/raid1/www/Hosts/bankrupt/TCR_Public/160110.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, January 10, 2016, Vol. 20, No. 10
Headlines
AGATE BAY 2016-1: Fitch to Rate Class B-4 Certificates 'BB'
AGATE BAY 2016-1: S&P Assigns Prelim. BB Rating on Cl. B-4 Certs
AIRPLANES PASS: Fitch Affirms & Withdraws C Ratings on 3 Tranches
ALESCO PREFERRED V: Moody's Hikes Ratings on 3 Tranches to Caa2
ALESCO PREFERRED VIII: Moody's Raises Rating on Cl. B-1 Notes to B1
BANK OF AMERICA 2001-3: Fitch Raises Rating on Cl. M Certs to 'B'
BEAR STEARNS 2003-TOP12: Fitch Raises Rating on Class N to B
CANTOR COMMERCIAL 2016-C3: Fitch Expects to Rate Class G 'B-sf'
CARLYLE HIGH X: Moody's Hikes Class E Debt Rating to 'Ba2(sf)'
DLJ COMMERCIAL 1999-CG3: Fitch Affirms 'Dsf' Rating on 5 Certs.
FLATIRON CLO 2007-1: Moody's Affirms Ba3(sf) Rating on Cl. E Notes
FOUR CORNERS III: Moody's Affirms 'Ba3' Rating on Class E Debt
GS MORTGAGE 2007-GG10: Fitch Affirms 'Dsf' Rating on Cl. C Certs
JP MORGAN 2000-C10: Fitch Affirms 'Dsf' Rating on 6 Certificates
JPMCC COMMERCIAL 2015-JP1: DBRS Finalizes BB Rating on Cl. F Debt
JPMCC COMMERCIAL 2015-JP1: Fitch Assigns B- Rating on Cl. G Debt
LB-UBS COMMERCIAL 2006-C1: Fitch Lowers Rating on Cl. E Certs to C
MADISON PARK XIX: Moody's Assigns Ba3 Rating on Class D Notes
MARANON LOAN 2015-1: Moody's Assigns Ba3(sf) to Class E Notes
MASTR RESECURITIZATION 2007-1: Moody's Cuts A1 Debt Rating to Caa3
MERRILL LYNCH: S&P Hikes Rating on 10 Pass Through Certs to BB+
MORGAN STANLEY 2003-IQ5: Fitch Affirms 'Bsf' Rating on Cl. M Certs
SHERIDAN FUND I: S&P Lowers Rating to 'CCC', Outlook Negative
SHERIDAN FUND II: S&P Lowers Rating to 'CCC', Outlook Negative
ST. JAMES RIVER: Moody's Affirms Ba1 Rating on Class E Notes
US CAPITAL VI: Moody's Raises Rating on Cl. A-2 Notes to 'B1'
WFRBS COMMERCIAL 2013-C11: S&P Affirms B+ Rating on Cl. F Certs
WG HORIZONS I: Moody's Hikes Class D Debt Rating From 'Ba1(sf)'
[*] Moody's Upgrades $125MM of Subprime RMBS Issued 2002-2005
[*] S&P Discontinues Ratings on 24 Classes From 7 CDO Transactions
[*] S&P Takes Rating Actions on 11 Classes From 3 RMBS Deals
[*] S&P Takes Various Rating Actions on 21 U.S. Alt-A RMBS
*********
AGATE BAY 2016-1: Fitch to Rate Class B-4 Certificates 'BB'
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Fitch Ratings expects to rate Agate Bay Mortgage Trust 2016-1 as
follows:
-- $197,937,000 class A-6 certificates 'AAAsf'; Outlook Stable;
-- $65,979,000 class A-8 certificates 'AAAsf'; Outlook Stable;
-- $20,418,000 class A-10 certificates 'AAAsf'; Outlook Stable;
-- $284,334,000 class A-X-1 notional certificates 'AAAsf';
Outlook Stable;
-- $197,937,000 class A-X-4 notional certificates 'AAAsf';
Outlook Stable;
-- $65,979,000 class A-X-5 notional certificates 'AAAsf'; Outlook
Stable;
-- $20,418,000 class A-X-6 notional certificates 'AAAsf'; Outlook
Stable;
-- $7,009,000 class B-1 certificates 'AAsf'; Outlook Stable;
-- $5,333,000 class B-2 certificates 'Asf'; Outlook Stable;
-- $3,962,000 class B-3 certificates 'BBBsf'; Outlook Stable;
-- $1,676,000 class B-4 certificates 'BBsf'; Outlook Stable.
Exchangeable Certificates:
-- $284,334,000 class A-1 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $284,334,000 class A-2 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $263,916,000 class A-3 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $263,916,000 class A-4 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $197,937,000 class A-5 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $65,979,000 class A-7 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $20,418,000 class A-9 exchangeable certificates 'AAAsf';
Outlook Stable;
-- $284,334,000 class A-X-2 exchangeable notional certificates
'AAAsf'; Outlook Stable;
-- $263,916,000 class A-X-3 exchangeable notional certificates
'AAAsf'; Outlook Stable.
The $2,438,767 class B-5 certificates and $304,752,767 class A-IO-S
notional certificates will not be rated.
KEY RATING DRIVERS
High Quality Mortgage Pool: The collateral pool consists of very
high-quality fixed-rate, fully amortizing loans to borrowers with
strong credit profiles, low leverage and liquid reserves. All loans
have a 30-year original term to maturity. The pool has a weighted
average (WA) FICO score of 772 and an original combined
loan-to-value (CLTV) ratio of 67.5%. While the average amount of
liquid reserves is slightly lower for this pool relative to other
recent Agate Bay transactions with comparable profiles, but more
than 28% of the borrowers still have reserves in excess of 30% of
their mortgage amount.
Geographic Concentration Risk: The pool's primary concentration
risk is in California, where 49.5% of the properties are located.
In addition, the metropolitan areas encompassing San Francisco, Los
Angeles, San Jose and San Diego combine for 40% of the collateral
balance and represent four of the top 10 regions. While this is a
slight improvement over prior Agate Bay transactions, the regional
concentration resulted in an additional penalty to the pool's
lifetime probability of default (PD) of roughly 3%.
Robust Representation Framework: Fitch considers the transaction's
representation, warranty and enforcement (RW&E) mechanism framework
to be consistent with Tier 1 quality. The transaction benefits from
a life-of-loan representation and warranty (R&W), as well as a
backstop by the seller, TH TRS, in case of insolvency or
dissolution of the related originator. Similar to recent
transactions rated by Fitch, ABMT 2016-1 contains binding
arbitration provisions that may serve to provide timely resolution
to R&W disputes.
Originators with Limited Performance History: Many of the loans
were originated by lenders with a limited non-agency performance
history. However, all the loans were originated to meet TH TRS's
purchase criteria and were reviewed by a third-party due diligence
firm to TH TRS's guidelines with no material findings. TH TRS is a
wholly owned subsidiary of Two Harbors Investment Corp. In
addition, Fitch conducted an onsite review or in-depth call with
three of the top five originators which account for approximately
30.5% of the pool.
Extraordinary Expense Treatment: The trust provides for expenses,
including indemnification amounts and costs of arbitration, to be
paid by the net WA coupon (WAC) of the loans, which does not affect
the contractual interest due on the certificates. Furthermore, the
expenses to be paid from the trust are capped at $300,000 per annum
($125,000 for the trustee), which can be carried over each year,
subject to the cap until paid in full.
Safe-Harbor Qualified Mortgages: All the loans in the pool have
application dates of Jan. 10, 2014 or later and are, therefore,
subject to the ability-to-repay (ATR)/qualified mortgage (QM) Rule.
All the loans subject to this rule were classified as safe harbor
QM (SHQM), for which no adjustment was made.
AGATE BAY 2016-1: S&P Assigns Prelim. BB Rating on Cl. B-4 Certs
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Standard & Poor's Ratings Services assigned its preliminary ratings
to Agate Bay Mortgage Trust 2016-1's $302.314 million mortgage
pass-through certificates.
The certificate issuance is a residential mortgage-backed
securities transaction backed by first-lien fixed residential
mortgage loans secured by one- to four-family residential
properties, condominiums, cooperatives, and planned unit
developments to primarily prime borrowers.
The preliminary ratings are based on information as Jan. 4, 2016.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- High-quality collateral in the pool;
-- Available credit enhancement; and the
-- Transaction's associated structural mechanics.
RATINGS LIST
PRELIMINARY RATINGS ASSIGNED
Agate Bay Mortgage Trust 2016-1
Class Ratings (i) Amount (Mil. $)
A-1 AAA (sf) 284.334
A-2 AAA (sf) 284.334
A-3 AAA (sf) 263.916
A-4 AAA (sf) 263.916
A-5 AAA (sf) 197.937
A-6 AAA (sf) 197.937
A-7 AAA (sf) 65.979
A-8 AAA (sf) 65.979
A-9 AAA (sf) 20.418
A-10 AAA (sf) 20.418
A-X-1 AAA (sf) Notional
A-X-2 AAA (sf) Notional
A-X-3 AAA (sf) Notional
A-X-4 AAA (sf) Notional
A-X-5 AAA (sf) Notional
A-X-6 AAA (sf) Notional
B-1 AA (sf) 7.009
B-2 A (sf) 5.333
B-3 BBB (sf) 3.962
B-4 BB (sf) 1.676
B-5 NR 2.439
(i) The classes, principle amounts, and ratings in this table
reflect the preliminary term sheet dated Jan. 4, 2016.
NR--Not rated.
AIRPLANES PASS: Fitch Affirms & Withdraws C Ratings on 3 Tranches
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Fitch Ratings has affirmed and withdrawn the following Airplanes
Pass Through Trust ratings:
-- Class A-9 at 'Csf', RE 0%;
-- Class B at 'Csf', RE 0%;
-- Class C at 'Csf', RE 0%;
-- Class C at 'Csf', RE 0%.
KEY RATING DRIVERS
The affirmation of the notes at 'Csf' reflects Fitch's view that
default is considered inevitable. The pool of aircraft consists
predominately of aged, lower tier aircraft, which Fitch believes
will be unable to generate sufficient cash flow to repay the notes
in full as leasing potential is minimal and the size of the trust's
remaining debt obligations far exceeds the value of the collateral.
The recovery estimate for all classes is 0% as the subordinate
notes have extensive interest shortfalls and no principal is
expected to be paid as collections will be applied to build up the
transaction's liquidity reserve in order to cover potential
liabilities owed due to ongoing litigation. However, a positive
outcome of the ongoing litigation may result in higher recoveries
to the senior note.
Fitch is withdrawing the ratings of Airplanes Pass Through Trust as
they are no longer considered to be relevant to the agency's
coverage.
RATING SENSITIVITIES
No longer relevant as the ratings have been withdrawn.
ALESCO PREFERRED V: Moody's Hikes Ratings on 3 Tranches to Caa2
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Alesco Preferred Funding V, Ltd.:
US$189,000,000 Class A-1 First Priority Senior Secured Floating
Rate Notes due December 23, 2034 (current outstanding balance of
$92,733,976), Upgraded to Aa2 (sf); previously on August 6, 2014
Affirmed Aa3 (sf)
US$42,000,000 Class A-2 Second Priority Senior Secured Floating
Rate Notes due December 23, 2034, Upgraded to A1 (sf); previously
on August 6, 2014 Upgraded to A2 (sf)
US$10,000,000 Class B Deferrable Third Priority Secured Floating
Rate Notes due December 23, 2034 (current outstanding balance of
$10,615,266.29 including deferred interest balance); Upgraded to
Baa1 (sf); previously on August 6, 2014 Upgraded to Baa3 (sf)
US$42,350,000 Class C-1 Deferrable Mezzanine Secured Floating Rate
Notes due December 23, 2034 (current outstanding balance of
$45,515,935.36 including deferred interest balance), Upgraded to
Caa2 (sf); previously on August 6, 2014 Upgraded to Caa3 (sf)
US$37,700,000 Class C-2 Deferrable Mezzanine Secured Fixed/Floating
Rate Notes due December 23, 2034 (current outstanding balance of
$40,838,472.05 including deferred interest balance), Upgraded to
Caa2 (sf); previously on August 6, 2014 Upgraded to Caa3 (sf)
US$4,450,000 Class C-3 Deferrable Mezzanine Secured Fixed/Floating
Rate Notes due December 23, 2034 (current outstanding balance of
$5,540,961.66 including deferred interest balance), Upgraded to
Caa2 (sf); previously on August 6, 2014 Upgraded to Caa3 (sf)
US$5,000,000 Series I Combination Notes due December 23, 2034
(current rated balance of $3,526,163), Upgraded to Aa2 (sf);
previously on August 6, 2014 Upgraded to Aa3 (sf)
US$4,150,000 Series II Combination Notes due December 23, 2034
(current rated balance of $1,658,180), Upgraded to B2 (sf);
previously on August 6, 2014 Upgraded to Caa1 (sf)
Alesco Preferred Funding V, Ltd., issued in September 2004, is a
collateralized debt obligation backed by a portfolio of bank and
insurance trust preferred securities (TruPS).
