million: NR
Class C-R2 (deferrable), $27.00 million: NR
Class D-1-R2 (deferrable), $25.00 million: NR
Class D-2-R2 (deferrable), $2.00 million: NR
Class E-R2 (deferrable), $14.00 million: NR
Subordinated notes(i), $38.80 million: NR
(i)Includes $2.45 million of subordinated notes issued on the Feb.
20, 2025, refinancing date.
NR--Not rated.
SWCH 2025-DATA: DBRS Gives Prov. BB(low) Rating on F Certs
----------------------------------------------------------
DBRS Limited assigned provisional credit ratings to the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2025-DATA (the Certificates) to be issued by SWCH Commercial
Mortgage Trust 2025-DATA:
-- Class A at (P) AAA (sf)
-- Class B at (P) AA (sf)
-- Class C at (P) AA (low) (sf)
-- Class D at (P) A (sf)
-- Class E at (P) BBB (low) (sf)
-- Class F at (P) BB (low) (sf)
-- Class HRR at (P) B (high) (sf)
All trends are Stable.
SWCH Commercial Mortgage Trust 2025-DATA is a securitization
collateralized by the borrower's fee-simple interest in three data
center properties in Nevada. Morningstar DBRS generally takes a
positive view on the credit profile of the overall transaction
based on the portfolio's favorable property quality, affordable
power rates, desirable efficiency metrics, and strong redundancy.
Switch Ltd. (Switch) held a portfolio of more than 20 operating
data center properties in six different metropolitan areas,
inclusive of the subject collateral.
Morningstar DBRS' credit rating on the Certificates reflects the
low leverage of the transaction, the strong and stable cash flow
performance, and a firm legal structure to protect
certificateholders' interests. The credit rating also reflects the
quality of service provided by the company, the access to key fiber
nodes, and technology that can maintain the data centers' relevance
into the future.
The data centers backing this financing are generally well-built
and benefit from the large national network provided by Switch.
Switch is a leader in the technology sector with more than 700
patents and patents pending for design and operations that maintain
its high standards and reliability. Switch also uses a modular
design that allows for infrastructure upgrades and interchanging
with minimal disruption. Finally, Switch has, over the last two
decades, developed a large purchasing co-operative for its
customers that allows for savings on both connectivity and power,
both of which represent key inputs for users.
Data centers, which have existed in various forms for many years,
have become a key component of the modern global technology
industry. The advent of cloud computing, streaming media, file
storage, and artificial intelligence applications has increased the
need for these facilities over the last decade in order to manage,
store, and transmit data globally. Both hyperscale and co-location
data centers have a role in the existing data ecosystem. Hyperscale
data centers are designed for large capacity storage and processing
of information, whereas co-location centers act as an on-ramp for
users to gain access to the wider network, or for information from
the network to be routed back to users. Switch operates a large
network using third-party and proprietary fiber to provide access
to a large number of technology firms. From the standpoint of the
physical plants, the data center assets are adequately powered,
with some assets in the portfolio exhibiting higher critical IT
loads than others. Morningstar DBRS views the data center
collateral as strong assets with a strong critical infrastructure,
including power and redundancy that is built to accommodate the
technology needs of today and the future.
All three properties in the portfolio maintain 2N+1 electrical
redundancy, which allows for more certainty around uptime at
subject data centers. This is well-above market standard. With 2N+1
electrical redundancy, multiple layers of systems must fail
simultaneously to result in service outages and forfeit uptime. The
2N+1 electrical redundancy is more expensive to build out compared
with other redundancies, such as N+1 or N+2. RNO 2 property, which
accounts for approximately 20% of Morningstar DBRS total revenue,
was recently completed in 2023. Overall, the LAS 07, LAS 09, and
RNO 02 facilities exhibited Power Usage Effectiveness (PUE) ratios
between 1.27 to 1.38 during a 12-month period ended August 30,
2024, which Morningstar DBRS views as highly efficient. According
to the Uptime Institute's 2024 Data Center Survey, the average
annual PUE across the data center sector was 1.56.
Founded in 2000, Switch is an experienced data center operator
owning more than 20 operating properties across six different
metropolitan areas. Switch also has more than 700 issued and
pending patents that allow Switch facilities to remain
state-of-the-art and maintain a competitive advantage over other
data center operators. Furthermore, Switch has emphasized
commitments to the markets in the portfolio as they are actively
constructing additional data centers, such the two Reno, Nevada,
campuses that span across thousands of acres. Switch focuses on the
construction of highly redundant data centers and has been powered
by 100% renewable power since 2016 through the procurement of
renewable energy for its facilities or through the purchase of
carbon credits. Furthermore, Switch has had Net Zero Scope 1
Emissions since 2021 and Net Zero Scope 2 Emissions since 2016.
Switch has also maintained 100% uptime across its facilities and
has never experienced a service-level agreement (SLA) breach or
provided SLA credit.
The subject portfolio exhibits significantly low historical churn
of less than 3.0% per annum, which demonstrates the strong
stickiness of tenants at the properties within the portfolio. The
portfolio also benefits from hundreds of customers across the three
facilities, which can reduce the volatility of revenue. The top
five tenants by annualized revenue comprise 40.1% of the
Morningstar DBRS revenue, and four of those top five tenants, which
comprise 19.5% of the total Morningstar DBRS revenue, are rated
investment-grade. Furthermore, eight out of top 10 tenants are
rated investment-grade.
Data center operators have historically benefited from high
barriers to entry because of the complexity of their operations
along with the specialized knowledge required to operate the
facilities to extraordinarily high uptime and reliability
standards. Furthermore, the high upfront capital costs and
necessary power infrastructure make speculative development more
difficult than with other property types. The portfolio assets
include purpose-built facilities within the vicinity of fiber nodes
that would be costly to replicate. The purpose-built facilities
have been built across large campuses at high initial construction
and ramp-up costs.
Data center operators benefit from strong clustering and network
effects attributable to the complex IT environments of their
tenants. Larger tenants prefer to scale within the existing
environment rather than add capacity at a facility with a different
provider. Also, Switch's Reno and Las Vegas campuses, which house
the subject data center properties, are connected by the SUPERLOOP,
Switch's proprietary 500-mile, multi-terabyte fiber optic network.
Furthermore, the portfolio benefits from the Core Co-operative,
which is a telecommunications purchasing co-operative operated by
Switch at its facilities and allows companies and customers to
aggregate their purchasing power of services from carriers and pass
on savings to member companies. As a result, members of the
co-operative have access to more telecommunication providers at a
below market pricing, leading to cost savings. This is a
significant selling point for Switch and is a leading reason for
lengthy tenant tenure and renewals at Switch facilities.
Switch boasts zero greenhouse gas emissions across its portfolio
and use of 100% renewable power to operate its data centers. The
assets in the portfolio located in Las Vegas are powered through
procured solar power. The portfolio benefits from operating in
markets that boast relatively low costs of power, despite primarily
operating using renewable energy sources. Furthermore, wholesale
power rates in Mountain region of Nevada and Las Vegas $0.0784 per
kilowatt hour (kWh) to $0.086/kWh, which is less than the national
average of $0.123/kWh.
Notes: All figures are in U.S dollars unless otherwise noted.
SYMPHONY CLO XXI: S&P Affirms 'BB- (sf)' Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R2, B-R2,
C-R2, D-1-R2, and D-2-R2 replacement debt from Symphony CLO XXI
Ltd/Symphony CLO XXI LLC, a CLO managed by Nuveen Asset Management
LLC, as successor to Symphony Asset Management LLC, that was
originally issued in 2019 and underwent a refinancing in July 2021.
At the same time, S&P withdrew its ratings on the original class
A-R, B-R, C-R, and D-R debt and the associated MASCOT notes,
following payment in full on the Feb. 21, 2025, refinancing date.
S&P also affirmed its ratings on the class E-R debt and its
associated MASCOT notes, which were not refinanced.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period for the second refinancing notes will end
on Aug. 21, 2025.
-- The reinvestment period and the legal final maturity dates were
not extended.
-- The existing class D-R debt was split into class D-1-R2 and
D-2-R2 debt, with the aggregate principal balance equal to that of
the original class D-R debt. Class D-1-R2 is senior to class
D-2-R2.
-- The MASCOT notes associated with the refinanced July 2021 debt
were terminated. The replacement debt does not have the same
feature.
-- Class E-R debt and its associated MASCOT notes were not
refinanced.
Replacement And July 2021 Debt Issuances
Replacement debt
-- Class A-R2, $235.14 million: Three-month CME term SOFR + 0.90%
-- Class B-R2, $52.00 million: Three-month CME term SOFR + 1.35%
-- Class C-R2, $24.00 million: Three-month CME term SOFR + 1.75%
-- Class D-1-R2, $18.00 million: Three-month CME term SOFR +
2.65%
-- Class D-2-R2, $5.00 million: Three-month CME term SOFR + 4.35%
July 2021 debt(i)
-- Class A-R, $235.14 million: Three-month CME term SOFR + 1.38 %
+ CSA(ii)
-- Class B-R, $52.00 million: Three-month CME term SOFR + 1.90% +
CSA(ii)
-- Class C-R, $24.00 million: Three-month CME term SOFR + 2.55% +
CSA(ii)
-- Class D-R, $23.00 million: Three-month CME term SOFR + 3.65% +
CSA(ii)
(i)The associated MASCOT note details are provided in the ratings
list.
(ii)The CSA is 0.26161%.