RATINGS RATIONALE
The rating actions are primarily a result of deleveraging of the
Class A-1 notes, an increase in the transaction's
over-collateralization (OC) ratios, resumption of interest payments
of previously deferring assets, and the improvement in the credit
quality of the underlying portfolio since February 2015.
In addition, the Class A-1 notes have paid down by approximately
8.1% or $8.2 million since February 2015 using principal proceeds
from the redemption of the underlying assets, recovery proceeds
from a defaulted security, and the diversion of excess interest
proceeds. In addition, Moody's gave full par credit in its analysis
to one deferring asset that meets certain criteria, totaling $5.0
million in par. As a result, the Class A-1 notes' par coverage has
improved to 242.5% from 220.9% since February 2015. Based on the
trustee's December 2015 report, the Class A OC ratio was 162.9%
(limit 125.0%), versus 154.8% in February 2015 and the Class D OC
ratio was 90.5% (limit 102.6%), versus 87.6% in February 2015. The
Class A-1 notes will continue to benefit from the diversion of
excess interest and the use of proceeds from redemptions of any
assets in the collateral pool.
The deal has also benefited from improvement in the credit quality
of the underlying portfolio. According to Moody's calculations, the
weighted average rating factor (WARF) improved to 680 from 759 in
February 2015. The total par amount that Moody's treated as having
defaulted or deferring declined to $29.3 million from $34.2 million
in February 2015. Since then, one previously deferring bank with a
par of $5.0 million has resumed making interest payments on its
TruPS; two assets with a total par of $4.5 million have redeemed at
par.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the underlying
collateral pool has having a performing par (after treating
deferring securities as performing if they meet certain criteria)
of $224.9 million, defaulted and deferring par of $29.3 million, a
weighted average default probability of 7.55% (implying a WARF of
680), and a weighted average recovery rate upon default of 10.0%.
In addition to the quantitative factors Moody's explicitly models,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of an event of default, recent deal performance under
current market conditions, the legal environment and specific
documentation features. All information available to rating
committees, including macroeconomic forecasts, inputs 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.
Loss and Cash Flow Analysis:
Moody's applied a Monte Carlo simulation framework in Moody's
CDOROM to model the loss distribution for TruPS CDOs. The simulated
defaults and recoveries for each of the Monte Carlo scenarios
defined the reference pool's loss distribution. Moody's then used
the loss distribution as an input in its CDOEdge cash flow model.
The portfolio of this CDO contains mainly TruPS issued by small to
medium sized U.S. community banks and insurance companies that
Moody's does not rate publicly. To evaluate the credit quality of
bank TruPS that do not have public ratings, Moody's uses RiskCalc,
an econometric model developed by Moody's Analytics, to derive
credit scores. Moody's evaluation of the credit risk of most of the
bank obligors in the pool relies on the latest FDIC financial data.
For insurance TruPS that do not have public ratings, Moody's relies
on the assessment of its Insurance team, based on the credit
analysis of the underlying insurance firms' annual statutory
financial reports.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Assuming a two-notch upgrade to assets with below-investment grade
ratings or rating estimates (WARF of 412)
Class A-1: +1
Class A-2: +2
Class B: +2
Class C-1: +1
Class C-2: +1
Class C-3: +1
Class D: 0
Series I combination notes: +1
Series II combination notes: +2
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 1041)
Class A-1: 0
Class A-2: -1
Class B: -2
Class C-1: -1
Class C-2: -1
Class C-3: -1
Class D: 0
Series I combination notes: -1
Series II combination notes: -2
ALESCO PREFERRED VIII: Moody's Raises Rating on Cl. B-1 Notes to B1
-------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on these notes
issued by Alesco Preferred Funding VIII, Ltd.:
$110,000,000 Class A-1A First Priority Senior Secured Floating
Rate Notes due Dec. 23, 2035 (current balance of $63,201,948),
Upgraded to Aa3 (sf); previously on July 14, 2014, Upgraded to
A1 (sf)
$255,000,000 Class A-1B First Priority Delayed Draw Senior
Secured Floating Rate Notes due Dec. 23, 2035, (current balance
of $146,513,606), Upgraded to Aa3 (sf); previously on July 14,
2014 Upgraded to A1 (sf)
$70,000,000 Class A-2 Second Priority Senior Secured Floating
Rate Notes due Dec. 23, 2035, Upgraded to A3 (sf); previously
on July 14, 2014, Upgraded to Baa1 (sf)
$50,000,000 Class B-1 Deferrable Third Priority Secured Floating
Rate Notes due Dec. 23, 2035, (current balance including
interest shortfall of $52,434,057), Upgraded to B1 (sf);
previously on July 14, 2014, Upgraded to B2 (sf)
$5,000,000 Class B-2 Deferrable Third Priority Secured
Fixed/Floating Rate Notes due Dec. 23, 2035, (current balance
including interest shortfall of $6,189,707), Upgraded to
B1 (sf); previously on July 14, 2014, Upgraded to B2 (sf)
Alesco Preferred Funding VIII, Ltd., issued in August 2005, is a
collateralized debt obligation backed by a portfolio of bank and
insurance trust preferred securities (TruPS).
RATINGS RATIONALE
The rating actions are primarily a result of the deleveraging of
the Class A-1A and A-1B notes, an increase in the transaction's
over-collateralization ratios, resumption of interest payments of
previously deferring assets, and the improvement in the credit
quality of the underlying portfolio since January 2015.
In addition, the Class A-1A and A-1B notes have paid down by
approximately 13% or $30.2 million since January 2015 using
principal proceeds from the redemption of the underlying assets and
the diversion of excess interest proceeds. In addition Moody's
gave full par credit in its analysis to two deferring assets that
meet certain criteria, totaling $20.0 million in par. As a result,
the Class A-1A and A-1B notes' par coverage has thus improved to
196.7% from 183.4% since January 2015 by Moody's calculations.
Based on the trustee's December 2015 report, the
over-collateralization ratio of the Class A notes was 136.5% (limit
125.0%), and that of the Class E notes, 78.3% (limit 103.8%). The
Class A-1 notes will continue to benefit from the diversion of
excess interest and the use of proceeds from redemptions of any
assets in the collateral pool.
The deal has also benefited from improvement in the credit quality
of the underlying portfolio. According to Moody's calculations,
the weighted average rating factor (WARF) improved to 1180 from
1284 in January 2015. Since January 2015, four assets with a total
par of $25.2 million have redeemed at par.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool has having a performing par (after
treating deferring securities as performing if they meet certain
criteria) of $412.5 million, defaulted/deferring par of $23.0
million, a weighted average default probability of 12.58% (implying
a WARF of 1180), and a weighted average recovery rate upon default
of 10.0%. In addition to the quantitative factors Moody's
explicitly models, qualitative factors are part of rating committee
considerations. Moody's considers the structural protections in
the transaction, the risk of an event of default, recent deal
performance under current market conditions, the legal environment
and specific documentation features. All information available to
rating committees, including macroeconomic forecasts, inputs 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.
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs," published in June 2014.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings, as described below:
1) Macroeconomic uncertainty: TruPS CDOs performance could be
negatively affected by uncertainty about credit conditions in
the general economy. Moody's has a stable outlook on the US
banking sector. Moody's maintains its stable outlook on the
US insurance sector.
2) Portfolio credit risk: Credit performance of the assets
collateralizing the transaction that is better than Moody's
current expectations could have a positive impact on the
transaction's performance. Conversely, asset credit
performance weaker than Moody's current expectations could
have adverse consequences on the transaction's performance.
3) Deleveraging: One source of uncertainty in this transaction
is whether deleveraging from unscheduled principal proceeds
and excess interest proceeds will continue and at what pace.
Note repayments that are faster than Moody's current
expectations could have a positive impact on the notes'
ratings, beginning with the notes with the highest payment
priority.
4) Resumption of interest payments by deferring assets: A number
of banks have resumed making interest payments on their
TruPS. The timing and amount of deferral cures could have
significant positive impact on the transaction's over-
collateralization ratios and the ratings on the notes.
5) Exposure to non-publicly rated assets: The deal contains a
large number of securities whose default probability Moody's
assesses through credit scores derived using RiskCalc or
credit estimates. Because these are not public ratings, they
are subject to additional uncertainties.
Loss and Cash Flow Analysis:
Moody's applied a Monte Carlo simulation framework in Moody's
CDOROM to model the loss distribution for TruPS CDOs. The
simulated defaults and recoveries for each of the Monte Carlo
scenarios defined the reference pool's loss distribution. Moody's
then used the loss distribution as an input in its CDOEdge cash
flow model.
The portfolio of this CDO contains mainly TruPS issued by small to
medium sized U.S. community banks and insurance companies that
Moody's does not rate publicly.
To evaluate the credit quality of bank TruPS that do not have
public ratings, Moody's uses RiskCalc, an econometric model
developed by Moody's Analytics, to derive credit scores. Moody's
evaluation of the credit risk of most of the bank obligors in the
pool relies on the latest FDIC financial data. For insurance TruPS
that do not have public ratings, Moody's relies on the assessment
of its Insurance team, based on the credit analysis of the
underlying insurance firms' annual statutory financial reports.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Assuming a two-notch upgrade to assets with below-investment grade
ratings or rating estimates (WARF of 688)
Class A-1A: +1
Class A-1B: +1
Class A-2: +3
Class B-1: +3
Class B-2: +3
Class C-1: +1
Class C-2: +1
Class C-3: +1
Class D-1: 0
Class D-2: 0
Class E: 0
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 1701)
Class A-1A: -2
Class A-1B: -2
Class A-2: -3
Class B-1: -3
Class B-2: -3
Class C-1: 0
Class C-2: 0
Class C-3: 0
Class D-1: 0
Class D-2: 0
Class E: 0
BANK OF AMERICA 2001-3: Fitch Raises Rating on Cl. M Certs to 'B'
-----------------------------------------------------------------
Fitch Ratings has upgraded one class and affirmed three classes of
Bank of America, N.A. - First Union National Bank Commercial
Mortgage Trust's (BofA-FUNB) commercial mortgage pass-through
certificates series 2001-3.
KEY RATING DRIVERS
The upgrade to class M reflects sufficient credit enhancement, due
to a sizable subordinate class, and the performance of the two
remaining loans. The specially serviced asset at Fitch's last
rating action was resolved in July 2015 and paid classes K and L in
full. Class M is currently the most senior class and will continue
to receive principal paydown.
As of the December 2015 distribution date, the pool's aggregate
principal balance has been reduced by 98.9% to $12.6 million from
$1.14 billion at issuance. The pool has realized $45.5 million (4%
of the original pool balance) in losses to date. Interest
shortfalls are currently affecting classes N through Q.
The largest loan in the pool (69.1% of the pool) is secured by a
98,344-square foot (sf) retail property located in Las Vegas, NV.
The property is roughly two miles from the Las Vegas Strip and is
shadow-anchored by Smith's, a grocery store chain with 132
locations. The loan transferred to the special servicer in August
2011 due to a balloon payment default. However, after receiving a
maturity date extension through November 2022, the loan was
returned to the master servicer in August 2013 and has remained
current. National tenants at the center include Chase Bank (ground
lease), Jack in the Box and Supercuts, but the majority of the
tenants are local. Occupancy has been stable for the past several
years and was reported to be 84% as of September 2015. The debt
service coverage ratio (DSCR) was reported to be 1.77x at year-end
(YE) 2014, which is an improvement from 1.60x reported at YE 2013.