CSA--Credit spread adjustment.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Symphony CLO XXI Ltd./Symphony CLO XXI LLC
Class A-R2, $235.14 million: AAA (sf)
Class B-R2, $52.00 million: AA (sf)
Class C-R2, $24.00 million: A (sf)
Class D-1-R2, $18.00 million: BBB- (sf)
Class D-2-R2, $5.00 million: BBB- (sf)
Ratings Affirmed
Symphony CLO XXI Ltd./Symphony CLO XXI LLC
Class E-R: 'BB- (sf)'
Class E-1R: 'BB- (sf)'
Class E-1XR: 'BB- (sf)'
Class E-2R: 'BB- (sf)'
Class E-2XR: 'BB- (sf)'
Class E-3R: 'BB- (sf)'
Class E-3XR: 'BB- (sf)'
Class E-4R: 'BB- (sf)'
Class E-4XR: 'BB- (sf)'
Ratings Withdrawn
Symphony CLO XXI Ltd./Symphony CLO XXI LLC
Class A-R to NR from 'AAA (sf)'
Class A-1R to NR from 'AAA (sf)'
Class A-1XR to NR from 'AAA (sf)'
Class A-2R to NR from 'AAA (sf)'
Class A-2XR to NR from 'AAA (sf)'
Class A-3R to NR from 'AAA (sf)'
Class A-3XR to NR from 'AAA (sf)'
Class A-4R to NR from 'AAA (sf)'
Class A-4XR to NR from 'AAA (sf)'
Class B-R to NR from 'AA (sf)'
Class B-1R to NR from 'AA (sf)'
Class B-1XR to NR from 'AA (sf)'
Class B-2R to NR from 'AA (sf)'
Class B-2XR to NR from 'AA (sf)'
Class B-3R to NR from 'AA (sf)'
Class B-3XR to NR from 'AA (sf)'
Class B-4R to NR from 'AA (sf)'
Class B-4XR to NR from 'AA (sf)'
Class C-R to NR from 'A (sf)'
Class C-1R to NR from 'A (sf)'
Class C-1XR to NR from 'A (sf)'
Class C-2R to NR from 'A (sf)'
Class C-2XR to NR from 'A (sf)'
Class C-3R to NR from 'A (sf)'
Class C-3XR to NR from 'A (sf)'
Class C-4R to NR from 'A (sf)'
Class C-4XR to NR from 'A (sf)'
Class D-R to NR from 'BBB- (sf)'
Class D-1R to NR from 'BBB- (sf)'
Class D-1XR to NR from 'BBB- (sf)'
Class D-2R to NR from 'BBB- (sf)'
Class D-2XR to NR from 'BBB- (sf)'
Class D-3R to NR from 'BBB- (sf)'
Class D-3XR to NR from 'BBB- (sf)'
Class D-4R to NR from 'BBB- (sf)'
Class D-4XR to NR from 'BBB- (sf)'
Other Debt
Symphony CLO XXI Ltd./Symphony CLO XXI LLC
Subordinated notes, $41.40 million: NR
NR--Not rated.
SYMPHONY CLO XXXI: S&P Assigns BB- (sf) Rating on Class E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class X-R, A-R, B-R,
C-R, D-R, and E-R replacement debt from Symphony CLO XXXI
Ltd./Symphony CLO XXXI LLC, a CLO originally issued in March 2022
that is managed by Symphony Alternative Asset Management LLC. At
the same time, S&P withdrew its ratings on the original class A, B,
C, D, and E debt following payment in full on the Feb. 21, 2025,
refinancing date. The original class X debt was paid in full before
the Feb. 21, 2025, refinancing date and was already not rated.
The replacement debt was issued via a supplemental indenture, which
outlined the terms of the replacement debt. According to the
supplemental indenture:
-- The class A-R, B-R, C-R, D-R, and E-R replacement debt was
issued at a lower spread over three-month CME term SOFR than the
original debt.
-- The replacement class X-R debt was issued at a higher spread
over three-month CME term SOFR than the original debt.
-- The replacement class X-R, A-R, B-R, C-R, D-R, and E-R debt was
issued at a floating spread.
-- The reinvestment period was extended to Jan. 22, 2030.
-- The stated maturity was extended to Jan. 22, 2038.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Symphony CLO XXXI Ltd./Symphony CLO XXXI LLC
Class X-R, $5.00 million: AAA (sf)
Class A-R, $310.00 million: AAA (sf)
Class B-R, $70.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-R (deferrable), $28.15 million: BBB (sf)
Class E-R (deferrable), $21.85 million: BB- (sf)
Ratings Withdrawn
Symphony CLO XXXI Ltd./Symphony CLO XXXI LLC
Class A to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C (deferrable) to NR from 'A(sf)'
Class D (deferrable) to NR from 'BBB-(sf)'
Class E (deferrable) to NR from 'BB-(sf)'
Other Debt
Symphony CLO XXXI Ltd./Symphony CLO XXXI LLC
Subordinated notes, $57.25 million: NR
NR--Not rated.
TCI-FLATIRON CLO 2016-1: S&P Affirms 'BB-' Rating on E-R-3 Notes
----------------------------------------------------------------
S&P Global Ratings reviewed its ratings on TCI-Flatiron CLO 2016-1
Ltd., a U.S. CLO managed by TCI Capital Management II LLC. S&P
raised its ratings on the class B-R-3, C-R-3, and D-R-3 debt. At
the same time, S&P affirmed its ratings on the class A-R-3 and
E-R-3 debt.
The rating actions follow its review of the transaction's
performance using data from the January 2025 trustee report.
Since S&P's February 2022 rating action, based on data from the
December 2021 trustee report, the class A-R-3 debt had total
paydowns of $208.53 million, which reduced its outstanding balance
to 18.54% of its original balance. The changes in the reported
overcollateralization (O/C) ratios since the December 2021 trustee
report, which S&P used for our previous rating actions, are as
follows:
-- The class A/B O/C ratio improved to 169.95% from 131.45%.
-- The class C O/C ratio improved to 143.81% from 122.52%.
-- The class D O/C ratio declined to 123.14% from 114.07%.
-- The class E O/C ratio declined to 112.38% from 109.06%.
-- The senior O/C ratios experienced a positive movement due to
the lower balances of the senior debt.
The upgrades reflect the improved credit support available to the
debt at the prior rating levels.
The affirmations reflect the adequate credit support at the current
rating levels, though any further deterioration in the credit
support available to the debt could result in changes to the
ratings.
S&P said, "Although our cash flow analysis indicated higher ratings
for the class C-R-3, D-R-3, and E-R-3 debt, our rating actions
reflect additional sensitivity analysis we ran to consider the
portfolio's exposures to defaulted assets, assets in the 'CCC'
rating category, and assets trading at distressed prices, as well
as our preference for extra cushion to offset any potential credit
migration in the underlying collateral.
"In line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis considered
the transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis--and other qualitative factors as
applicable--demonstrated, in our view, that all of the rated
outstanding classes have adequate credit enhancement available at
the rating levels associated with this rating action."
S&P Global Ratings will continue to review whether, in its view,
the ratings assigned to the debt remain consistent with the credit
enhancement available to support them and take rating actions as it
deems necessary.
Ratings Raised
TCI-Flatiron CLO 2016-1 Ltd.
Class B-R-3 to 'AAA (sf)' from 'AA (sf)'
Class C-R-3 to 'AA+ (sf)' from 'A (sf)'
Class D-R-3 to 'BBB+ (sf)' from 'BBB- (sf)'
Ratings Affirmed
TCI-Flatiron CLO 2016-1 Ltd.
Class A-R-3: 'AAA (sf)'
Class E-R-3: 'BB- (sf)'
TMSQ 2014-1500: Moody's Downgrades Rating on Cl. D Certs to Caa1
----------------------------------------------------------------
Moody's Ratings has downgraded the ratings on five CMBS classes in
TMSQ 2014-1500 Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2014-1500 as follows:
Cl. A, Downgraded to Baa2 (sf); previously on Aug 19, 2024
Downgraded to A3 (sf) and Placed On Review for Downgrade
Cl. B, Downgraded to Ba1 (sf); previously on Aug 19, 2024
Downgraded to Baa2 (sf) and Placed On Review for Downgrade
Cl. C, Downgraded to B1 (sf); previously on Aug 19, 2024 Downgraded
to Ba1 (sf) and Placed On Review for Downgrade
Cl. D, Downgraded to Caa1 (sf); previously on Aug 19, 2024
Downgraded to B1 (sf) and Placed On Review for Downgrade
Cl. X-A*, Downgraded to Baa2 (sf); previously on Aug 19, 2024
Downgraded to A3 (sf) and Placed On Review for Downgrade
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on the four P&I classes were downgraded due to an
increase in Moody's loan-to-value (LTV) ratio driven by the
expected imminent decline in the property's cash flow and occupancy
from the largest tenant's lease expiration in May 2025. The loan
has passed its original maturity date in October 2024 and absent
new leases at property, Moody's expects the property's cash flow to
decline causing the Net Cash Flow (NCF) DSCR to drop below 1.00X
after May 2025. The loan is current on its monthly debt service
payments as of February 2025 and the servicer commentary indicates
that negotiations with the borrower for an extension are ongoing,
however, the downgrades also reflect the potential time to re-lease
the vacant space as well as the uncertainty around the ultimate
resolution value given the weak office fundamentals and lower
office valuations in the Time Square office submarket.
The rating on the interest only (IO) class was downgraded based on
the credit quality of the referenced class.
The actions conclude the review for downgrade that was initiated on
August 19, 2024.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking views of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization.
Factors that could lead to a downgrade of the ratings include a
further decline in actual or expected performance of the loan or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-backed Securitizations" published in
January 2025.
DEAL PERFORMANCE
As of the February 12, 2025 distribution date, the transaction's
aggregate certificate balance remains unchanged at $335 million.
The interest only, 10-year, fixed-rate loan matures in October 2024
and is secured by a 506,614 SF Class A Office and retail building
located at 1500 Broadway in New York City. The property is located
on Broadway along the "Bow Tie" of Times Square with a full block
of frontage between 43rd and 44th Streets. The 33-story building
was completed in 1974. There is additional mezzanine debt of $170
million held outside the trust. The sponsor, Tamares Real Estate
Holdings, Inc., acquired the property in 1995 and previously
reinvested capital into the improvements to upgrade and renovate
the property.
The loan was transferred to special servicing as the borrower was
unable to pay off the loan at the October 6, 2024 maturity date.
The loan remains current on its debt service payments through
February 2025 and servicer commentary has indicated a
pre-negotiation letter has been executed and the negotiations with
the borrower for an extension are continuing. The servicer is also
prepared to dual track negotiations if necessary.
The property's occupancy had historically been stable at
approximately 93% between securitization and 2018 before it dropped
to 88% in 2019. The property's occupancy subsequently decreased to
74% in 2021 due to loss of certain tenants during the pandemic.
Additionally, the property's largest tenant, Times Square Studios
(TSS), an affiliate of the Walt Disney Company (Disney), currently
leases 15% of the NRA with an upcoming lease expiration in May
2025. As part of Disney's strategic decision to consolidate its
physical operations it was announced Good Morning America is moving
to Disney's new headquarters in Hudson Square in 2025. The second
largest tenant, NASDAQ OMX Group (NASDAQ), 10% of the property's
NRA, didn't renew the lease that expired in August 2024.
The property's reported NOI peaked in 2020 at $33.8 million,
however, it has since gradually declined and the NOI reported as of
September 2023 was $30.5 million, 10% lower than its 2020 NOI.
Despite the performance declines, the interest only fixed rate
mortgage loan (3.844%) had a DSCR of 2.11X based on the annualized
NCF of September 2023 and the loan remained current on its interest
only debt service payments as of the February 2025 remittance
statement. However, absent new leases at property, Moody's
anticipates the NCF DSCR will fall below 1.00X after May 2025 due
to the departure of the property's largest tenant upon lease
expiration.
The Time Square office market fundamentals have been deteriorating
since the COVID pandemic and continue to show signs of weakness.
According to CBRE EA, as of Q4 2024, the Class A office vacancy in
Times Square/ West Side submarket was 17.3% and the average gross
asking rent was $69.34 PSF, compared to 5.8% and $82.08 PSF,
respectively, in 2019 and 7.9% and $71.93 PSF, respectively, in
2014. The Times Square/ West Side office submarket had seen
consecutive years of negative net absorptions between 2019 and
2023.
The property benefits from its flagship retail and signage location
and provides approximately 200 feet of retail store frontage and
seven billboard signs along the "Bow Tie" of New York City's Times
Square as well as proximately to nearby public transportation
including multiple subway stations as well as the Port Authority
Bus Terminal and the shuttle to Grand Central Terminal.
Moody's LTV ratio for the first mortgage balance is 111% based on
Moody's Value, which takes into account the anticipated decline in
the properties' NCF and the Time Square market dynamics. Moody's
Adjusted Moody's LTV ratio for the first mortgage balance is 103%
based on Moody's Value using a cap rate adjusted for the current
interest rate environment. There is no interest shortfall as of the
February 2025 distribution date.
TOWD POINT 2025-R1: Fitch Gives 'B-sf' Rating on Class M2 Notes
---------------------------------------------------------------
Fitch Ratings rates Towd Point Mortgage Trust 2025-R1 (TPMT
2025-R1).
Entity/Debt Rating Prior
----------- ------ -----
Towd Point Mortgage
Trust 2025-R1
A1 LT A-sf New Rating A-(EXP)sf
A2 LT BBB-sf New Rating BBB-(EXP)sf
A12 LT BBB-sf New Rating BBB-(EXP)sf
M1 LT BB-sf New Rating BB-(EXP)sf
M2 LT B-sf New Rating B-(EXP)sf
B1 LT NRsf New Rating NR(EXP)sf
B2 LT NRsf New Rating NR(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
Transaction Summary
The transaction is a re-securitization collateralized by 36 bonds
from 18 distinct underlying transactions (seven underlying Freddie
Mac Seasoned Credit Risk Transfer [SCRT] transactions and 11
underlying Towd Point Mortgage Trust [TPMT] transactions). The
underlying bonds are made up of 17 interest-only (IO) bonds and 19
non-IO bonds.
KEY RATING DRIVERS
Re-REMIC Structure (Positive)
TPMT 2025-R1 is a re-securitization of 36 subordinate RPL REMIC
tranches with a contributing balance totaling approximately $815.17
million (excluding the contribution from notional IO or excess
servicing fee classes). The notes benefit from credit enhancement
at the re-securitization level, excess cash flow at the
re-securitization level in the form of the 15% class B3 issued as a
Principal Only (PO) bond, minimal credit enhancement (CE) at the
underlying bond level for a portion of the collateral and the
potential for excess interest at the underlying level.
The transaction utilizes a fully sequential structure whereby
interest collections are paid sequentially, and principal
collections can be used to pay interest shortfalls on the most
senior bond then outstanding prior to paying down the principal
balance sequentially. To the extent there is excess interest
remaining after all distributions are made, it can be used to turbo
down the bonds sequentially resulting in the creation of over
collateralization.
Strong Performance to Date (Positive)
All the underlying transactions and associated underlying bonds
were issued more than six years ago and comprise loans with average
seasoning in excess of 17 years. Since the underlying deals were
issued, they have paid down by more than 50% on average and have
typically experienced losses less than 1% of the issuance balance.
Prepayment rates have consistently run around 5% over the past few
years and were closer to 10% during the pre-COVID, low-interest
rate environment.
Current delinquencies have run at mid-single digits almost
exclusively since issuance with the exception being the COVID
period. The percent of the collateral that has been performing on
time for at least two years is close to 90% for both the SCRT and
TPMT underlying transactions. All underlying transactions have
benefited from substantial home price gains with average mark to
market loan-to-values running at sub-50%.
At the bond level, write-downs have been very modest with average
write-downs less than 10% of the original balance (while the deals
have paid down ~50%), and a number of bonds have built up
over-collateralization to protect against future losses.
No Advancing on Underlying Transactions (Mixed)
None of the underlying transactions are structured with any amount
of servicer advancing for delinquent P&I. For deals structured to
not include servicer advances, servicers will not be advancing on
delinquent monthly payments of principal and interest. Because P&I
advances made on behalf of loans that become delinquent and
eventually liquidate reduce liquidation proceeds to the trust, the
loan-level loss severities (LS) are less for those transactions
than those where the servicer is obligated to advance on P&I.
However, given the subordinate nature of the underlying bonds
collateralizing the securitization, the lack of advancing can
introduce heightened cash flow volatility as there is minimal if
any credit support on the underlying to protect against
delinquencies.
Interest Rate Reduction Stress (Negative)
The analysis incorporates an interest rate reduction assumption on
the underlying mortgage loans due to the sensitivity of certain of
the underlying structures to interest rate reductions. The SCRT
bonds are highly sensitive to interest rate reductions as the
underlying senior bonds are guaranteed a fixed coupon.
Running a rate reduction on this collateral resulted in a material
amount of cash flow being removed at the Re-REMIC level resulting
in a much higher credit enhancement needed to pass the target
rating stresses. As this stress is highly unlikely given the
coupons on the underlying loans and the current interest rate
environment, given the sensitivity to its occurrence, Fitch's
analysis incorporated it into its rating assessment.
Adjusted Net WAC Stress (Negative)
The stated coupon on the P&I bonds at the Re-REMIC level is set to
the lower of the fixed rate (4.0%) or the adjusted underlying net
weighted average coupon (WAC) rate. It is highly likely that in
most periods the bonds will be limited by the adjusted net WAC and
accrue coupon cap shortfalls. The deal prioritizes repayment of
coupon cap shortfalls to the most senior bond then outstanding from
interest collections.
This results in a larger amount of principal being required to
repay outstanding interest shortfalls to the A2 bond and below
resulting in a higher amount of credit enhancement to ensure full
payment of principal and repayment of all interest shortfalls.
Fitch's rating analysis only assumes payment of interest at the
adjusted underlying net WAC rate and not at the stated 4%.
Updated Sustainable Home Prices (Negative)
Fitch views the home price values of this pool as 11.1% above a
long-term sustainable level versus 11.1% on a national level as of
3Q24, down 0.5% since last quarter, based on Fitch's updated view
on sustainable home prices. Housing affordability is the worst it
has been in decades driven by both high interest rates and elevated
home prices. Home prices have increased 3.8% yoy nationally as of
November 2024 despite modest regional declines, but are still being
supported by limited inventory.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
This 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 declines.
The analysis indicates that there is some potential rating
migration with higher MVDs for all rated classes, compared with the
model projection. At the 'A-sf' rating, a 10% MVD could result in a
downgrade to 'BB+sf', while a 20% or 30% MVD could result in a
downgrade to a distressed rating.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. The analysis indicates there is potential
positive rating migration for all the rated classes. Specifically,
a 10% gain in home prices could result in an upgrade from 'A-sf' to
'A+sf'.
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 PwC. The third-party due diligence described in Form
15E focused on a confirmation of underlying bond characteristics.
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.
TRESTLES CLO VI: Fitch Assigns 'B+(EXP)sf' Rating on Cl. F-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Trestles CLO VI, Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Trestles CLO VI,
Ltd.
X LT AAA(EXP)sf Expected Rating
A-1R LT NR(EXP)sf Expected Rating
A-2R LT AAA(EXP)sf Expected Rating
B-R LT AA(EXP)sf Expected Rating
C-1R LT A+(EXP)sf Expected Rating
C-2R LT A(EXP)sf Expected Rating
D-1R LT BBB-(EXP)sf Expected Rating
D-2R LT BBB-(EXP)sf Expected Rating
E-R LT BB-(EXP)sf Expected Rating
F-R LT B+(EXP)sf Expected Rating
Transaction Summary
Trestles CLO VI, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by APC
Asset Development II, LP. The transaction originally closed in Dec.
2023 and is being reset for the first time. The CLO's existing
secured notes will be refinanced in whole on Feb. 28, 2025, from
proceeds of the new secured notes. Net proceeds from the issuance
of the secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.64, versus a maximum covenant, in accordance with
the initial expected matrix point of 24. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.32% first lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.62% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.2%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 43.5% of the portfolio balance in aggregate while
the top five obligors can represent up to 11.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
that of other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.2-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric.
The results under these sensitivity scenarios are as severe as
'AAAsf' for class X, between 'BBB+sf' and 'AA+sf' for class A-2R,
between 'BB+sf' and 'A+sf' for class B-R, between 'BB-sf' and
'A-sf' for class C-1R, between 'B+sf' and 'BBB+sf' for class C-2R,
between less than 'B-sf' and 'BB+sf' for class D-1R, between less
than 'B-sf' and 'BB+sf' for class D-2R, between less than 'B-sf'
and 'BB-sf' for class E-R and between less than 'B-sf' and 'B+sf'
for class F-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class X and class A-2R
notes as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'AA+sf' for class C-1R, 'AAsf'
for class C-2R, 'Asf' for class D-1R, 'A-sf' for class D-2R,
'BBB+sf' for class E-R and 'BBB-sf' for class F-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Most 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 Trestles CLO VI,
Ltd. In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, program,
instrument or issuer, Fitch will disclose in the key rating drivers
any ESG factor which has a significant impact on the rating on an
individual basis.
TRINITAS CLO XX: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to the
Trinitas CLO XX, Ltd. refinancing notes. Additionally, Fitch has
affirmed class A-2.
Entity/Debt Rating Prior
----------- ------ -----
Trinitas CLO XX, Ltd.