The second remaining loan (30.9%) is secured by a 89,589-sf retail
property located in Menasha, WI, which is approximately 35 miles
southwest of Green Bay. This loan also received a maturity date
extension after transferring to the special servicer in February
2011 for maturity default. As a result of the loan modification,
the maturity date was extended to December 2018 and the loan was
returned to the master servicer in January 2014. Gold's Gym (42%
of net rentable area) occupies the anchor space, which was formerly
leased to a grocery store. The property is shadow-anchored by
ShopKo and features other national tenants include TCF Bank, Edward
Jones and National Cash Advance. Occupancy at the property has
been historically low with the average occupancy being 63% since
2008. As of June 2015, the occupancy and debt service coverage
ratio (DSCR) was reported to be 61% and 1.38x, respectively.
RATING SENSITIVITIES
The Stable Rating Outlook assigned to class M is due to the class
seniority and continued paydown. Any losses to the remaining loans
should be absorbed by the subordinate N class. Given the pool
concentration, further upgrades to class M are unlikely.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
Fitch upgrades these classes and assigns the Rating Outlook as
indicated:
-- $4.1 million class M to 'Bsf' from 'CCCsf'; Outlook Stable.
Fitch affirms these classes and revises REs as indicated:
-- $8.5 million class N at 'Dsf'; RE 50%;
-- $0 class O at 'Dsf'; RE 0%;
-- $0 class P at 'Dsf'; RE 0%.
The class A-1, A-2, A-2F, B, C, D, E, F, G, H, J, K and L
certificates have paid in full. Fitch does not rate the class Q
certificates or the subordinate component class V-1, V-2, V-3, V-4
and V-5 certificates. Fitch previously withdrew the rating on the
interest-only class XC certificates.
BEAR STEARNS 2003-TOP12: Fitch Raises Rating on Class N to B
------------------------------------------------------------
Fitch Ratings has upgraded seven classes and affirmed two classes
of Bear Stearns Commercial Mortgage Securities Trust series
2003-TOP12 (BSCMS 2003-TOP12).
KEY RATING DRIVERS
The upgrades follow increasing credit enhancement to the bonds from
loans repayments and amortization. Since issuance, the deal has
experienced 95.6% in collateral reduction. In the last twelve
months, two loans repaid from the trust and contributed $12.1
million in principal paydown.
Four loans are fully defeased, representing 16.4% of the pool.
Although the pool is highly concentrated, with the three largest
loans comprising 60.2% of the total pool, 14 of the 18 outstanding
loans are fully amortizing. As a whole, the pool is considered low
leverage, with a weighted-average LTV of 54.7% and a
weighted-average debt yield of 40.2%.
The fifth largest loan in the pool, CalSafe, comprises the only
major loss expectation in the pool. It is secured by a dark
single-tenant retail property in Mountain View, California. The
property is fully leased to Safeway through September 2016. Safeway
vacated the subject and moved to a newly built building across the
street in 2014. A large power center known as San Antonio Center
is situated across the street from the subject, the developer of
which has subleased the property and is currently using it for
storage. Considering both the sublease and master lease are
coterminous with the loan's scheduled maturity nine months from
now, the vacancy could pose a refinance risk. Mitigating this is
the property's location and current debt at $69 psf.
In its modelling of the pool, Fitch utilized conservative stressed
cap rates and NOI haircuts. The only loan scheduled to mature in
the next twelve months is CalSafe (5.5% of the pool), which is a
Fitch Loan of Concern. The pool has $3.3 million of realized
losses to date. All of the currently projected losses would be
fully contained to the unrated class O.
Including defeased loans, one loan (11.2% of the pool) is scheduled
to mature in 2017, twelve loans (66.8% of the pool) in 2018, one
loan (1.3% of the pool) in 2019 and three loans (14.9% of the pool)
in 2023.
RATING SENSITIVITIES
The Rating Outlook for all but two classes is Stable. The upgrades
represent strong credit support to the bonds and deleveraging of
the pool; however, additional upgrades in the near term are
unlikely given the pool's concentration and property quality. As
the deal continues to wind down and loans repay, additional
upgrades are possible. To reflect this, the Rating Outlooks for
classes M and L has been revised to Positive from Stable.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
Fitch has upgraded these classes as indicated:
-- $7.3 million class F to 'AAAsf' from 'AAsf'; Rating Outlook
Stable;
-- $7.3 million class G to 'AAAsf' from 'Asf'; Rating Outlook
Stable;
-- $5.8 million class H to 'AAsf' from 'BBBsf'; Rating Outlook
Stable;
-- $5.8 million class J to 'Asf' from 'BBBsf'; Rating Outlook
Stable;
-- $2.9 million class K to 'BBBsf' from 'BBsf'; Rating Outlook
Stable;
-- $2.9 million class N to 'Bsf' from 'CCCsf'; Rating Outlook
Stable.
Fitch has upgraded these classes and revised the Rating Outlook as
indicated:
-- $2.9 million class M to 'BBsf' from 'Bsf'; Rating Outlook to
Positive from Stable.
Fitch has affirmed these classes:
-- $4.8 million class E at 'AAAsf'; Rating Outlook Stable.
Fitch has affirmed this class and revised the Rating Outlook as
indicated:
-- $2.9 million class L at 'BBsf'; Rating Outlook to Positive
from Stable.
The class A-1, A-2, A-3, A-4, B, C and D certificates have paid in
full. Fitch does not rate the class O certificate. Fitch
previously withdrew the ratings on the interest-only class X-1 and
X-2 certificates.
CANTOR COMMERCIAL 2016-C3: Fitch Expects to Rate Class G 'B-sf'
---------------------------------------------------------------
Fitch Ratings has issued a presale report on Cantor Commercial Real
Estate CFCRE 2016-C3 Mortgage Trust commercial mortgage
pass-through certificates.
Fitch expects to rate these classes as follows:
-- $29,088,000 class A-1 'AAAsf'; Outlook Stable;
-- $40,514,000 class A-SB 'AAAsf'; Outlook Stable;
-- $200,000,000 class A-2 'AAAsf'; Outlook Stable;
-- $222,884,000 class A-3 'AAAsf'; Outlook Stable;
-- $528,543,000b class X-A 'AAAsf'; Outlook Stable;
-- $36,057,000 class A-M 'AAAsf'; Outlook Stable;
-- $37,815,000 class B 'AA-sf'; Outlook Stable;
-- $37,815,000b class X-B 'AA-sf'; Outlook Stable;
-- $37,816,000 class C 'A-sf'; Outlook Stable;
-- $37,816,000b class X-C 'A-sf'; Outlook Stable;
-- $41,334,000a class D 'BBB-sf'; Outlook Stable;
-- $41,334,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $10,553,000a class E 'BB+sf'; Outlook Stable;
-- $10,553,000ab class X-E 'BB+sf'; Outlook Stable;
-- $8,795,000a class F 'BB-sf'; Outlook Stable;
-- $8,795,000ab class X-F 'BB-sf'; Outlook Stable;
-- $7,915,000a class G 'B-sf'; Outlook Stable;
-- $7,915,000ab class X-G 'B-sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
The expected ratings are based on information provided by the
issuer as of Jan. 4, 2016. Fitch does not expect to rate the
$30,780,602 class H certificates or the $30,780,602 class X-H
certificates.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 38 loans secured by 67
commercial properties having an aggregate principal balance of
approximately $703.6 million as of the cut-off date. The loans were
contributed to the trust by Cantor Commercial Real Estate Lending,
L.P., Societe Generale, and Liberty Island Group I LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 85.4% of the properties
by balance, cash flow analysis of 85.8%, and asset summary reviews
on 85.8% of the pool.
KEY RATING DRIVERS
High Fitch Leverage: The pool has higher leverage statistics than
other recent Fitch-rated fixed-rate multiborrower transactions. The
pool's Fitch debt service coverage ratio (DSCR) of 1.12x is lower
than the 2015 and 2014 averages of 1.18x and 1.19x, respectively.
The pool's Fitch loan to value (LTV) of 109.5% is higher than the
2015 and 2014 averages of 109.3% and 106.2%, respectively.
Below Average Amortization: Twelve loans (36.1% of the pool) are
full-term interest-only, and nine loans representing 23.9% of the
pool are partial interest only. The pool is scheduled to amortize
by 10.5% over the term of the loans, lower than the 2014 and 2015
averages of 12.0% and 11.7%, respectively.
Low Hospitality Exposure: Only three loans that make up 5.1% of the
total pool are collateralized by hotel assets, which is much lower
than the average hotel exposure of 17.0% in 2015. The pool is
concentrated in retail with 34.3% exposure compared to the 2015
average of 27.0% retail exposure.
Above Average Collateral Quality: The quality of the assets is
considered above average. As a percentage of the inspected
properties, 67.1% received property quality grades of 'B+' or
higher. Four loans (24.8% of the pool) received property quality
grades of 'A-' or higher. No properties received grades below
'B-'.
High Pool Concentration: The top 10 and top 20 loans comprise 56.2%
and 83.4% of the pool, respectively, higher than 2015 averages of
49.3% and 67.8%, respectively, and 2014 averages of 50.5% and
67.8%. The pool has high concentrations with LCI and SCI scores of
430 and 443 compared to the average LCI and SCI scores for 2015 of
364 and 410, respectively. However, nine loans representing 24.1%
of the pool are secured by multiple properties.
Geographic Concentration: The largest state concentration is
California (29.8%), with five of the largest 20 loans (26.3%)
secured by properties in Northern and Southern California. The next
largest state concentrations are New York (11.4%), Texas (10.3%),
and Georgia (9.2%).
Limited Additional Debt: Other than pari passu pieces, there is no
current additional debt on any of the loans in the pool. This
compares positively to 2014 and 2015 which had average amounts of
the pool with additional debt (both mezzanine and subordinate
secured) of 12.5% and 14.0%, respectively.
Low Mortgage Coupons: The pool's weighted average mortgage coupon
is 4.79%, below historical averages. Fitch accounted for increased
refinance risk in a higher interest rate environment by reviewing
an interest rate sensitivity that assumes an interest rate floor of
5.0% for the term rate for most property types, 4.5% for
multifamily properties, and 6.0% for hotel properties in
conjunction with Fitch's stressed refinance rates, which were 9.50%
on a weighted average basis.
CARLYLE HIGH X: Moody's Hikes Class E Debt Rating to 'Ba2(sf)'
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Carlyle High Yield Partners X, Ltd.:
US$16,000,000 Class B Senior Secured Floating Rate Notes due 2022
Notes, Upgraded to Aaa (sf); previously on February 27, 2014
Upgraded to Aa1 (sf)
US$21,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2022 Notes, Upgraded to Aa3 (sf); previously on February 27,
2014 Upgraded to A2 (sf)
US$16,000,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2022 Notes, Upgraded to Baa2 (sf); previously on February 27,
2014 Upgraded to Baa3 (sf)
US$12,000,000 Class E Secured Deferrable Floating Rate Notes due
2022 Notes, Upgraded to Ba2 (sf); previously on February 27, 2014
Affirmed Ba3 (sf)
Moody's also affirmed the ratings on the following notes:
US$128,500,000 Class A-1 Senior Secured Floating Rate Notes due
2022 Notes (current outstanding balance of $95,047,091), Affirmed
Aaa (sf); previously on February 27, 2014 Affirmed Aaa (sf)
US$155,000,000 Class A-2-A Senior Secured Floating Rate Notes due
2022 Notes (current outstanding balance of $110,092,399), Affirmed
Aaa (sf); previously on February 27, 2014 Affirmed Aaa (sf)
US$17,500,000 Class A-2-B Senior Secured Floating Rate Notes due
2022 Notes, Affirmed Aaa (sf); previously on February 27, 2014
Upgraded to Aaa (sf)
Carlyle High Yield Partners X, Ltd., issued in April 2007, is a
collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period ended in April 2014.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since January 2015. Since then
the Class A-1 and Class A-2-A Notes have been paid down by
approximately 24.9% or $31.4 million and 27.7% or $42.2 million,
respectively. Based on the trustee's December 2015 report, the OC
ratios for the Class A/B, Class C, Class D, and Class E Notes are
reported at 129.9%, 119.4%, 112.5% and 107.8% respectively, versus
January 2015 levels of 124.0%, 115.9%, 110.4% and 106.6%,
respectively.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2015.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Post-Reinvestment Period Trading: Subject to certain
requirements, the deal can reinvest certain proceeds after the end
of the reinvestment period, and as such the manager has the ability
to erode some of the collateral quality metrics to the covenant
levels. Such reinvestment could affect the transaction either
positively or negatively.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes. Below is a summary of the impact
of different default probabilities (expressed in terms of WARF) on
all of the rated notes (by the difference in the number of notches
versus the current model output, for which a positive difference
corresponds to lower expected loss):
Moody's Adjusted WARF - 20% (2034)
Class A-1: 0
Class A-2A: 0
Class A-2B: 0
Class B: 0
Class C: +2
Class D: +2
Class E: +2
Moody's Adjusted WARF + 20% (3050)
Class A-1: 0
Class A-2A: 0
Class A-2B: 0
Class B: -1
Class C: -2
Class D: -2
Class E: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations".