A-1 89640EAA6 LT PIFsf Paid In Full AAAsf
A-1-R LT AAAsf New Rating
A-2 89640EAJ7 LT AAAsf Affirmed AAAsf
B-R LT NRsf New Rating
C-R LT NRsf New Rating
D-1-R LT NRsf New Rating
D-2-R LT NRsf New Rating
E 89640GAA1 LT PIFsf Paid In Full BB-sf
E-R LT BB+sf New Rating
F-R LT NRsf New Rating
Transaction Summary
Trinitas CLO XX, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that is managed by Trinitas
Capital Management LLC that originally closed in June 2022. On Feb.
19, 2025 (refinancing transaction closing date), the existing
classes A-1, B, C, D-1, D-2, E, and F will be refinanced with the
new classes A-1-R, B-R, C-R, D-1-R, D-2-R, E-R, and F-R,
respectively. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $474 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 74.84%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% of the portfolio balance in aggregate while the
top five obligors can represent up to 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 2.4-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 approximately
0.4 year 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.
Key Provision Changes
The refinancing is being implemented via the First Supplemental
Indenture, which amended certain provisions of the transaction. The
changes include but are not limited to:
- The spreads for A-1-R, B-R, C-R, D-1-R, D-2-R, E-R, and F-R notes
are 1.04%, 1.50%, 1.95%, 3.00%, 4.00%, 5.75%, and 7.85%, compared
with the spreads of 1.53%, 2.46%, 3.50%, 4.70%, 5.85%, 8.15%, and
8.33% for classes A-1, B, C, D-1, D-2, E, and F notes,
respectively, before refinancing;
- The non-call period is extended from June 2024 to February 2026
for all classes except class A-2.
Fitch Analysis
The current portfolio presented to Fitch includes 414 assets from
364 primarily high yield obligors. The portfolio balance is
approximately $474 million. As per the January trustee report, the
transaction passed all of its coverage tests and collateral quality
tests. The weighted average rating of the current portfolio is
'B'/'B-'. Fitch has an explicit rating, credit opinion or private
rating for 43.1% of the current portfolio par balance; ratings for
56.5% of the portfolio were derived using Fitch's Issuer Default
Rating equivalency map; assets that are unrated by Fitch and have
no public ratings from other agencies constitute 0.4% of the
portfolio.
Current Portfolio
The PCM default rate output for the current portfolio of class
A-1-R at the 'AAAsf' rating stress was 45.4%. The PCM recovery rate
output for the current portfolio of class A-1-R at the 'AAAsf'
rating stress was 39.9%. In the analysis of the current portfolio,
the class A-1-R notes passed the 'AAAsf' threshold in all nine cash
flow scenarios with a minimum cushion of 15.5%.
The PCM default rate output for the current portfolio of class A-2
at the 'AAAsf' rating stress was 45.4%. The PCM recovery rate
output for the current portfolio of class A-2 at the 'AAAsf' rating
stress was 39.9%. In the analysis of the current portfolio, the
class A-2 notes passed the 'AAAsf' threshold in all nine cash flow
scenarios with a minimum cushion of 13.1%.
The PCM default rate output for the current portfolio of class E-R
at the 'BB+sf' rating stress was 27.7%. The PCM recovery rate
output for the current portfolio of class E-R at the 'BB+sf' rating
stress was 73.3%. In the analysis of the current portfolio, the
class E-R notes passed the 'BB+sf' threshold in all nine cash flow
scenarios with a minimum cushion of 13.8%.
Fitch Stressed Portfolio (FSP)
The PCM default rate output for the stressed portfolio of class
A-1-R at the 'AAAsf' rating stress was 50.7%. The PCM recovery rate
output for the FSP of class A-1-R at the 'AAAsf' rating stress was
36.7%. In the stressed analysis, the class A-1-R notes passed the
'AAAsf' rating threshold in all nine cash flow scenarios with a
minimum cushion of 7.9%.
The PCM default rate output for the stressed portfolio of class A-2
at the 'AAAsf' rating stress was 50.7%. The PCM recovery rate
output for the FSP of class A-2 at the 'AAAsf' rating stress was
36.7%. In the stressed analysis, the class A-2 notes passed the
'AAAsf' rating threshold in all nine cash flow scenarios with a
minimum cushion of 5.6%.
The PCM default rate output for the stressed portfolio of class E-R
at the 'BB+sf' rating stress was 31.5%. The PCM recovery rate
output for the FSP of class E-R at the 'BB+sf' rating stress was
68.9%. In the stressed analysis, the class E-R notes passed the
'BB+sf' rating threshold in all nine cash flow scenarios with a
minimum cushion of 5.9%.
The rating actions reflect that the notes can sustain a robust
level of defaults combined with low recoveries, as well as other
factors, such as the degree of cushion when analyzing the
indicative portfolio and the strong performance in the sensitivity
scenarios.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'A+sf' and 'AAAsf' for class A-1-R, between
'A-sf' and 'AAAsf' for class A-2, and between less than 'B-sf' and
'BB+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R 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 '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 Trinitas CLO XX,
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.
VELOCITY COMMERCIAL 2025-1: DBRS Gives Prov. B Rating on 3 Classes
------------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the
Mortgage-Backed Certificates, Series 2025-1 (the Certificates) to
be issued by Velocity Commercial Capital Loan Trust 2025-1 (VCC
2025-1 or the Issuer) as follows:
-- $241.7 million Class A at (P) AAA (sf)
-- $20.2 million Class M-1 at (P) AA (low) (sf)
-- $22.1 million Class M-2 at (P) A (low) (sf)
-- $30.1 million Class M-3 at (P) BBB (low) (sf)
-- $23.9 million Class M-4 at (P) BB (sf)
-- $4.7 million Class M-5 at (P) B (high) (sf)
-- $4.4 million Class M-6 at (P) B (sf)
-- $241.7 million Class A-S at (P) AAA (sf)
-- $241.7 million Class A-IO at (P) AAA (sf)
-- $20.2 million Class M1-A at (P) AA (low) (sf)
-- $20.2 million Class M1-IO at (P) AA (low) (sf)
-- $22.1 million Class M2-A at (P) A (low) (sf)
-- $22.1 million Class M2-IO at (P) A (low) (sf)
-- $30.1 million Class M3-A at (P) BBB (low) (sf)
-- $30.1 million Class M3-IO at (P) BBB (low) (sf)
-- $23.9 million Class M4-A at (P) BB (sf)
-- $23.9 million Class M4-IO at (P) BB (sf)
-- $4.7 million Class M5-A at (P) B (high) (sf)
-- $4.7 million Class M5-IO at (P) B (high) (sf)
-- $4.4 million Class M6-A at (P) B (sf)
-- $4.4 million Class M6-IO at (P) 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 (P) AAA (sf) credit ratings on the Certificates reflect 31.25%
of credit enhancement (CE) provided by subordinated certificates.
The (P) AA (low) (sf), (P) A (low) (sf), (P) BBB (low) (sf), (P) BB
(sf), (P) B (high) (sf), and (P) B (sf) credit ratings reflect
25.50%, 19.20%, 10.65%, 3.85%, 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 2025-1 is a securitization of a portfolio of newly originated
and seasoned fixed rate, first-lien residential mortgages
collateralized by investor properties with one to four units
(residential investor loans) and small-balance commercial (SBC)
mortgages collateralized by various types of commercial,
multifamily rental, and mixed-use properties. Five 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, which
are backed by 793 mortgage loans with a total principal balance of
$351,581,520 as of the Cut-Off Date (January 1, 2025).
Approximately 41.1% of the pool comprises residential investor
loans, about 57.9% are traditional SBC loans, and about 0.9% are
the aforementioned SBA 504 loans. Most of the loans in this
securitization (82.3%) were originated by Velocity Commercial
Capital, LLC (Velocity or VCC). Thirty-eight loans (17.7%) were
originated by New Day Commercial Capital, LLC, which is a wholly
owned subsidiary of Velocity, which 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 five SBA 504 loans, which, 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, though 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 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 (ATR) rules and TILA-RESPA Integrated
Disclosure rule.
On January 5, 2024, Harvest Small Business Finance, LLC and Harvest
Commercial Capital, LLC filed a suit in the U.S. District Court for
the Central District of California against certain employees of New
Day Business Finance LLC and Velocity 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 the suit is material.
PHH Mortgage Corporation (PMC) will service all loans within the
pool for a servicing fee of 0.30% per annum. New Day will act as
Subservicer for the 38 New Day-originated loans (including the five
SBA 504 loans), and PHH will also 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 for loans that default or become 60
or more days delinquent under 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 (rated AA with a Stable trend
by Morningstar DBRS) 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 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. Each class'
target principal balance is determined based on the CE targets and
the performing and nonperforming (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 each class'
target principal balance, 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 bonds' principal balances
amortize over the life of the transaction.
COMMERCIAL MORTGAGE-BACKED SECURITIES (CMBS) METHODOLOGY - SMALL
BALANCE COMMERCIAL (SBC) LOANS
The collateral for the SBC portion of the pool consists of 299
individual loans (six loans are collateralized by adjacent
properties owned by the same borrower and treated as one loan)
secured by 297 commercial and multifamily properties. All
commentary in this report will refer to the pool as a 294-loan pool
because Morningstar DBRS treated the six related loans as one.
Given the complexity of the structure and granularity of the pool,
Morningstar DBRS applied its "North American CMBS Multi-Borrower
Rating Methodology" (the CMBS Methodology).
The CMBS loans have a weighted-average (WA) fixed interest rate of
11.2%. This is approximately 20 basis points (bps) higher than the
VCC 2024-6 transaction, 50 bps higher than the VCC 2024-5
transaction, 20 bps lower than the VCC 2024-4 transaction, 50 bps
lower than the VCC 2024-3 transaction, and 40 bps lower than the
VCC 2024-2 and VCC 2024-1 transactions. Most of the loans have
original term lengths of 30 years and fully amortize over 30-year
schedules. However, 15 loans, which represent 7.8% of the SBC pool,
have an initial interest-only (IO) period of 60 or 120 months.
All of the SBC loans were originated between September 2018 and
December 2024 (100.0% of the cut-off pool balance), resulting in a
WA seasoning of 0.7 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 59.7%. However, Morningstar DBRS made LTV adjustments to
38 loans that had an implied capitalization rate of more than 200
bps lower than a 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 63.0%. Lastly, all loans fully
amortize over their respective remaining terms, resulting in 100%
expected amortization, 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 noted 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 supported 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.
Those loans' historical prepayment performance is close to a 0%
conditional prepayment rate (CPR). 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. This collateral pool does not
have any prepayment lockout features, and Morningstar DBRS expects
this pool will have prepayments over the remainder of the
transaction. 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 loan.
As a result of higher interest rate and lending spreads, the SBC
pool has a significant increase in interest rates compared with
prior VCC transactions. Consequently, 168 SBC loans (approximately
56.9% of the deal) have an Issuer net operating income debt service
coverage ratio less than 1.0 times, which is in line with the
previous 2024 transactions, but a larger composition than the
previous VCC transactions in 2023 and 2022. Additionally, although
the Morningstar DBRS CMBS Insight Model does not contemplate FICO
scores, it is important to point out the WA FICO score of 712 for
the SBC loans, which is relatively similar to prior VCC
transactions. With regard to the aforementioned 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 $692,680, a concentration profile
equivalent to that of a transaction with 81 equal-size loans, and a
top 10 loan concentration of 23.7%. 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.
The SBC pool contains one loan that is collateralized by
residential land, though the site is currently used by the borrower
for its stone carving business. There is no lease or cash flow in
place to support the debt service for this loan. Morningstar DBRS
applied a loss given default (LGD) and POD penalty to mitigate this
risk.
As classified by Morningstar DBRS for modeling purposes, the SBC
pool contains a significant exposure to retail (29.6% of the SBC
pool) and office (16.6% of the SBC pool), which are two of the
higher-volatility asset types. Loans counted as retail include
those identified as automotive and potentially commercial
condominium. Combined, retail and office properties represent
approximately 46.1% of the SBC pool balance. Morningstar DBRS
applied a 20.0% reduction to the net cash flow (NCF) for retail
properties and a 30.0% reduction to the NCF for office assets in
the SBC pool, which is above the average NCF reduction applied for
comparable property types in commercial mortgage-backed securities
(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, two were Average + quality (4.8%), 20 were Average
quality (27.9%), 37 were Average - quality (48.0%), 16 were Below
Average quality (15.3%), and five were Poor quality (4.1%).
Morningstar DBRS assumed unsampled loans were Average - quality,
which has a slightly increased POD level. This is consistent with
the assessments from 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 within the top 23 of the
pool, which represent 35.8% of the SBC pool balance. These
appraisals were issued between November 2024 and December 2024 when
the respective loans were originated. Morningstar DBRS was able to
perform a loan-level cash flow analysis on 23 loans in the pool.
The NCF haircuts for these loans ranged from 3.3% to 54.3%, with an
average of 18.7%; however, Morningstar DBRS generally applied more
conservative haircuts on the nonsampled 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, an LGD 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 history. Additionally, the WA
interest rate of the deal is 11.2%, 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 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 December
31, 2024. If any loan has more than two late payments within this
period or is currently 30 days past due, Morningstar DBRS applied
an additional stress to the default rate. This occurred for two
loans, representing 0.3% of the SBC pool balance.
SBA 504 LOANS
The transaction includes five SBA 504 loans, totaling approximately
$3.3 million or 0.94% of the aggregate VCC 2025-1 collateral pool.
These are owner-occupied, first-lien commercial real estate
(CRE)-backed loans, originated via SBA 504 in conjunction with
community development companies (CDC), 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 November
2024 and December 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 $3,315,917, with an average
balance of $663,183. The WA interest rate is 10.24%. 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. WA LTV is 58.52%. WA DSCR is 1.07 times (x) and the WA FICO
of this subpool is 689.
For these loans, Morningstar DBRS applied its "Rating U.S.
Structured Finance Transactions" methodology, Small Business,
Appendix (XVIII). As there is limited historical information for
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
LGD stratified by property type, LTV, and market rank. Morningstar
DBRS input these into its 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 489 mortgage loans with a total
balance of approximately $144.6 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 December 2024 Update," published on December 19, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse coronavirus pandemic scenarios, which were
first published in April 2020.
Notes: All figures are in U.S. dollars unless otherwise noted.
VOYA CLO 2015-3: Fitch Lowers Rating on Class E-R Notes to 'CCCsf'
------------------------------------------------------------------
Fitch Ratings has downgraded the class E-R notes in Voya CLO
2015-3, Ltd. (Voya 2015-3). Fitch has also affirmed the class
A-1-R3, A-2-R3 and A-3-R3 notes at their current ratings, and the
Rating Outlooks on these classes remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Voya CLO 2015-3, Ltd.
A-1-R3 92913UBC9 LT AAAsf Affirmed AAAsf
A-2-R3 92913UBE5 LT AAAsf Affirmed AAAsf
A-3-R3 92913UBG0 LT AAAsf Affirmed AAAsf
E-R 92913DAL8 LT CCCsf Downgrade B-sf
Transaction Summary
Voya 2015-3 is a broadly syndicated loan collateralized loan
obligation (CLO) that is managed by Voya Alternative Asset
Management LLC. The transaction originally closed in September
2015, reset in November 2018, and partially refinanced twice, the
first time in February 2021 and then again in May 2024. The deal
exited its reinvestment period in October 2023. The CLO is secured
primarily by first-lien, senior secured leveraged loans.
KEY RATING DRIVERS
Credit Quality Deterioration and Spread Compression
Fitch believes that there is a real possibility of default for the
class E-R notes, as a result of deterioration of credit quality and
spread compression of the portfolio. The average credit quality of
the portfolio as of the January 2025 reporting is in the 'B'/'B-'
category, and Fitch's weighted average rating factor increased to
26.1 from 25.2 since the last rating action. Downgrades have
increased the number of 'CCC'-rated assets above their respective
limits, and exposure to assets with a Negative Outlook and Fitch's
watchlist are 19.8% and 14.6%, respectively.
The weighted average spread (WAS) of the portfolio decreased to
3.33% from 3.52% measured at the last partial refinancing in May
2024. Comparatively, the WAS of the liabilities is 2.22%, which is
expected to rise as notes continue to amortize.
Note Amortization
The affirmations of the class A-1-R3, A-2-R3, and A-3-R3 notes are
supported by increased credit enhancement (CE) levels driven by
amortization of the class A-1-R3 notes. As of the January 2025
payment date, the class A-1-R3 notes deleveraged by approximately
53% of its original note balance. The CE of the class E-R notes,
however, remains limited from asset coverage and excess spread.
The Stable Outlooks on the class A-1-R3, A-2-R3 and A-3-R3 notes
reflect Fitch's expectation that the notes have sufficient level of
credit protection to withstand potential deterioration in the
credit quality of the portfolios in stress scenarios commensurate
with each class's rating.
Cash Flow Analysis
Fitch used a proprietary cash flow model to replicate the principal
and interest waterfalls, as well as the various structural features
of the transaction. The rating actions for the class A-1-R3,
A-2-R3, and A-3-R3 notes are in line with the model implied ratings
(MIRs) as defined in Fitch's CLO and Corporate CDOs Rating
Criteria.
Fitch's cash flow analysis also indicated that the class E-R notes
are no longer able to withstand default rates commensurate with a
'B-sf' stress, supporting the downgrade of the notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades may occur if portfolio losses continue and notes' CE
further deteriorates or become undercollateralized to render
default more probable or imminent for the class E-R notes;
- A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to no change in the MIR for the
class A-1-R3, A-2-R3 and A-3-R3 notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Except for tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance;
- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating levels
for the current portfolio, would lead to upgrade up to four rating
notches for the class E-R notes, based on the MIR.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
ESG Considerations
Fitch does not provide ESG relevance scores for Voya CLO 2015-3,
Ltd.
In cases where Fitch does not provide ESG relevance scores in
connection with the credit rating of a transaction, programme,
instrument or issuer, Fitch will disclose any ESG factor that is a
key rating driver in the key rating drivers section of the relevant
rating action commentary.
WBRK 2025-WBRK: Fitch Assigns 'BB-(EXP)sf' Rating on Cl. HRR Certs
------------------------------------------------------------------
Fitch Ratings has assigned the following expected ratings and
Rating Outlooks to WBRK 2025-WBRK Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, series 2025-WBRK:
- $201,600,000 class A 'AAAsf'; Outlook Stable;
- $201,600,000(a) class X 'AAAsf'; Outlook Stable;
- $38,200,000 class B 'AA-sf'; Outlook Stable;
- $30,100,000 class C 'A-sf'; Outlook Stable;
- $42,300,000 class D 'BBB-sf'; Outlook Stable.
- $25,925,000 class E 'BBsf'; Outlook Stable.
- $21,875,000(b) 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 in aggregate.
Transaction Summary
WBRK 2025-WBRK Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, represent the beneficial ownership interest in a
five-year, fixed-rate, interest-only first lien mortgage loan with
an original principal balance of $360.0 million.
The mortgage loan is secured by the fee simple and leasehold
interest in the Willowbrook Mall, a 1.5 million sf (731,523 sf of
collateral) super-regional mall located in Wayne, NJ. The loan
sponsor is a wholly owned subsidiary of Brookfield Properties
Retail Holding LLC (Brookfield). Loan proceeds, along with $3.6
million of sponsor equity, will be used to refinance existing debt,
currently securitized in BAMLL 2013-WBRK, of $360.0 million, and
pay estimated closing costs of $3.6 million.
The loan is expected to be co-originated by German American Capital
Corporation and Citi Real Estate Funding Inc. Trimont LLC will
serve as the master servicer, and Situs Holdings, LLC will serve as
the special servicer. Computershare Trust Company, National
Association will serve as the trustee and Deutsche Bank National
Trust Company, National Association will serve as the certificate
administrator. Park Bridge Lender Services LLC will serve as the
operating advisor. The certificates will follow a sequential-pay
structure. The transaction is expected to close on March 6, 2025.
KEY RATING DRIVERS
Net Cash Flow: Fitch's net cash flow (NCF) for the property is
estimated at $37.1 million, which is 12.9% lower than the issuer's
NCF and 13.7% lower than the TTM December 2024 NCF. Fitch applied
an 9.00% cap to derive a Fitch value of $409.4 million, after
deducting for unreserved outstanding tenant improvements and
leasing commissions.
Moderate Fitch Leverage: The $360 million mortgage loan has
moderate leverage, with a Fitch stressed loan-to-value ratio (LTV)
of 87.9%, debt service coverage ratio (DSCR) of 1.02x and debt
yield of 10.2%, along with debt of $492 psf.
Strong Position in a Core Location: The collateral is a
super-regional mall in Wayne, NJ, situated at the confluence of
three major highways: Interstate 80, State Route 23 and U.S. Route
46. The mall hosts a strong tenancy lineup that includes Macy's
(non-collateral), Bloomingdale's (non-collateral) and JCPenney
(non-collateral), BJ's Wholesale Club, Dave & Busters, Zara, H&M,
Apple, Cinemark (leased fee) and Lululemon. It operates within a
trade area that includes about 1.4 million people with an average
household income of over $128,000.