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $310.0 million, no defaulted par, a
weighted average default probability of 16.7% (implying a WARF of
2542), a weighted average recovery rate upon default of 50.6%, a
diversity score of 53 and a weighted average spread of 3.13%
(before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
DLJ COMMERCIAL 1999-CG3: Fitch Affirms 'Dsf' Rating on 5 Certs.
---------------------------------------------------------------
Fitch Ratings has upgraded one and affirmed five classes of DLJ
Commercial Mortgage Corporation commercial mortgage pass-through
certificates series 1999-CG3.
KEY RATING DRIVERS
The upgrade is due to high credit enhancement as a result of
continued paydown, including defeasance sufficient to pay down the
majority of the class. There are only four loans remaining,
including one defeased loan (29.3% of the pool). Expected losses
on the original pool balance total 5.2%, including $46.7 million in
realized losses to date.
As of the December 2015 distribution date, the pool's aggregate
principal balance has been reduced by 98.7% to $11.6 million from
$899.3 million at issuance. Interest shortfalls are currently
affecting classes B-5 through D.
The Loan of Concern is the Whitfield Village Apartments loan (11.2%
of the pool), secured by four 2-story and one 1-story buildings
that consist of 48 2-bedroom/2-bathroom, Class C, multifamily units
located in Sarasota, FL (55 miles south of Tampa). The Borrower
filed for Chapter 11 Bankruptcy in March 2013. The loan was
modified effective Jan. 1, 2015, and modification terms include an
interest rate reduction to 5.25% from 8.58%, maturity extension to
Dec.1, 2024, from July 1, 2019; and prepayment allowed in whole or
in part on any payment date without penalty. The loan was returned
to the master servicer in April 2015. As of October 2015, the
property was 96% occupied. The most recent debt-service coverage
ratio (DSCR) as of year-end (YE) 2014 was 1.14x.
The largest loan in the pool (51.3%) is secured by the Regency
Apartments, a 186-unit multifamily property located in
Fayetteville, NC. The property was built in 1996. The amenities
include a pool, clubhouse, playground, and tennis and volleyball
courts. As per the servicer reporting the property's occupancy has
improved to 93% as of September 2015, compared to 87% as of
December 2014.
RATING SENSITIVITIES
The Rating Outlook on class B-4 remains Stable due to increasing
credit enhancement and continued paydown. Although credit
enhancement is high and a significant amount of the class is
covered by defeasance, upgrades are not likely as risk remains for
interest shortfalls to reappear, and the remaining pool is
concentrated. All of the remaining loans are multifamily loans
with maturities in 2023, 2024 and 2028.
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch upgrades this class as indicated:
-- $4.4 million class B-4 to 'Asf' from 'BBsf'; Outlook Stable.
Fitch affirms these classes and revises recovery estimates as
indicated:
-- $7.3 million class B-5 at 'Dsf'; RE 100%;
-- $0 class B-6 at 'Dsf'; RE 0%;
-- $0 class B-7 at 'Dsf'; RE 0%;
-- $0 class B-8 at 'Dsf'; RE 0%;
-- $0 class C at 'Dsf'; RE 0%.
The class A-1A, A-1B, A-1C, A-2, A-3, A-4, A-5, B-1, B-2 and B-3
certificates have paid in full. Fitch does not rate the class D
certificates. Fitch previously withdrew the rating on the
interest-only class S certificates.
FLATIRON CLO 2007-1: Moody's Affirms Ba3(sf) Rating on Cl. E Notes
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Flatiron CLO 2007-1 Ltd.:
US$29,000,000 Class B Senior Term Notes Due 2021, Upgraded to Aaa
(sf); previously on August 19, 2014 Upgraded to Aa2 (sf)
US$14,000,000 Class C Deferrable Mezzanine Term Notes Due 2021,
Upgraded to A2 (sf); previously on August 19, 2014 Upgraded to A3
(sf)
US$15,000,000 Class D Deferrable Mezzanine Term Notes Due 2021,
Upgraded to Baa3 (sf); previously on August 19, 2014 Affirmed Ba1
(sf)
Moody's also affirmed the ratings on the following notes:
US$228,600,000 Class A-1a Senior Term Notes Due 2021 (current
oustanding balance of $147,896,076.41), Affirmed Aaa (sf);
previously on August 19, 2014 Affirmed Aaa (sf)
US$25,400,000 Class A-1b Senior Term Notes Due 2021, Affirmed Aaa
(sf); previously on August 19, 2014 Upgraded to Aaa (sf)
US$11,500,000 Class E Deferrable Junior Term Notes Due 2021,
Affirmed Ba3 (sf); previously on August 19, 2014 Affirmed Ba3 (sf)
Flatiron CLO 2007-1 Ltd., issued in August 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans. The transaction's reinvestment period ended
in October 2014.
RATINGS RATIONALE
These rating actions are primarily a result of recent deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since June 2015. The Class A-1a
notes have been paid down by approximately 27% or $55.7 million
since that time. Based on the trustee's December 2015 report, the
OC ratios for the Class A/B (or Senior Par Coverage Test), Class C
and Class D notes are reported at 125.87%, 117.72%, and 110.09%,
respectively, versus June 2015 levels of 121.67%, 115.40%, and
109.37%, respectively.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets reported by the trustee and those that Moody's
assumes as having defaulted could result in volatility in the
deal's OC levels. Further, the timing of recoveries and whether a
manager decides to work out or sell defaulted assets create
additional uncertainty. Moody's analyzed defaulted recoveries
assuming the lower of the market price and the recovery rate in
order to account for potential volatility in market prices.
Realization of higher than assumed recoveries would positively
impact the CLO.
6) Long-dated assets: The presence of assets that mature after the
CLO's legal maturity date exposes the deal to liquidation risk on
those assets. This risk is borne first by investors with the lowest
priority in the capital structure. Moody's assumes that the
terminal value of an asset upon liquidation at maturity will be
equal to the lower of an assumed liquidation value (depending on
the extent to which the asset's maturity lags that of the
liabilities) or the asset's current market value. However, actual
long-dated asset exposures and prevailing market prices and
conditions at the CLO's maturity will drive the deal's actual
losses, if any, from long-dated assets.
7) Post-Reinvestment Period Trading: Subject to certain
requirements, the deal can reinvest certain proceeds after the end
of the reinvestment period. Such reinvestment could affect the
transaction either positively or negatively.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (2016)
Class A-1a: 0
Class A-1b: 0
Class B: +1
Class C: +2
Class D: +3
Class E: +1
Moody's Adjusted WARF + 20% (3024)
Class A-1a: 0
Class A-1b: 0
Class B: -2
Class C: -2
Class D: -1
Class E: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $254.1 million, defaulted par of $3.0
million, a weighted average default probability of 17.04% (implying
a WARF of 2520), a weighted average recovery rate upon default of
51.07%, a diversity score of 52 and a weighted average spread of
3.04%(before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
FOUR CORNERS III: Moody's Affirms 'Ba3' Rating on Class E Debt
--------------------------------------------------------------
Moody's Investors Service has upgraded the rating on the following
notes issued by Four Corners CLO III, Ltd:
US$9,000,000 Class D Deferrable Floating Rate Notes Due 2020,
Upgraded to A1 (sf); previously on Jul 1, 2015 Upgraded to A3 (sf)
Moody's also affirmed the ratings on the following notes:
US$230,400,000 Class A Floating Rate Notes Due 2020 (current
outstanding balance of $39,493,006), Affirmed Aaa (sf); previously
on Jul 1, 2015 Affirmed Aaa (sf)
US$9,000,000 Class B Floating Rate Notes Due 2020, Affirmed Aaa
(sf); previously on Jul 1, 2015 Affirmed Aaa (sf)
US$18,000,000 Class C Deferrable Floating Rate Notes Due 2020,
Affirmed Aaa (sf); previously on Jul 1, 2015 Upgraded to Aaa (sf)
US$9,600,000 Class E Deferrable Floating Rate Notes Due 2020,
Affirmed Ba3 (sf); previously on Jul 1, 2015 Affirmed Ba3 (sf)
Four Corners CLO III, Ltd., issued in September 2006, is a
collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period ended in October 2012.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since July 2015. Since then, the
Class A notes have been paid down by approximately 27% or $14.7
million. Based on the December trustee's report, the OC ratios for
the Class A/B, Class C, Class D and Class E notes are reported at
188.7%, 137.6%, 121.2% and 107.5%, respectively, versus July 2015
levels of 168.3%, 131.0%, 118.0% and 106.6%, respectively.
The portfolio includes a number of investments in securities that
mature after the notes do. Based on Moody's calculation, securities
that mature after the notes do currently make up approximately 16%
of the portfolio. These investments could expose the notes to
market risk in the event of liquidation when the notes mature.
Despite the increase in the OC ratio of the Class E notes, Moody's
affirmed the rating on the Class E notes owing to market risk
stemming from the exposure to these long-dated assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2015.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets reported by the trustee and those that Moody's
assumes as having defaulted could result in volatility in the
deal's OC levels. Further, the timing of recoveries and whether a
manager decides to work out or sell defaulted assets create
additional uncertainty. Moody's analyzed defaulted recoveries
assuming the lower of the market price and the recovery rate in
order to account for potential volatility in market prices.
Realization of higher than assumed recoveries would positively
impact the CLO.
6) Long-dated assets: The presence of assets that mature after the
CLO's legal maturity date exposes the deal to liquidation risk on
those assets. This risk is borne first by investors with the lowest
priority in the capital structure. Moody's assumes that the
terminal value of an asset upon liquidation at maturity will be
equal to the lower of an assumed liquidation value (depending on
the extent to which the asset's maturity lags that of the
liabilities) or the asset's current market value. The deal's
increased exposure owing to amendments to loan agreements extending
maturities continues. In light of the deal's sizable exposure to
long-dated assets, which increases its sensitivity to the
liquidation assumptions in the rating analysis, Moody's ran
scenarios using a range of liquidation value assumptions. However,
actual long-dated asset exposures and prevailing market prices and
conditions at the CLO's maturity will drive the deal's actual
losses, if any, from long-dated assets.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes.Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (1784)
Class A: 0
Class B: 0
Class C: 0
Class D: +2
Class E: +2
Moody's Adjusted WARF + 20% (2676)
Class A: 0
Class B: 0
Class C: 0
Class D: -2
Class E: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $91 million, defaulted par of $1.5
million, a weighted average default probability of 12.20% (implying
a WARF of 2230), a weighted average recovery rate upon default of
49.37%, a diversity score of 28 and a weighted average spread of
2.79%(before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
GS MORTGAGE 2007-GG10: Fitch Affirms 'Dsf' Rating on Cl. C Certs
----------------------------------------------------------------
Fitch Ratings has affirmed 19 classes of GS Mortgage Securities
Trust series 2007-GG10 (GSMSC) commercial mortgage pass-through
certificates series 2007-GG10.
KEY RATING DRIVERS
The affirmations reflect the transaction's stable performance since
Fitch's last review. Fitch modeled losses of 17.6% of the
remaining pool; expected losses on the original pool balance total
23.4%, including $887.1 million (11.7% of the original pool
balance) in realized losses to date. Fitch has designated 65 loans
(65.5%) as Fitch Loans of Concern, which includes 15 specially
serviced assets (8.6%).
As of the December 2015 distribution date, the pool's aggregate
principal balance has been reduced by 33.8% to $5.01 billion from
$7.56 billion at issuance. Per the servicer reporting, 13 loans
(11.3% of the pool) are defeased. Interest shortfalls are
currently affecting classes A-J through S.