The property is located in Passaic County and therefore is not
subject to the "blue laws" of nearby Bergen County, which prohibit
the sale of most consumer discretionary goods on Sundays. As such,
the subject is able to attract shoppers from outside its immediate
trade area. Fitch assigned Willowbrook Mall a property quality
grade of "B+".
Strong Sales Performance: The property, including non-collateral
anchors, reported strong overall sales of about $416.4 million in
2021, $481.5 million in 2022, $461.6 million in 2023 and $498.4
million in the TTM October 2024. Comparable in-line sales
(excluding Apple) for 2021 through TTM October 2024 were $669 psf,
$694 psf, $697 psf and $714 psf, respectively. Notably, the
non-collateral Macy's the store reported 2023 sales of $85.9
million or $239 psf, far exceeding the national average sales per
store of $23.2 million ($160 psf). The overall occupancy cost for
the collateral was 12.1% as of the October 2024 TTM.
Institutional Sponsorship: The sponsor of this transaction is a
wholly owned subsidiary of Brookfield Properties Retail Holding
LLC, a global real estate services firm under Brookfield Asset
Management. Brookfield Asset Management is a leading alternative
asset manager with over $1 trillion in assets under management.
Brookfield Properties Retail Group is one of the largest retail
real estate companies in the U.S., managing over 200 mall
properties across 43 states, totaling about 155 million sf of
retail space. The company focuses on managing, leasing and
redeveloping high quality retail properties and is headquartered in
Chicago.
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 list below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf'/'AA-sf'/'A-sf'/'BBB-sf'/'BBsf'/'BB-sf'.
- 10% NCF Decline: 'AAsf'/'A-sf'/'BBB-f'/'BBsf'/'BB-sf'/'B+sf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The list below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf'/'AA-sf'/'A-sf'/'BBB-sf'/'BBsf'/'BB-sf'.
- 10% NCF Increase:
'AAAsf'/'AAsf'/'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-calculation of
certain characteristics with the 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.
WELLS FARGO 2015-NXS2: DBRS Confirms C Rating on 3 Classes
----------------------------------------------------------
DBRS Limited downgraded its credit rating on one class of
Commercial Mortgage Pass-Through Certificates, Series 2015-NXS2
issued by Wells Fargo Commercial Mortgage Trust 2015-NXS2 as
follows:
-- Class D to C (sf) from CCC (sf)
In addition, Morningstar DBRS confirmed the following credit
ratings:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at A (low) (sf)
-- Class C at BBB (low) (sf)
-- Class PEX at BBB (low) (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class X-A at AAA (sf)
-- Class X-E at C (sf)
Classes A-2, A-3, and A-SB were discontinued as they were repaid
with the January 2025 remittance.
The trend on Class B was changed to Stable from Negative; Classes C
and PEX continue to carry a Negative trend. All remaining trends
are Stable with the exception of Classes D, E, F, and X-E, which
have credit ratings that do not typically carry trends in
commercial mortgage-backed securities (CMBS) credit ratings.
The downgrade reflects Morningstar DBRS' increased loss projections
for the loans in special servicing. There are six specially
serviced loans, representing 20.4% of the current pool. Morningstar
DBRS' analysis considered liquidation scenarios for all specially
serviced loans and determined that estimated liquidated losses are
likely to almost fully erode the Class E certificate, a primary
consideration in the downgrade of Class D. Morningstar DBRS'
analysis also included consideration of a wind-down scenario given
the near-term maturity of nearly all remaining loans. While
Morningstar DBRS expects the majority of maturing loans are likely
to repay from the pool, three loans representing 13.9% of the
current pool balance, were identified as being at increased risk of
maturity default based on concentrated upcoming rollover or recent
declines in performance. The possibility for additional defaults,
further value decline for loans already in special servicing and an
increase in Morningstar DBRS' loss projections is considered a key
driver in the Negative trend on Class C. Morningstar DBRS'
wind-down scenario also indicated that the senior classes are well
insulated from losses, with nearly $80 million in remaining credit
support beneath the Class B certificate based on current loss
projections, thereby supporting the trend change on Class B to
Stable from Negative.
As of the January 2025 remittance, 50 of the original 63 loans
remain in the trust, with an aggregate balance of $596.8 million,
representing a collateral reduction of 34.7% since issuance. Since
the last credit rating action, a previously specially serviced
loan, Colman Building (Prospectus ID#10) was liquidated from the
trust resulting in a realized loss in line with Morningstar DBRS'
projections. All the remaining loans in the pool are scheduled to
mature by July 2025, with the exception of five loans, totaling
9.8% of the pool, which are scheduled to mature in 2035.
Morningstar DBRS expects most of the loans will successfully repay
at their respective maturity dates based on the performance of the
underlying collateral; this is exhibited by a weighted-average (WA)
debt service coverage ratio (DSCR) of 1.71 times (x) and WA debt
yield of 11.9% as of YE2023 financials.
Morningstar DBRS' loss expectations are primarily driven by Sea
Harbor Office Center (Prospectus ID#6, 6.7% of the pool), which is
secured by a 359,514-square-foot (sf) suburban office building in
Orlando, Florida. The loan originally transferred to the special
servicer in January 2019 for nonmonetary default related to
noncompliance with a cash management trigger. As of the January
2025 remittance, the loan is current on debt payments and the
workout strategy remains unclear. The subject was 94.0% occupied as
of the June 2024 rent roll; however, there is significant near-term
rollover. The largest tenant, Wyndham Hotels & Resorts occupies
72.4% of net rentable area (NRA) on a lease through October 2025.
In May 2024, the tenant publicly announced its plans to relocate
upon its October 2025 lease expiration. This departure is expected
to drive occupancy at the subject down to 21.6%. Moreover, the
second largest tenant, Visit Orlando (12.4% of the NRA), also has a
near-term lease expiration in October 2025, making a resolution or
refinance of the loan increasingly challenging. As per the most
recent servicer commentary, the borrower has listed the property
for sale and reports interest from potential buyers and
redevelopers. The property was reappraised in March 2023 at $44.5
million, 32.6% less than the issuance appraised value of $66.0
million. Given the concentrated near-term rollover risk,
significant value deterioration, and softening submarket metrics,
Morningstar DBRS' analysis includes a liquidation scenario, based
on a 40% haircut to the 2023 appraised value to account for the
expected further value deterioration. The resulting projected loss
severity is approximately 40%, or $15.5 million.
The largest loan in the pool is Campbell Technology Park, which is
secured by a four-building, 280,000-sf office complex in Campbell,
California. The loan was added to the watchlist in February 2022
because of declining occupancy/DSCR figures. The property was 50.3%
occupied as of the September 2024 rent roll, significantly less
than the issuance occupancy rate of 93.4%. Moreover, all remaining
leases are scheduled to expire by December 2025. Given the high
maturity default risk stemming from the declining performance and
concentrated upcoming rollover, Morningstar DBRS applied an
elevated loan-to-value adjustment and probability of default
penalty, resulting in a loan-level expected loss that is more than
two times higher than the pool-level expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
ZAYO ISSUER 2025-1: Fitch Assigns BB-sf Rating on C Notes
---------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Zayo Issuer, LLC, Secured Fiber Network Revenue Notes, Series
2025-1 as follows:
- $42.5 million(a) 2025-1 class A-1-L 'Asf'; Outlook Stable;
- $1,022.5 million 2025-1 class A-2 'A-sf'; Outlook Stable;
- $164.9 million 2025-1 class B 'BBB-sf'; Outlook Stable;
- $230.9 million 2025-1 class C 'BB-sf'; Outlook Stable.
The following class is not expected to be rated by Fitch:
- $77,000,000(b) series 2025-1, class R.
Entity/Debt Rating Prior
----------- ------ -----
Zayo Issuer, LLC,
Secured Fiber Network
Revenue Notes,
Series 2025-1
A-1-L LT Asf New Rating A(EXP)sf
A-2 LT A-sf New Rating A-(EXP)sf
B LT BBB-sf New Rating BBB-(EXP)sf
C LT BB-sf New Rating BB-(EXP)sf
R LT NRsf New Rating NR(EXP)sf
(a) This note is a liquidity funding note that can be drawn for the
purpose of funding liquidity funding advances subject to the
satisfaction of certain conditions. The balance of the note will be
$0 at issuance and is not counted when calculating debt/Fitch net
cash flow (NCF) ratio.
(b) This class reflects the sponsor's horizontal credit risk
retention interest with a notional balance representing 5% of the
2025-1 notes.
Transaction Summary
Zayo Issuer, LLC, Secured Fiber Network Revenue Notes, Series
2025-1 is a securitization of contract payments derived from an
existing enterprise fiber network. Collateral assets include
conduits, cables, network-level equipment, access rights, customer
contracts and transaction accounts. Debt is secured by NCF from
operations and benefits from a perfected security interest in the
securitized assets.
The collateral network consists of the sponsor's enterprise fiber
network of approximately 28,000 fiber route miles (FRM) that serves
2,245 on-net facilities across 11 states and Washington D.C. in the
northeast region of the U.S. The network supports 12,264 contracts
that provide lit and dark data transport, at 75.5% of monthly
recurring revenue (MRR) in October 2024, as well as lit fiber
connectivity services (24.5%).
The expected ratings reflect Fitch's structured finance analysis of
cash flow from the ownership interest in the underlying fiber optic
network, rather than an assessment of the corporate default risk of
the parent, Zayo Group, LLC.
KEY RATING DRIVERS
NCF and Leverage: The pool's Fitch NCF is $131.9 million, implying
a 15.6% haircut to issuer NCF. The debt multiple relative to
Fitch's NCF on the rated classes is 10.8x, compared with
debt/issuer NCF leverage of 9.1x.
Based on the Fitch NCF and assumed annual revenue NCF growth of
2.0%, and following the transaction's anticipated repayment date
(ARD), the notes would be repaid 18.4 years from closing.
Credit Risk Factors: The major factors affecting Fitch's
determination of cash flow and maximum potential leverage include
the high quality of the underlying collateral networks, low
historical churn, the creditworthiness of contract counterparties,
market position, market diversity, capability of the operator and
the transaction structure.
Technology-Dependent Credit: Due to the specialized nature of the
collateral and potential for changes in technology to affect
long-term demand for digital infrastructure, the senior classes of
this transaction do not achieve ratings above 'Asf'.