The pool contains many highly leveraged performing loans originated
at the previous market peak which may not be able to refinance at
maturity. While many of these loans have institutional quality
borrowers, many have failed to fully recover from stressed levels
seen during the downturn. Additionally, the remaining pool
contains 23 loans totaling $560.7 million which were modified at
some point. Fifteen of these modified loans were split into A/B
notes structures where Fitch deems the B-notes to have very slim
prospects of recovery. One such modified loan (0.5% of the pool)
re-defaulted at its modified maturity date and is now back with the
special servicer.
The largest contributor to expected losses is the Shorenstein
Portland Portfolio loan (13.9% of the pool). The largest loan in
the pool is secured by a portfolio of 46 office buildings
encompassing 3,882,036 square feet (sf) located throughout greater
Portland, OR. As of June 2015, the portfolio was approximately
88.6% occupied, which is an improvement over year-end 2014
occupancy of 81.7%. While the increase in occupancy is positive,
leases signed prior to 2007 were at rates which are now above
market. Renewals and replacement leases have been at lower rates
and have required concessions. The June 2015 net cash flow (NCF)
debt service coverage ratio (DSCR) was 1.02x and is expected to
trend upwards over the next year as concessions burn off and market
fundamentals continue to improve.
The next largest contributor to expected losses is the Wells Fargo
Tower loan (11%), which is secured by a 1,385,325-sf office tower
located in the Los Angeles, CA, CBD. Significant lease roll
occurred in 2013 when tenants occupying approximately 100,000-sf
vacated the property, driving occupancy down to 85.8%. As of June
2015, occupancy had fallen further to 80%. Due to market
conditions, rental rates have remained flat to slightly declining.
NCF DSCR has consistently been below 1.0x but increased to 1.04x as
of June 2015. Upcoming rollover is approximately 10% in 2016 and
14% in 2017.
The third largest contributor to expected losses is the
specially-serviced 400 Atlantic Street loan (5.3%), which is
secured by a 527,424-sf office property located in the Stamford,
CT, CBD. The loan transferred to the special servicer in October
2014 when American Express (7% of net rentable area [NRA]) vacated
at lease expiration. The second largest tenant also vacated its
space in December 2015. The borrower has re-leased approximately
20% of the property which will bring occupancy to approximately 87%
once the new tenants take occupancy. The largest tenant (51% of
NRA) has vacated the property but continues to pay rent. The
tenant has indicated that it will not renew its lease which expires
in September 2018. A sub-tenant occupies approximately 65% of that
space. The borrower and the special servicer are in discussions
about a possible loan modification.
RATING SENSITIVITIES
The Rating Outlooks on classes A-4 and A-1A remain Negative due to
the high leverage of the pool overall as well as the many large
loans that struggle with performance issues. These classes could
be downgraded if performance continues to deteriorate. Downgrades
to distressed classes will occur as losses make their way up the
capital stack, if additional loans become specially serviced or
fail to pay off at maturity. Upgrades are unlikely unless there is
significant paydown or defeasance.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
Fitch affirms these following classes as indicated:
-- $3.3 billion class A-4 at 'Asf'; Outlook Negative;
-- $343.8 million class A-1A at 'Asf'; Outlook Negative;
-- $756.3 million class A-M at 'CCCsf'; RE 50%;
-- $519.9 million class A-J at 'Csf'; RE 0%;
-- $75.6 million class B at 'Csf'; RE 0%;
-- $30.2 million class C at 'Dsf'; RE 0%.
The class A-1, A-2, A-3 and A-AB certificates have paid in full.
Classes D through Q have been reduced to zero balance by realized
losses and are affirmed at 'Dsf', RE 0%. Fitch does not rate the
class S certificates. Fitch previously withdrew the rating on the
interest-only class X certificates.
JP MORGAN 2000-C10: Fitch Affirms 'Dsf' Rating on 6 Certificates
----------------------------------------------------------------
Fitch Ratings has upgraded one and affirmed six classes of JP
Morgan Commercial Mortgage Finance Corp., commercial mortgage
pass-through certificates series 2000-C10.
KEY RATING DRIVERS
The upgrade to class F is a result of paydown and increased credit
enhancement from stable performance of the underlying collateral.
The top three loans (70%) in the pool are covered by fully
amortizing loans scheduled to mature in 2020. Maturities for the
remaining loans are scheduled to occur in 2018 (9%) and 2019
(21%).
The pool is highly concentrated with only six of the original 169
loans remaining. None of the remaining loans are in special
servicing or considered a Fitch Loan of Concern. Five loans
(92.43% of the pool balance) are backed by retail properties
including three single tenant Eckards / Rite Aids (36.9%), and one
loan is secured by a self-storage property (7.6%).
As of the December 2015 distribution date, the pool's aggregate
principal balance has been reduced by 98.5% to $11.4 million from
$738.5 million at issuance. The pool has experienced $62.3 million
(8.5% of the original pool balance) in realized losses to date.
Interest shortfalls are currently affecting classes G through NR.
The largest loan in the pool is a grocery anchored retail property
in Richardson, TX (38.6%). The property is anchored by Albertson's
(34.3% of the net rentable area [NRA]) whose lease expires in
October 2016. Additional major tenants include Richardson Bike
Mart (20.2%) and Dress Barn (5.3%). Occupancy most recently
reported at 93%. The loan matures in 2020 and the most recently
reported debt service coverage ratio (DSCR) is 1.52x as of December
2014.
RATING SENSITIVITIES
Rating Outlook on class F is Stable due to sufficient credit
enhancement and continued paydown. Classes G through M have
realized losses and will remain at 'D'.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch upgrades this class as indicated:
-- $5.4 million class F to 'AAAsf' from 'Asf'; Outlook Stable.
Fitch affirms these classes and RE as indicated:
-- $6 million class G at 'Dsf'; RE 100%;
-- $0 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%.
Classes A-1, A-2, B, C, D and E have paid in full. Class NR is not
rated. Fitch previously withdrew the rating on the interest-only
class X certificates.
JPMCC COMMERCIAL 2015-JP1: DBRS Finalizes BB Rating on Cl. F Debt
-----------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2015-JP1 (the Certificates) issued by JPMCC Commercial Mortgage
Securities Trust 2015-JP1. The trends are Stable.
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class X-E at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (low) (sf)
Classes X-E, E, F, G and NR have been privately placed. The X-A,
X-B, X-C, X-D and X-E balances are notional. DBRS ratings on
interest-only (IO) certificates address the likelihood of receiving
interest based on the notional amount outstanding. DBRS considers
the IO certificates’ position within the transaction payment
waterfall when determining the appropriate rating. The collateral
consists of 51 fixed-rate loans secured by 58 commercial and
multifamily properties, comprising a total transaction balance of
$799,219,441. The conduit pool was analyzed to determine the
provisional ratings, reflecting the long-term probability of loan
default within the loan term and its liquidity at maturity. When
the cut-off loan balances were measured against the DBRS Stabilized
net cash flow (NCF) and their respective actual constants, there
were five loans, representing 5.7% of the pool, with a DBRS Term
debt service coverage ratio (DSCR) below 1.15 times (x), a
threshold indicative of a higher likelihood of mid-term default.
Additionally, to assess refinance risk given the current low
interest rate environment, DBRS applied its refinance constants to
the balloon amounts. This resulted in 30 loans, representing 70.9%
of the pool, having DBRS Refinance (Refi) DSCRs below 1.00x;
however, the DBRS Refi DSCR for these loans are based on a
weighted-average (WA) stress refinance constant of 9.73%, which
implies an interest rate of 9.17%, amortizing on a 30-year
schedule. This represents a significant stress of 4.2% over the WA
contractual interest rate of loans in the pool. Of these loans with
DBRS Refi DSCRs below 1.00x, 94.8% are located in urban or suburban
markets. Fourteen loans, comprising 38.9% of the pool, are located
in urban markets, which generally benefit from consistent investor
demand even in times of stress. Additionally, only seven loans,
representing 7.7% of the transaction balance, are located in
tertiary and/or rural markets. This transaction also has a minimal
single-tenant concentration with only five loans and two individual
properties secured by two distinct multi-property portfolios,
representing 8.0% of the pool balance, secured by properties that
are either fully or primarily leased to a single tenant.
Loans secured by properties occupied by single tenants have been
found to suffer from higher loss severities in the event of
default. As such, DBRS modeled single-tenant properties with a
higher probability of default (POD) and cash flow volatility
compared with multi-tenant properties. Ten loans, representing
20.5% of the pool are secured by limited- and full-service hotels,
including The 9 as one of the three collateral components securing
the loan consists of a 156-key full-service hotel. Hotels generally
have the highest cash flow volatility for all major property types
as their income is derived from daily contracts rather than
multi-year leases and their expenses, which are mostly fixed, are
quite high as a percentage of revenue. These two factors cause
revenue to fall swiftly during a downturn and cash flow to fall
even faster because of the high operating leverage. Six loans,
representing 30.9% of the pool, are structured with full IO
payments for the full loan term, including three of the top loans
and the largest loan in the pool, 32 Avenue of the Americas (12.5%
of the pool).
An additional 21 loans, representing 36.3% of the pool, have
partial IO periods ranging from 12 months to 60 months. One loan,
representing 1.0% of the pool, provides for monthly payments of IO
for the first five years of the loan term, followed by a 30-year
amortization schedule with an ARD in the tenth year. The DBRS Term
DSCR is calculated by using the amortizing debt service obligation
and the DBRS Refi DSCR is calculated considering the balloon
balance and lack of amortization when determining refinance risk.
DBRS determines POD based on the lower of Term or Refi DSCR, so
loans that lack amortization will be treated more punitively. The
DBRS sample included 29 of the 51 loans in the pool. For modeling
purposes, DBRS treated the three Franklin Ridge office properties
as one portfolio as the three mortgage loans secured by those
properties are cross-collateralized and cross-defaulted. Site
inspections were performed on 33 of the 58 properties in the pool
(75.7% of the pool by allocated loan balance). DBRS conducted
meetings with the on-site property manager, leasing agent or a
representative of the borrowing entity for 67.1% of the pool. The
DBRS sample had an average NCF variance of -12.0% and ranged from
-31.9% to -3.3%. DBRS identified six loans, representing 8.2% of
the pool, with unfavorable sponsor strength, including three of the
top 15 loans.
DBRS increased the POD for the loans with identified sponsorship
concerns. The ratings assigned to the Certificates by DBRS are
based exclusively on the credit provided by the transaction
structure and underlying trust assets. All classes will be subject
to ongoing surveillance, which could result in upgrades or
downgrades by DBRS after the date of issuance.
JPMCC COMMERCIAL 2015-JP1: Fitch Assigns B- Rating on Cl. G Debt
----------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to JPMCC Commercial Mortgage Securities Trust 2015-JP1
commercial mortgage pass-through certificates.
-- $26,534,000 class A-1 'AAAsf'; Outlook Stable;
-- $138,016,000 class A-2 'AAAsf'; Outlook Stable;
-- $34,912,000 class A-3 'AAAsf'; Outlook Stable;
-- $120,000,000 class A-4 'AAAsf'; Outlook Stable;
-- $196,971,000 class A-5 'AAAsf'; Outlook Stable;
-- $43,021,000 class A-SB 'AAAsf'; Outlook Stable;
-- $590,423,000b class X-A 'AAAsf'; Outlook Stable;
-- $40,960,000b class X-B 'AA-sf'; Outlook Stable;
-- $45,955,000b class X-C 'A-sf'; Outlook Stable;
-- $27,973,000b class X-D 'BBBsf'; Outlook Stable;
-- $30,969,000 class A-S 'AAAsf'; Outlook Stable;
-- $40,960,000 class B 'AA-sf'; Outlook Stable;
-- $45,955,000 class C 'A-sf'; Outlook Stable;
-- $27,973,000 class D 'BBBsf'; Outlook Stable;
-- $21,979,000ab class X-E 'BBB-sf'; Outlook Stable;
-- $21,979,000a class E 'BBB-sf'; Outlook Stable;
-- $17,982,000a class F 'BBsf'; Outlook Stable;
-- $9,990,000a class G 'B-sf'; Outlook Stable;
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
The ratings are based on information provided by the issuer as of
Dec. 29, 2015. Fitch did not rate the $43,957,440 class NR
certificates.
The classes above reflect the final ratings and deal structure. The
certificates represent the beneficial ownership interest in the
trust, primary assets of which are 51 loans secured by 58
commercial properties having an aggregate principal balance of
approximately $799.2 million as of the cut-off date. The loans were
contributed to the trust by JPMorgan Chase Bank, N.A., Barclays
Bank plc, Starwood Mortgage Funding II LLC, and Redwood Commercial
Mortgage Corporation.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 74.9% of the properties
by balance, cash flow analysis of 84.6%, and asset summary reviews
on 84.6% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The transaction has higher leverage than other
recent Fitch-rated fixed-rate multiborrower transactions. The
pool's Fitch debt service coverage ratio (DSCR) of 1.09x is lower
than both the YTD 2015 average of 1.18x and the 2014 average of
1.19x, and the pool's Fitch loan-to-value (LTV) of 114.1% is higher
than both the YTD 2015 average of 109.4% and the 2014 average of
106.2%.
Pool Concentration: The largest loan in the pool, 32 Avenue of the
Americas, represents 12.5% of the pool's balance. However, the
largest 10 loans account for 55.8% of the total pool, which is
higher than the YTD 2015 average of 48.5% and the 2014 average of
50.5%. This results in a loan concentration index (LCI) of 468,
which is higher than the YTD 2015 and 2014 averages of 360 and 331,
respectively. The pool's sponsor concentration index (SCI) of 500
is higher than the YTD 2015 and 2014 averages of 398 and 419,
respectively.
Below-Average Amortization: Six loans representing 30.9% of the
pool are interest-only, which is higher than the YTD 2015 average
of 22.1% for other Fitch-rated fixed-rate multiborrower
transactions. There are 22 loans representing 37.3% of the pool
that are partial interest-only. Based on the scheduled balance at
maturity, the pool is expected to pay down by 8.8%, which is less
than the YTD 2015 average of 12.1%.
Six loans in the pool are pari passu: 32 Avenue of the Americas
(12.5% of the pool), 7700 Parmer (9.4%), Heinz 57 Center (6.3%),
The 9 (5.0%), First National Building (3.8%), and DoubleTree
Anaheim-Orange County (2.5%). No loans currently have mezzanine
debt held outside the trust. Four loans (24.9%) allow for future
additional mezzanine debt. One loan (1.8%) allows for affiliated
unsecured subordinate debt.
Low Mortgage Coupons: The pool's weighted average mortgage coupon
is 4.77%, below historical averages. Fitch accounted for increased
refinance risk in a higher interest rate environment by analyzing
sensitivity to increased interest rates.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 7.7% below
the most recent net operating income (NOI; for properties for which
a recent NOI was provided, excluding properties that were
stabilizing during this period). Unanticipated further declines in
property-level NCF could result in higher defaults and loss
severities on defaulted loans, and could result in potential rating
actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to JPMCC
2015-JP1 certificates and found that the transaction displays
average sensitivity to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the senior 'AAAsf' certificates to 'BBB+sf' could result. In a more
severe scenario, in which NCF declined a further 30% from Fitch's
NCF, a downgrade of the senior 'AAAsf' certificates to 'BBB-sf'
could result.
LB-UBS COMMERCIAL 2006-C1: Fitch Lowers Rating on Cl. E Certs to C
------------------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed 20 classes of
LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage
pass-through certificates series 2006-C1.
KEY RATING DRIVERS
The affirmations are a result of Fitch's stable loss projections
for the pool. Fitch modeled losses of 20.8% of the remaining pool;
expected losses on the original pool balance total 10.8%, including
$164.5 million in realized losses to date. At Fitch's last rating
action, expected losses for the original pool was 11.2%. Since the
last review, several loans have been disposed via liquidation or
payoff with better than expected recoveries. Because of this, Fitch
has revised the Rating Outlook on class A-J from Negative to
Stable.
In the last twelve months, 84 loans have repaid, contributing
approximately $1.3 billion in principal paydown to the trust. Three
outstanding loans, representing 5.8% of the pool, are fully
defeased. There are 12 loans in special servicing, representing
48% of the pool. Four specially serviced loans are in the Top 15,
including the largest loan in the pool. Most of these transfers
occurred recently and were due to imminent maturity default, as
much of the pool was scheduled to mature in December 2015 and
January 2016. Thirty of the 32 outstanding loans are scheduled to
mature in 2016; while Fitch believes many of those maturing loans
not in special servicing will successfully refinance, it is
possible that additional defaults will occur.
The largest contributor to expected loss remains DHL Center, the
third largest loan, secured by an industrial building located west
of Allentown, Pennsylvania. The property was previously occupied
solely by DHL, which vacated the building in 2009 but has continued
to pay rent per the original terms. Approximately 58.8% of the
space is being subleased to two tenants, both with lease
expirations in 2020. According to the servicer, the configuration
of the property would make it difficult to lease the remaining
portion, and it is not being marketed. The loan transferred to the
special servicer in October 2015 after the borrower indicated it
would not be able to refinance ahead of the loan's scheduled
January 2016 maturity. The June 2015 DSCR was 1.30x. The loan
remains current as of the December 2015 remittance.
The largest loan in the pool is also in special servicing and is a
significant expected loss contributor. The collateral is a mall
and lifestyle center in northeast Raleigh, North Carolina known as
Triangle Towne Center. It is owned and operated by CBL and the
non-collateral anchor tenants include Dillard's, Belk, Macy's, Saks
Fifth Avenue and Sears. A competing mall is located approximately
10 miles away and features many of the same tenants as the subject.
The loan, which was originally scheduled to mature in December
2015, transferred in September 2015 for imminent default and is now
delinquent. Based on the servicer OSAR, the June 2015 trust NOI
DSCR was 1.17x. The property was 85.6% occupied as of September
2015. According to the 2015 servicer site inspection, the subject
has experienced historical vacancy issues within the lifestyle
component.
The fourth largest loan in the pool is the next largest contributor
to expected loss and is also secured by a mall. River Valley Mall,
located in Lancaster, Ohio, is anchored by Sears, JC Penney,
Elder-Beerman, Dick's Sporting Goods and a 10-screen Regal Cinemas.
A sixth anchor pad is vacant. The mall is owned and operated by
WP Glimcher and was 90.7% occupied as of September 2015; however,
leases representing 20.3% of the NRA are scheduled to roll in 2016.
The nearest competing mall is located approximately 20 miles away
in Columbus, Ohio. The loan, which was originally scheduled to
mature in January 2016, transferred to special servicing in October
2015 and remains current.
RATING SENSITIVITIES
The Rating Outlook to class A-M remains Stable and the Rating
Outlook to class A-J has been revised from Negative to Stable. A
number of loans refinanced or liquidated in the last twelve months
with better than expected recoveries. Based on the credit metrics
for the remaining loans in the pool, Fitch believes many of the
loans expected to transfer ahead of maturity default have already
done so. Upgrades to Class A-J in the near future are unlikely
given the deal's concentration of specially serviced loans.
Distressed classes may be subject to downgrades as losses are
realized.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
Fitch downgrades this class as indicated:
-- $18.4 million class E to 'Csf' from 'CCsf'; RE 0%.
Fitch affirms these classes as indicated:
-- $141.2 million class A-M at 'AAAsf'; Outlook Stable;
-- $221 million class A-J at 'Bsf'; Outlook to Stable from
Negative;
-- $15.3 million class B at 'CCCsf'; RE 75%;
-- $27.6 million class C at 'CCCsf'; RE 0%;
-- $24.6 million class D at 'CCsf'; RE 0%;
-- $21.5 million class F at 'Csf'; RE 0%;
-- $13.4 million class G at 'Dsf' RE 0%;
-- $0 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%;
-- $0 class IUU-3 at 'Dsf'; RE 0%;
-- $0 class IUU-4 at 'Dsf'; RE 0%;
-- $0 class IUU-5 at 'Dsf'; RE 0%;
-- $0 class IUU-6 at 'Dsf'; RE 0%;
-- $0 class IUU-7 at 'Dsf'; RE 0%;
-- $0 class IUU-8 at 'Dsf'; RE 0%;
-- $0 class IUU-9 at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-4, A-AB, IUU-1 and I-UU2 certificates
have paid in full. Fitch does not rate the class P, Q, S, T and
IUU-10 certificates. Fitch previously withdrew the ratings on the
interest-only class X-CP and X-CL certificates.
MADISON PARK XIX: Moody's Assigns Ba3 Rating on Class D Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Madison Park Funding XIX, Ltd.
Moody's rating action is:
$387,000,000 Class A-1 Floating Rate Notes Due 2028, Assigned
Aaa (sf)
$68,800,000 Class A-2 Floating Rate Notes Due 2028, Assigned
Aa2 (sf)
$16,000,000 Class B-1 Deferrable Floating Rate Notes Due 2028,
Assigned A2 (sf)
$14,200,000 Class B-2 Deferrable Fixed/Floating Rate Notes Due
2028, Assigned A2 (sf)
$37,400,000 Class C Deferrable Floating Rate Notes Due 2028,
Assigned Baa3 (sf)
$28,500,000 Class D Deferrable Floating Rate Notes Due 2028,
Assigned Ba3 (sf)
$12,100,000 Class E Deferrable Floating Rate Notes Due 2028,
Assigned B3 (sf)
The Class A-1 Notes, the Class A-2 Notes, the Class B-1 Notes, the
Class B-2 Notes, the Class C Notes, the Class D Notes and the Class
E Notes are referred to herein, collectively, as the "Rated
Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to
defaults on the underlying portfolio of assets, the transaction's
legal structure, and the characteristics of the underlying assets.
Madison Park XIX is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 90% of the portfolio must
consist of senior secured loans (including participation interests
with respect to senior secured loans), and up to 10% of the
portfolio may consist of second lien loans and senior unsecured
loans. The portfolio is approximately 80% ramped as of the closing
date.
Credit Suisse Asset Management, LLC will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, the Manager may reinvest proceeds from bankruptcy
exchanges, unscheduled principal payments and proceeds from sales
of credit risk assets, subject to certain restrictions.
In addition to the Rated Notes, the Issuer will issue subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
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 December 2015.
For modeling purposes, Moody's used these base-case assumptions:
Par amount: $600,000,000
Score: 60
Weighted Average Rating Factor (WARF): 2826
Weighted Average Spread (WAS): 3.80%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 48%
Weighted Average Life (WAL): 9.0 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
December 2015.
Factors That Would Lead to an Upgrade or Downgrade of the Rating:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a component
in determining the ratings assigned to the Rated Notes. This
sensitivity analysis includes increased default probability
relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the Rated Notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds to
higher expected losses), assuming that all other factors are held
equal:
Percentage Change in WARF -- increase of 15% (from 2826 to 3250)
Rating Impact in Rating Notches
Class A-1 Notes: 0
Class A-2 Notes: -2
Class B-1 Notes: -2
Class B-2 Notes: -2
Class C Notes: -1
Class D Notes: 0
Class E Notes: -1
Percentage Change in WARF -- increase of 30% (from 2826 to 3674)
Rating Impact in Rating Notches
Class A-1 Notes: -1
Class A-2 Notes: -3
Class B-1 Notes: -4
Class B-2 Notes: -4
Class C Notes: -2
Class D Notes: -1
Class E Notes: -3
MARANON LOAN 2015-1: Moody's Assigns Ba3(sf) to Class E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Maranon Loan Funding 2015-1, Ltd.:
Moody's rating action is as follows:
US$94,000,000 Class A-1 Senior Secured Floating Rate Notes due 2028
(the "Class A-1 Notes"), Assigned Aaa(sf)
US$99,100,000 Class A-2 Senior Secured Floating Rate Notes due 2028
(the "Class A-2 Notes"), Assigned Aaa(sf)
US$42,100,000 Class B Senior Secured Floating Rate Notes due 2028
(the "Class B Notes"), Assigned Aa2(sf)
US$21,000,000 Class C Secured Deferrable Floating Rate Notes due
2028 (the "Class C Notes"), Assigned A2(sf)
US$26,000,000 Class D Secured Deferrable Floating Rate Notes due
2028 (the "Class D Notes"), Assigned Baa3(sf)
US$25,800,000 Class E Secured Deferrable Floating Rate Notes due
2028 (the "Class E Notes"), Assigned Ba3(sf)
The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the
Class C Notes, the Class D Notes and the Class E Notes are referred
to herein, collectively, as the "Rated Notes."