The securities have a rated final payment date 30 years after
closing, and the long-term tenor of the securities increases the
risk that an alternative technology, rendering obsolete the current
transmission of data through fiber optic cables, will be developed.
Fiber optic cable networks are currently the fastest and most
reliable means to transmit information, and data providers continue
to invest in and utilize this technology.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow as a result of higher expenses, customer churn,
declining contract rates, contract amendments or the development of
an alternative technology for the transmission of data could lead
to downgrades.
Fitch's base case NCF was 15.6% below the issuer's underwritten
cash flow. A further 10% decline in Fitch's NCF indicates the
following ratings based on Fitch's determination of MPL: class A-2
from 'A-sf' to 'BBB-sf'; class B from 'BBB-sf' to 'BB+sf'; class C
from 'BB-sf' to 'B-sf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Increasing cash flow from rate increases, additional customers,
lower expenses or contract amendments could lead to upgrades.
A 10% increase in Fitch's NCF indicates the following ratings based
on Fitch's determination of MPL: class A-2 from 'A-sf' to 'Asf';
class B from 'BBB-sf' to 'BBBsf'; class C from 'BB-sf' to 'BBsf'.
Upgrades, however, are unlikely due to the issuer's ability to
issue additional notes pari passu notes. In addition, the senior
classes are capped in the 'Asf' category.
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.
[] DBRS Hikes 23 Credit Ratings From 15 Carvana Auto Transactions
-----------------------------------------------------------------
DBRS, Inc. upgraded 23 credit ratings and confirmed 54 credit
ratings from 15 Carvana Auto Receivables Trust transactions.
The Affected Ratings are available at https://bit.ly/3Dd7qwE
The Issuers are:
Carvana Auto Receivables Trust 2021-N1
Carvana Auto Receivables Trust 2023-N3
Carvana Auto Receivables Trust 2021-N4
Carvana Auto Receivables Trust 2021-N2
Carvana Auto Receivables Trust 2024-N3
Carvana Auto Receivables Trust 2021-P2
Carvana Auto Receivables Trust 2021-N3
Carvana Auto Receivables Trust 2022-N1
Carvana Auto Receivables Trust 2020-P1
Carvana Auto Receivables Trust 2024-N1
Carvana Auto Receivables Trust 2024-N2
Carvana Auto Receivables Trust 2023-N4
Carvana Auto Receivables Trust 2021-P1
Carvana Auto Receivables Trust 2023-N1
Carvana Auto Receivables Trust 2023-N2
The credit rating actions are based on the following analytical
considerations:
-- For Carvana Auto Receivables Trust 2020-P1, Carvana Auto
Receivables Trust 2021-P1, and Carvana Auto Receivables Trust
2021-P2, the prime transactions, losses are tracking below the
Morningstar DBRS initial base-case CNL expectations. The current
levels of hard credit enhancement (CE) and estimated excess spread
are sufficient to support the Morningstar DBRS projected remaining
CNL assumptions at multiples of coverage commensurate with the
credit ratings.
-- For Carvana Auto Receivables Trust 2021-N1 and Carvana Auto
Receivables Trust 2021-N2, losses are tracking in line with or
below the Morningstar DBRS initial base-case CNL expectations. The
current levels of hard CE and estimated excess spread are
sufficient to support the Morningstar DBRS projected remaining CNL
assumptions at multiples of coverage commensurate with the credit
ratings.
-- For Carvana Auto Receivables Trust 2021-N3 through Carvana Auto
Receivables Trust 2023-N4, although losses are tracking above the
Morningstar DBRS initial base-case CNL expectations, the current
level of hard CE and estimated excess spread are sufficient to
support the Morningstar DBRS projected remaining CNL assumptions at
multiples of coverage commensurate with the credit ratings.
-- For Carvana Auto Receivables Trust 2024-N1 through Carvana Auto
Receivables Trust 2024-N3, losses are tracking below the
Morningstar DBRS initial base-case CNL expectations. The current
levels of hard credit enhancement (CE) and estimated excess spread
are sufficient to support the Morningstar DBRS projected remaining
CNL assumptions at multiples of coverage commensurate with the
credit ratings.
-- The credit rating actions are the result of collateral
performance to date and Morningstar DBRS' assessment of future
performance assumptions.
-- The transaction capital structures and form and sufficiency of
available credit enhancement.
-- The transaction parties' capabilities with regard to
originating, underwriting, and servicing.
-- The transaction assumptions consider Morningstar DBRS' baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary, "Baseline Macroeconomic Scenarios for Rated
Sovereigns December 2024 Update," published on December 19, 2024.
These baseline macroeconomic scenarios replace Morningstar DBRS'
moderate and adverse coronavirus pandemic scenarios, which were
first published in April 2020.
Carvana 2020-P1, Carvana 2021-P1, Carvana 2021-P2, Carvana 2021-N1,
Carvana 2021-N2, Carvana 2021-N3, Carvana 2021-N4, Carvana 2022-N1,
& Carvana 2023-N1:
Morningstar DBRS' credit ratings on the applicable classes address
the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
Where applicable, a description of these financial obligations can
be found in the transactions' respective press releases at
issuance.
Carvana Auto Receivables Trust 2023-N2
Morningstar DBRS' credit rating on the securities listed below
addresses the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
Morningstar DBRS' credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations.
Morningstar DBRS' long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued.
Carvana Auto Receivables Trust 2023-N3
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 Accrued Note Interest and the related Note
Balance.
Morningstar DBRS' credit rating does not address non-payment risk
associated with contractual payment obligations that are not
financial obligations.
Morningstar DBRS' long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued. The Morningstar DBRS short-term debt rating scale
provides an opinion on the risk that an issuer will not meet its
short-term financial obligations in a timely manner.
Carvana Auto Receivables Trust 2023-N4
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 Accrued Note Interest and the related Note
Balance.
Morningstar DBRS' credit rating does not address non-payment risk
associated with contractual payment obligations that are not
financial obligations.
Morningstar DBRS' long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued. The Morningstar DBRS short-term debt rating scale
provides an opinion on the risk that an issuer will not meet its
short-term financial obligations in a timely manner.
Carvana Auto Receivables Trust 2024-N1
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 Accrued Note Interest and the related Note
Balance.
Morningstar DBRS credit rating does not address non-payment risk
associated with contractual payment obligations that are not
financial obligations.
Morningstar DBRS long-term credit ratings provide opinions on risk
of default. Morningstar DBRS considers risk of default to be the
risk that an issuer will fail to satisfy the financial obligations
in accordance with the terms under which a long-term obligation has
been issued. The Morningstar DBRS short-term debt rating scale
provides an opinion on the risk that an issuer will not meet its
short-term financial obligations in a timely manner.
Carvana Auto Receivables Trust 2024-N2
Morningstar DBRS's 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 Accrued Note Interest and the related
Note Balance.
Morningstar DBRS's credit rating does not address non-payment risk
associated with contractual payment obligations that are not
financial obligations.
Morningstar DBRS's long-term credit ratings provide opinions on
risk of default. Morningstar DBRS considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued. The Morningstar DBRS short-term debt
rating scale provides an opinion on the risk that an issuer will
not meet its short-term financial obligations in a timely manner.
Carvana Auto Receivables Trust 2024-N3
Morningstar DBRS's 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 Accrued Note Interest and the related
Note Balance.
Notes: The principal methodology applicable to the credit ratings
is Morningstar DBRS Master U.S. ABS Surveillance (January 10, 2025.
[] Fitch Affirms 37 Classes From 12 National Collegiate Trusts
--------------------------------------------------------------
Fitch Ratings has affirmed 37 classes of notes from 12 National
Collegiate Student Loan Trusts (NCSLTs). Two classes from NCSLTs
remain on Rating Watch Negative (RWN)
Entity/Debt Rating Prior
----------- ------ -----
National Collegiate Student
Loan Trust 2004-2/
NCF Grantor Trust 2004-2
B 63543PBA3 LT CCsf Affirmed CCsf
C 63543PBB1 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2005-1/
NCF Grantor Trust 2005-1
B 63543PBK1 LT CCsf Affirmed CCsf
C 63543PBL9 LT Dsf Affirmed Dsf
National Collegiate Student
Loan Trust 2007-1
A-4 63543XAD1 LT Csf Affirmed Csf
B 63543XAF6 LT Csf Affirmed Csf
C 63543XAG4 LT Csf Affirmed Csf
D 63543XAH2 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2007-2
A-4 63543LAD7 LT Csf Affirmed Csf
B 63543LAF2 LT Csf Affirmed Csf
C 63543LAG0 LT Csf Affirmed Csf
D 63543LAH8 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2006-3
A-5 63543VAE3 LT CCsf Affirmed CCsf
B 63543VAG8 LT Csf Affirmed Csf
C 63543VAH6 LT Csf Affirmed Csf
D 63543VAJ2 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2006-1
A-5 63543PCD6 LT Csf Affirmed Csf
B 63543PCF1 LT Csf Affirmed Csf
C 63543PCG9 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2005-2/
NCF Grantor Trust 2005-2
A-5-1 63543PBU9 LT CCCsf Affirmed CCCsf
A-5-2 63543PBY1 LT CCCsf Affirmed CCCsf
B 63543PBW5 LT Csf Affirmed Csf
C 63543PBX3 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2005-3/
NCF Grantor Trust 2005-3
A-5-1 63543TAE8 LT Bsf Rating Watch Maintained Bsf
A-5-2 63543TAF5 LT Bsf Rating Watch Maintained Bsf
B 63543TAJ7 LT Csf Affirmed Csf
C 63543TAK4 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2006-2
A-4 63543MAD5 LT Csf Affirmed Csf
B 63543MAF0 LT Csf Affirmed Csf
C 63543MAG8 LT Csf Affirmed Csf
National Collegiate
Student Loan Trust
2003-1
B-1 63543PAJ5 LT Csf Affirmed Csf
B-2 63543PAK2 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2004-1
A-4 63543PAP1 LT CCsf Affirmed CCsf
B-1 63543PAS5 LT Csf Affirmed Csf
B-2 63543PAT3 LT Csf Affirmed Csf
National Collegiate Student
Loan Trust 2006-4
A-4 63543WAD3 LT Csf Affirmed Csf
B 63543WAF8 LT Csf Affirmed Csf
C 63543WAG6 LT Csf Affirmed Csf
D 63543WAH4 LT Csf Affirmed Csf
Transaction Summary
For each of these classes Fitch maintained a rating cap at the
current 'Bsf' rating. Each of these classes remain on RWN:
- NCSLT 2005-3: Class A-5-1 and Class A-5-2.