In addition, Moody's announced that it has assigned the following
rating to notes issued by Maranon Loan Funding 2015-1 (Combination
Note) Trust (the "Combination Note Issuer").
Moody's rating action is as follows:
US$177,350,000 Exchangeable Combination Notes (composed of
components representing US$74,000,000 of Class A-1 Notes,
US$41,100,000 of Class B Notes, US$8,000,000 of Class C Notes,
US$7,500,000 of Class D Notes and US$46,750,000 of Maranon Loan
Funding 2015-1, Ltd. subordinated notes (collectively, the
"Underlying Components")) due 2028 (the "Combination Notes"),
Assigned Baa3(sf) only with respect to the ultimate payment of the
Exchangeable Combination Note Balance (as that term is defined in
the Combination Note Issuer's transaction documents).
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to defaults
on the underlying portfolio of assets, the transaction's legal
structure, and the characteristics of the underlying assets.
Moody's rating of the Combination Notes addresses only the ultimate
receipt of the Exchangeable Combination Note Balance by the holders
of the Combination Notes. Moody's rating of the Combination Notes
does not address any other payments or additional amounts that a
holder of the Combination Notes may receive pursuant to the
underlying documents.
Maranon Loan Funding 2015-1, Ltd. is a managed cash flow SME CLO.
The issued notes will be collateralized primarily by small and
medium enterprise loans. At least 95% of the portfolio must consist
of senior secured loans, cash, and eligible investments, and up to
5% of the portfolio may consist of second lien loans and unsecured
loans. The transaction's portfolio is fully ramped as of the
closing date.
Maranon Capital, L.P. (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's four year reinvestment period.
After the reinvestment period, the Manager may not reinvest in new
assets, and proceeds from sales and unscheduled principal proceeds
will be used to amortize the notes in accordance with the priority
of payments.
In addition to the Rated Notes, the Issuer will issue subordinated
notes. The transaction incorporates interest and par coverage tests
which, if triggered, divert interest and principal proceeds to pay
down the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1,
Section 3.4 and Appendix 14 of the "Moody's Global Approach to
Rating Collateralized Loan Obligations" rating methodology
published in December 2015.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $350,000,000
Diversity Score: 33
Weighted Average Rating Factor (WARF): 3604
Weighted Average Spread (WAS): 4.95%
Weighted Average Coupon (WAC): 6%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8 years.
Factors That Would Lead to an Upgrade or Downgrade of the Rating:
The performance of the Rated Notes and Combination Notes is subject
to uncertainty. The performance of the Rated Notes and the
Combination 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 and the Combination Notes.
The rating on the Combination Notes, which combine cash flows from
the Underlying Components, is subject to a higher degree of
volatility than those of the Rated Notes, primarily due to the
uncertainty of cash flows from the subordinated note component.
Moody's applies haircuts to the cash flows from the subordinated
note component based on the target rating of the Combination Notes.
Actual distributions from the subordinated note component that
differ significantly from Moody's assumptions can lead to a faster
(or slower) speed of reduction in the Exchangeable Combination Note
Balance, thereby resulting in better (or worse) ratings performance
than previously expected.
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a component
in determining the ratings assigned to the Rated Notes and the
Combination Notes. This sensitivity analysis includes increased
default probability relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the Rated Notes
and the Combination Notes (shown in terms of the number of notch
difference versus the current model output, whereby a negative
difference corresponds to higher expected losses), assuming that
all other factors are held equal:
Percentage Change in WARF -- increase of 15% (from 3604 to 4145)
Rating Impact in Rating Notches
Class A-1 Notes: 0
Class A-2 Notes: 0
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: -1
Combination Notes: -1
Percentage Change in WARF -- increase of 30% (from 3604 to 4685)
Rating Impact in Rating Notches
Class A-1 Notes: -1
Class A-2 Notes: -1
Class B Notes: -3
Class C Notes: -3
Class D Notes: -2
Class E Notes: -1
Combination Notes: -1
MASTR RESECURITIZATION 2007-1: Moody's Cuts A1 Debt Rating to Caa3
------------------------------------------------------------------
Moody's Investors Service has downgraded the rating of Class A1
issued by MASTR Resecuritization Trust 2007-1. The
resecuritization is backed by various residential mortgage-backed
securities backed by residential mortgage loans.
The complete rating action is:
Issuer: MASTR Resecuritization Trust 2007-1
Cl. A1, Downgraded to Caa3 (sf); previously on Jun 2, 2011
Downgraded to Caa1 (sf)
RATINGS RATIONALE
The downgrade is primarily due to erosion of the credit enhancement
available to the tranche and the continued poor performance of the
underlying assets.
The principal methodologies used in this rating was "Moody's
Approach to Rating Resecuritizations" published in February 2014
and "US RMBS Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the rating:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 5% in November 2015 from 5.8% in
November 2014. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2016 year. Deviations from this central
scenario could lead to rating actions in the sector. House prices
are another key driver of US RMBS performance. Moody's expects
house prices to continue to rise in 2016. Lower increases than
Moody's expects or decreases could lead to negative rating actions.
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.
MERRILL LYNCH: S&P Hikes Rating on 10 Pass Through Certs to BB+
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on 10 Merrill
Lynch Auction Preferred Pass-Through Trust auction pass-through
certificates, relating to Bank of America's noncumulative preferred
stock, series D and E, to 'BB+' from 'BB'.
This action follows Standard & Poor's July 23, 2015, raising of its
rating on the underlying assets to 'BB+' from 'BB'.
The ratings on the certificates reflect the rating on the
underlying assets and reflect S&P's opinion of the likelihood that
bondholders will receive interest and principal payments when due.
Changes to the ratings on these bonds could result from, among
other things, changes to the ratings on the underlying assets or
support provider, the expiration or termination of the letter of
credit agreements, or amendments to the transactions' terms.
A list of the Affected Ratings is available at:
http://bit.ly/1IHpID9
MORGAN STANLEY 2003-IQ5: Fitch Affirms 'Bsf' Rating on Cl. M Certs
------------------------------------------------------------------
Fitch Ratings has upgraded four and affirmed three classes of
Morgan Stanley Capital I Trust (MSC) commercial mortgage
pass-through certificates series 2003-IQ5.
KEY RATING DRIVERS
The upgrades to class H through L are due to increased credit
enhancement as a result of continued paydown. The upgrades also
reflect the strong performance of the largest loan, 3 Times Square,
which accounts for 63.5% of the pool and is fully amortizing. The
affirmations of class M and N reflect the concentrated nature of
the pool and the stable performance of the remaining loans. Fitch
modeled losses of 4.2% of the remaining pool; expected losses on
the original pool balance total 0.8%, including $5.1 million (0.7%
of the original pool balance) in realized losses to date. Fitch
has designated two loans (15.7%) as Fitch Loans of Concern, which
does not include any specially serviced loans.
The pool is concentrated with only 17 loans remaining, all of which
are fully amortizing. As of the December 2015 distribution date,
the pool's aggregate principal balance has been reduced by 96.6% to
$26.2 million from $778.8 million at issuance. No loans are
defeased. Interest shortfalls are currently affecting class O.
The largest loan in the pool is the $16.6 million pari-passu
portion of 3 Times Square (totaling $80.8 million). Built in 2001,
the property is 100% occupied and its largest tenants include
Reuters (78% of net rentable area; NRA), BMO Harris Bank (18%) and
JP Morgan Chase (2%). As of June 2015, the debt service coverage
ratio (DSCR) was reported to be 1.75x. The loan is fully
amortizing through its October 2021 maturity date.
The second largest loan is a Fitch Loan of Concern and is secured
by a 50,959 square foot (sf) retail property in Arlington, TX
(12.1%). The property is adjacent to a Super Target and across
from The Parks at Arlington, a 1.5 million sf regional mall
anchored by Macy's, Nordstrom, JC Penney and Dillard's. The
property tenants include Chili's (12% of NRA), Sleep Experts (10%
of NRA), Catherine's (10% of NRA) and Corner Bakery (7% of NRA). As
of September 2014, occupancy was reported at 85%, which is an
improvement from the 66% reported in September 2014. The DSCR has
been 1.0x or below since 2011, primarily due to occupancy issues
and decreasing market rental rates. As of September 2015, the DSCR
was reported at 0.89x. Despite the low DSCR and occupancy issues,
the loan has remained current.
The other Fitch Loan of Concern is secured by a 25,232 suburban
office building located in Richmond, VA (3.6%). The collateral is
a two-story office building that was built in 1974 and renovated in
1995. The largest tenant (40% of NRA) is affiliated with the
loan's sponsor. The lease expired in April 2014 and is now
month-to-month. Per the master servicer inspection from July 2015,
the property is 100% occupied. As of year-end 2014, the DSCR was
reported at 0.92x, but the loan has remained current.
RATING SENSITIVITIES
Rating Outlooks on classes G through N remain Stable due to
increasing credit enhancement and overall stable collateral
performance. Future upgrades may be warranted as the pool
continues to pay down. Downgrades are possible if there is a
material economic or asset level event which impairs performance of
the remaining loans.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch upgrades these classes:
-- $5.8 million class H to 'AAAsf' from 'AAsf'; Outlook Stable;
-- $2.9 million class J to 'AAAsf' from 'Asf'; Outlook Stable.
-- $4.9 million class K to 'Asf' from 'BBBsf'; Outlook Stable;
-- $2.9 million class L to 'BBBsf' from 'BBsf'; Outlook Stable.
Fitch affirms these classes as indicated:
-- $4 million class G at 'AAAsf'; Outlook Stable;
-- $1.9 million class M at 'Bsf'; Outlook Stable;
-- $974,000 class N at 'B-sf'; Outlook Stable.
The class A-1, A-2, A-3, A-4, B, C, D, E and F certificates have
paid in full. Fitch does not rate the class O certificates.
SHERIDAN FUND I: S&P Lowers Rating to 'CCC', Outlook Negative
-------------------------------------------------------------
Standard & Poor's Ratings Services said it lowered its issuer
credit ratings on Sheridan Production Partners I-A, Sheridan
Investment Partners I, and Sheridan Production Partners I
(collectively referred to as "Sheridan Fund I") to 'CCC' from 'B+'.
The outlook is negative.
At the same time, S&P lowered the issue-level rating on the fund's
first-lien, senior secured credit facilities to 'B-' from 'B+'.
S&P revised the recovery rating on this debt to '1' from '3'. The
'1' recovery rating reflects S&P's expectation of "very high"
recovery (90%-100%) for creditors in the event of a payment
default.
"The downgrade primarily reflects the expected reduction of the
fund's borrowing base as a result of the prolonged reduction in oil
prices," said Standard & Poor's credit analyst Trevor Martin. Since
S&P believes total debt will be in excess of the borrowing base at
the time of the redetermination, the fund will have six months to
make up the shortfall before it is considered an event of default.
While the fund still generates adequate cash flow from operations,
further reductions in the borrowing base in 2016 would likely put
pressure on what S&P already considers to be a "weak" liquidity
position.
Sheridan Fund I is a 15-year private equity vehicle, which invests
in mature oil and gas assets. The fund's original investment
thesis was based on the idea that public exploration and production
companies were increasingly looking to sell mature properties. In
the third quarter of 2015, the fund had reduced production volumes
of 14,206 barrels of oil equivalent per day (Boe/d), or 7% below
its original plan.
Sheridan Fund I's borrowing base will most likely be reduced from
$1.155 billion. The fund had $1.091 billion of debt outstanding in
November 2015, after pre-paying $25 million of term debt at a 68%
discount to par through a Dutch auction. S&P did not consider this
a selective default at the time because of the trivial amount of
debt in relation to total borrowings.
"In our opinion, the first line of defense is to generate cash
flows from operations. But the fund does have a few avenues
available to it should the forecasted cash flows from operations be
insufficient to remedy a potential shortfall. Lower capital
budgets at exploration and production companies have led to a drop
in the U.S. active rig count (nearing its previous low in 2009),
which should allow the fund to lower its service costs. The fund
anticipates that operating costs will be about 10% below plan for
the year. Currently, we expect free cash flow after capital
reinvestment to be approximately $60 million to $70 million.