The RWN and the rating cap reflect the ongoing litigations between
the Consumer Financial Protection Bureau (CFPB) and the trusts,
which could have a negative credit impact on the transactions.
Fitch will resolve the RWN as soon as additional clarity is
available on the outcome of all ongoing litigations with the CFPB,
as well as any other pending litigation involving the trusts and
the transactions' parties, which may be more than six months from
the date of this review.
KEY RATING DRIVERS
Ongoing Litigation Risk:
Fitch maintained the RWN on the non-distressed notes due to the
ongoing litigation between the CFPB and the trusts. These classes
have been on RWN since Sept. 22, 2017 due to the proposed consent
judgment and the uncertainty around any possible negative credit
impact on the transactions. The CFPB filed an action on Sept. 18,
2017, and a proposed consent order against the NCSLT issuers for
illegal student loan debt collection practices. According to the
CFPB, consumers were sued for collection on private student loan
debt that the companies could not prove was owed or which
obligations were beyond the statutes of limitation for legal
action.
As of Jan. 16, 2025, the CFPB and the National Collegiate Student
Loan Trusts filed a proposed stipulated judgment that, if entered
by the court, would require the Trusts to pay $2.25 million in
monetary relief, redress, and damages in favor of the CFPB. This
follows an earlier 2024 ruling where NCSLT issuers were deemed
subject to the enforcement authority of the CFPB. Fitch expects no
rating impact should this amount eventually be due by the trusts.
Additionally, sufficient liquidity would be available in
transactions with outstanding notes rated 'Bsf' to cover these
additional costs.
On May 06, 2024, the CFPB took a separate action against the NCSLT
and PHEAA for multi-year servicing failures. Fitch will keep
monitoring the outcome of this ongoing litigation, as well as any
other pending litigation involving the trusts and the transactions'
parties.
Collateral Performance:
The NCSLT trusts are collateralized by private student loans
originated by First Marblehead Corporation. At deal inception, all
loans were guaranteed by The Education Resources Institute (TERI);
however, no credit is given to the guaranty since TERI filed for
bankruptcy on April 7, 2008.
Fitch maintained its assumption of constant default rate (CDR) at
4.00% on the transactions of NCSLT 2005-3. The recovery rate was
assumed to be 0% considering recent lawsuit uncertainty between the
trusts and defaulted borrowers.
Payment Structure:
All trusts are under-collateralized as total parity is less than
100%. As of the January 2025 distribution date, the senior reported
parity is 38.87%, 187.36%, 3246.75%, 152.74%, 68.72%, 509.76%,
216.63%, 147.07% and 129.77% for NCSLT 2004-1, 2005-2, 2005-3,
2006-1, 2006-2, 2006-3, 2006-4, 2007-1 and 2007-2, respectively.
Senior notes benefit from subordination provided by the junior
notes and have had increasing parity levels due to amortization,
except for 2004-1 and 2006-2. However, Fitch has capped the ratings
of each at their current ratings given ongoing litigation risk.
Operational Capabilities:
Pennsylvania Higher Education Assistance Agency (PHEAA) services
roughly 98% of the trusts, with Nelnet servicing the rest. US Bank
N.A. acts as special servicer for the trusts. Fitch believes all
servicers are acceptable servicers of private student loans.
A lawsuit to call a servicer default under the transaction
documents against PHEAA was initiated by some of the holders of the
beneficial interest in the NCSLT trusts. Despite the uncertainty on
the outcome of pending litigations between transaction parties,
including PHEAA, Fitch believes such risk is addressed by the
rating cap at current rating of 'Bsf' and Fitch's conservative
assumptions on defaults and recoveries.
ESG - Customer Welfare - Fair Messaging, Privacy & Data Security:
The trusts must comply with consumer protection-related regulatory
requirements such as fair/transparent lending, data security, and
safety standards.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch expects to resolve the RWN on the notes rated 'Bsf' as soon
as additional information is available on the outcome of the
ongoing litigation between the CFPB and the NCSLT trusts. Should
the litigation result in unforeseen monetary expenses, this could
result in negative rating actions, depending on the type, timing
and size of such expenses.
Fitch increased base case default rates by 10%, 25% and 50%, in
accordance with its U.S. Private Student Loan ABS Rating Criteria,
and there was no change to expected ratings due to the rating cap
on the trusts following the ongoing litigation risk.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Positive rating actions are not likely until there is resolution of
the outstanding litigation between the CFPB and the NCSLT trusts.
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
National Collegiate Student Loan Trust 2003-1 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety standards, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
capping the ratings at 'BBBsf' as well as placing the
non-distressed notes on RWN.
National Collegiate Student Loan Trust 2004-1 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety standards, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
capping the ratings at 'BBBsf' as well as placing the
non-distressed notes on RWN.
National Collegiate Student Loan Trust 2004-2/NCF Grantor Trust
2004-2 has an ESG Relevance Score of '5' for Customer Welfare -
Fair Messaging, Privacy & Data Security due to compliance with
consumer protection related regulatory requirements, such as
fair/transparent lending, data security, and safety standards,
which has a negative impact on the credit profile, and is highly
relevant to the rating, resulting in capping the ratings at 'BBBsf'
as well as placing the non-distressed notes on RWN.
National Collegiate Student Loan Trust 2005-1/NCF Grantor Trust
2005-1 has an ESG Relevance Score of '5' for Customer Welfare -
Fair Messaging, Privacy & Data Security due to compliance with
consumer protection related regulatory requirements, such as
fair/transparent lending, data security, and safety standards,
which has a negative impact on the credit profile, and is highly
relevant to the rating, resulting in capping the ratings at 'BBBsf'
as well as placing the non-distressed notes on RWN.
National Collegiate Student Loan Trust 2005-2/NCF Grantor Trust
2005-2 has an ESG Relevance Score of '5' for Customer Welfare -
Fair Messaging, Privacy & Data Security due to compliance with
consumer protection related regulatory requirements, such as
fair/transparent lending, data security, and safety standards,
which has a negative impact on the credit profile, and is highly
relevant to the rating, resulting in capping the ratings at 'BBBsf'
as well as placing the non-distressed notes on RWN.
National Collegiate Student Loan Trust 2005-3/NCF Grantor Trust
2005-3 has an ESG Relevance Score of '5' for Customer Welfare -
Fair Messaging, Privacy & Data Security due to compliance with
consumer protection related regulatory requirements, such as
fair/transparent lending, data security, and safety standards,
which has a negative impact on the credit profile, and is highly
relevant to the rating, resulting in capping the ratings at 'BBBsf'
as well as placing the non-distressed notes on RWN.
National Collegiate Student Loan Trust 2006-1 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety standards, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
capping the ratings at 'BBBsf' as well as placing the
non-distressed notes on RWN.
National Collegiate Student Loan Trust 2006-2 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety, which has a negative impact on the credit
profile, and is highly relevant to the rating, resulting in capping
the ratings at 'BBBsf' as well as placing the non-distressed notes
on RWN.
National Collegiate Student Loan Trust 2006-3 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety, which has a negative impact on the credit
profile, and is highly relevant to the rating, resulting in capping
the ratings at 'BBBsf' as well as placing the non-distressed notes
on RWN.
National Collegiate Student Loan Trust 2006-4 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety standards, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
capping the ratings at 'BBBsf' as well as placing the
non-distressed notes on RWN.
National Collegiate Student Loan Trust 2007-1 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety standards, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
capping the ratings at 'BBBsf' as well as placing the
non-distressed notes on RWN.
National Collegiate Student Loan Trust 2007-2 has an ESG Relevance
Score of '5' for Customer Welfare - Fair Messaging, Privacy & Data
Security due to compliance with consumer protection related
regulatory requirements, such as fair/transparent lending, data
security, and safety standards, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
capping the ratings at 'BBBsf' as well as placing the
non-distressed notes on RWN.
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.
[] Moody's Upgrades Ratings on 11 Bonds From 4 US RMBS Deals
------------------------------------------------------------
Moody's Ratings has upgraded the ratings of 11 bonds from four US
residential mortgage-backed transactions (RMBS), backed by
agency-eligible, prime jumbo, investor and some Non-QM mortgage
loans.
A comprehensive review of all credit ratings for the respective
transactions has been conducted during a rating committee.
The complete rating actions are as follows:
Issuer: Wells Fargo Mortgage Backed Securities 2020-1 Trust
Cl. B-2, Upgraded to Aaa (sf); previously on Jun 30, 2023 Upgraded
to Aa1 (sf)
Cl. B-3, Upgraded to Aa2 (sf); previously on Jun 30, 2023 Upgraded
to Aa3 (sf)
Cl. B-5, Upgraded to Baa2 (sf); previously on Apr 29, 2024 Upgraded
to Baa3 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2021-INV2 Trust
Cl. B-2, Upgraded to Aa2 (sf); previously on Apr 29, 2024 Upgraded
to Aa3 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Apr 29, 2024 Upgraded
to A3 (sf)
Cl. B-4, Upgraded to Baa2 (sf); previously on Apr 29, 2024 Upgraded
to Baa3 (sf)
Cl. B-5, Upgraded to Ba2 (sf); previously on Apr 29, 2024 Upgraded
to Ba3 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2021-RR1 Trust
Cl. B-1, Upgraded to Aaa (sf); previously on Apr 29, 2024 Upgraded
to Aa1 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2022-2 Trust
Cl. B-3, Upgraded to Baa2 (sf); previously on Apr 26, 2022
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Apr 26, 2022
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Apr 26, 2022
Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pools. These
transactions continue to display strong collateral performance,
with cumulative losses for each transaction under .09% and a small
number of loans in delinquencies. In addition, enhancement levels
for the tranches in these transactions have grown significantly, as
the pools amortize relatively quickly. The credit enhancement since
closing has grown, on average, 1.7x for the non-exchangeable
tranches upgraded.
In addition, while Moody's analysis applied a greater probability
of default stress on loans that have experienced modifications,
Moody's decreased that stress to the extent the modifications were
in the form of temporary payment relief.
No actions were taken on the other rated classes in this deal
because the expected losses on these bonds remain commensurate with
their current ratings, after taking into account the updated
performance information, structural features, and credit
enhancement.
Principal Methodologies
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
July 2024.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
*********
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