Furthermore, the fund has cut distributions to its limited partner
(LP) investors and has stated that it will not reinstate
distributions until it has a clearer picture of the financial
plan," S&P said.
The negative outlook reflects S&P's view that further borrowing
base reductions could add to the fund's liquidity strain. Although
S&P believes the fund will be deficient in its asset coverage
ratio, it still has the ability to make up the difference through
operating cash flows, unwinding its hedges, or through asset sales.
S&P is unlikely to revise the rating to stable unless oil and gas
prices show growth and stability. S&P could lower the rating if it
believed the fund could not make up the difference between the debt
and the borrowing base over the next six months. S&P could also
lower the ratings to signal a default if the fund pursues a
distressed debt exchange.
SHERIDAN FUND II: S&P Lowers Rating to 'CCC', Outlook Negative
--------------------------------------------------------------
Standard & Poor's Ratings Services said it lowered its issuer
credit ratings on Sheridan Production Partners II-A, Sheridan
Investment Partners II, and Sheridan Production Partners II
(collectively referred to as Sheridan Fund II) to 'CCC' from 'B+'.
The outlook is negative.
At the same time, S&P lowered the issue-level rating on the fund's
first-lien, senior secured credit facilities to 'CCC+' from 'B+'.
S&P revised the recovery rating on this debt to '2' (low end of the
range) from '3'. The '2' recovery rating reflects S&P's
expectation of "substantial" recovery (70%-90%) for creditors in
the event of a payment default.
The downgrade primarily reflects S&P's belief that the fund's
borrowing base will be reduced as a result of the prolonged
reduction in oil prices. Since S&P believes total debt will
continue to be in excess of the borrowing base, the fund will have
six months to make up the shortfall before it is considered an
event of default. "While it still generates adequate cash flow
from operations, further reductions in the borrowing base in 2016
zould likely put pressure on what we already consider to be a
"weak" liquidity position," said Standard & Poor's credit analyst
Trevor Martin.
Sheridan Fund II is a 15-year private equity vehicle, which invests
in mature oil and gas assets. The fund's original investment
thesis was based on the idea that public exploration and production
companies were increasingly looking to sell mature properties. In
the third quarter of 2015, the fund had reduced production volumes
of 14,468 barrels of oil equivalent per day (Boe/d), or 20% below
its original plan.
Sheridan Fund II's borrowing base will likely be reduced from $1.35
billion. The company had over $1.321 billion of debt outstanding
in November 2015, after pre-paying $70 million of term debt at a
68% discount to par through a Dutch auction. S&P did not consider
this a selective default at the time because of the trivial amount
of debt in relation to total borrowings.
"In our opinion, the first line of defense is to generate cash
flows from operations. But the fund does have a few avenues
available to it should the forecasted cash flows from operations be
insufficient to remedy the shortfall. Lower capital budgets at
exploration and production companies have led to a drop in the U.S.
active rig count (nearing its previous low in 2009), which should
allow the fund to lower its service costs. The fund anticipates
that operating costs will be about 10% below plan for the year.
Currently, we expect free cash flow after capital reinvestment to
be approximately $170 million to $180 million. Furthermore, the
fund has cut distributions to its limited partner (LP) investors
and has stated that it will not reinstate distributions until it
has a clearer picture of their financial plan," S&P said.
"The negative outlook reflects our view that further borrowing base
reductions could add to the fund's liquidity strain. Although the
fund is deficient in its asset coverage ratio, it still has the
ability to make up the difference through operating cash flows,
unwinding its hedges, or through asset sales. We are unlikely to
revise the rating to stable unless oil and gas prices show growth
and stability. We could lower the rating if we believed the fund
could not make up the difference between the debt and the borrowing
base over the next six months. We could also lower the ratings to
signal a default if the fund pursues a distressed debt exchange,"
S&P noted.
ST. JAMES RIVER: Moody's Affirms Ba1 Rating on Class E Notes
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on these notes
issued by St. James River CLO, Ltd.:
$15,500,000 Class C Third Priority Senior Secured Deferrable
Floating Rate Notes Due 2021, Upgraded to Aaa (sf); previously
on June 29, 2015, Upgraded to Aa1 (sf)
$15,500,000 Class D Fourth Priority Mezzanine Secured Deferrable
Floating Rate Notes Due 2021, Upgraded to A2 (sf); previously
on June 29, 2015, Upgraded to A3 (sf)
Moody's also affirmed the ratings on these notes:
$50,000,000 Class A-R First Priority Senior Secured Floating
Rate Revolving Notes Due 2021 (current outstanding balance of
$12,471,531.86), Affirmed Aaa (sf); previously on June 29,
2015, Affirmed Aaa (sf)
$255,500,000 Class A-T First Priority Senior Secured Floating
Rate Term Notes Due 2021 (current outstanding balance of
$63,729,527.81), Affirmed Aaa (sf); previously on June 29,
2015, Affirmed Aaa (sf)
$27,500,000 Class B Second Priority Senior Secured Floating Rate
Notes Due 2021, Affirmed Aaa (sf); previously on June 29, 2015,
Affirmed Aaa (sf)
$16,000,000 Class E Fifth Priority Mezzanine Secured Deferrable
Floating Rate Notes Due 2021 (current outstanding balance of
$12,198,493.01), Affirmed Ba1 (sf); previously on June 29,
2015, Upgraded to Ba1 (sf)
St. James River CLO, Ltd., issued in July 2007, is a collateralized
loan obligation (CLO) backed primarily by a portfolio of senior
secured loans. The transaction's reinvestment period ended in June
2013.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and/or an increase in the transaction's
over-collateralization (OC) ratios since June 2014. The Class A
notes have been paid down by approximately 31% or $34.6 million
since then. Based on Moody's calculations, the OC ratios for the
Class A/B, Class C, Class D and Class E notes are 154.76%, 134.66%,
119.16% and 109.27%, respectively, versus June 2015 levels of
142.12%, 127.80%, 116.10% and 108.30%, respectively.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2015.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy
and b) the large concentration of upcoming speculative-grade
debt maturities, which could make refinancing difficult for
issuers.
2) Collateral Manager: Performance can also be affected
positively or negatively by a) the manager's investment
strategy and behavior and b) differences in the legal
interpretation of CLO documentation by different
transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current
expectations, can lead to positive CLO performance.
Conversely, a negative shift in credit quality or performance
of the collateral can have adverse consequences for CLO
performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled
principal proceeds will continue and at what pace.
Deleveraging of the CLO could accelerate owing to high
prepayment levels in the loan market and/or collateral sales
by the manager, which could have a significant impact on the
notes' ratings. Note repayments that are faster than Moody's
current expectations will usually have a positive impact on
CLO notes, beginning with those with the highest payment
priority.
5) Recovery of defaulted assets: Fluctuations in the market
value of defaulted assets reported by the trustee and those
that Moody's assumes as having defaulted could result in
volatility in the deal's OC levels. Further, the timing of
recoveries and whether a manager decides to work out or sell
defaulted assets create additional uncertainty. Moody's
analyzed defaulted recoveries assuming the lower of the
market price and the recovery rate in order to account for
potential volatility in market prices. Realization of higher
than assumed recoveries would positively impact the CLO.
6) Higher-than-average exposure to assets with weak liquidity:
The presence of assets with the worst Moody's speculative
grade liquidity (SGL) rating, or SGL-4, exposes the notes to
additional risks if these assets default. The historical
default rate is far higher for companies with SGL-4 ratings
than those with other SGL ratings. Due to the deal's high
exposure to SGL-4 rated assets, which constitute around
$4.7 million of par, Moody's ran a sensitivity case
defaulting those assets.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (1845)
Class A-R: 0
Class A-T: 0
Class B: 0
Class C: 0
Class D: +2
Class E: +1
Moody's Adjusted WARF + 20% (2767)
Class A-R: 0
Class A-T: 0
Class B: 0
Class C: -1
Class D: -2
Class E: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base
case, Moody's analyzed the collateral pool as having a performing
par and principal proceeds balance of $160 million, defaulted par
of $0.9 million, a weighted average default probability of 12.84%
(implying a WARF of 2306), a weighted average recovery rate upon
default of 47.42%, a diversity score of 35 and a weighted average
spread of 2.86%(before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
US CAPITAL VI: Moody's Raises Rating on Cl. A-2 Notes to 'B1'
-------------------------------------------------------------
Moody's Investors Service has upgraded the rating on these notes
issued by U.S. Capital Funding VI, Ltd.:
$60,000,000 Class A-2 Floating Rate Senior Notes Due 2043,
Upgraded to B1 (sf); previously on Nov. 25, 2014, Upgraded to
B3 (sf)
Moody's also affirmed the rating on these notes:
$375,000,000 Class A-1 Floating Rate Senior Notes Due 2043
(current balance of $ 179,520,080), Affirmed Baa3 (sf);
previously on Nov. 25, 2014 Upgraded to Baa3 (sf)
Capital Funding VI, Ltd., issued in June 2007, is a
collateralized debt obligation backed by a portfolio of bank
trust preferred securities (TruPS).
RATINGS RATIONALE
The rating actions are primarily a result of the deleveraging of
the Class A-1 notes, an increase in the transaction's
over-collateralization ratios and a decrease in the total amount of
defaulted assets since January 2015. The Class A-1 notes have paid
down by approximately 5% or $9.3 million January 2015, using
principal proceeds from the redemption of the underlying assets,
the diversion of excess interest proceeds and recovery from
defaulted assets. Based on Moody's calculation, the par coverage
for Class A-1 notes and Class A-2 notes have improved to 141.3% and
105.9%, respectively. In addition, the total par amount of assets
that Moody's treated as having defaulted or deferring declined to
$165.4 million. The Class A-1 notes will continue to benefit from
the diversion of excess interest and the use of proceeds from
redemptions of any assets in the collateral pool.
Nevertheless, the credit quality of the underlying portfolio has
deteriorated. Based on Moody's calculations, the weighted average
rating factor (WARF) increased to 842, from 667 in May 2015.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool has having a performing par of $253.7
million, defaulted/deferring par of $165.4 million, a weighted
average default probability of 9.5% (implying a WARF of 842), and a
weighted average recovery rate upon default of 10%\. In addition to
the quantitative factors Moody's explicitly models, qualitative
factors are part of rating committee considerations. Moody's
considers the structural protections in the transaction, the risk
of an event of default, recent deal performance under current
market conditions, the legal environment and specific documentation
features. All information available to rating committees,
including macroeconomic forecasts, inputs 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.
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs," published in June 2014.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings, as described below:
1) Macroeconomic uncertainty: TruPS CDOs performance could be
negatively affected by uncertainty about credit conditions in
the general economy. Moody's has a stable outlook on the US
banking sector.
2) Portfolio credit risk: Credit performance of the assets
collateralizing the transaction that is better than Moody's
current expectations could have a positive impact on the
transaction's performance. Conversely, asset credit
performance weaker than Moody's current expectations could
have adverse consequences on the transaction's performance.
3) Deleveraging: One source of uncertainty in this transaction
is whether deleveraging from unscheduled principal proceeds
and excess interest proceeds will continue and at what pace.
Note repayments that are faster than Moody's current
expectations could have a positive impact on the notes'
ratings, beginning with the notes with the highest payment
priority.
4) Resumption of interest payments by deferring assets: The
timing and amount of deferral cures could have significant
positive impact on the transaction's over-collateralization
ratios and the ratings on the notes.
5) Exposure to non-publicly rated assets: The deal contains a
large number of securities whose default probability Moody's
assesses through credit scores derived using RiskCalc or
credit estimates. Because these are not public ratings, they
are subject to additional uncertainties.
Loss and Cash Flow Analysis:
Moody's applied a Monte Carlo simulation framework in Moody's
CDOROM to model the loss distribution for TruPS CDOs. The
simulated defaults and recoveries for each of the Monte Carlo
scenarios defined the reference pool's loss distribution. Moody's
then used the loss distribution as an input in its CDOEdge cash
flow model.
The portfolio of this CDO contains TruPS issued by small to medium
sized U.S. community banks that Moody's does not rate publicly. To
evaluate the credit quality of bank TruPS that do not have public
ratings, Moody's uses RiskCalc, an econometric model developed by
Moody's Analytics, to derive credit scores. Moody's evaluation of
the credit risk of most of the bank obligors in the pool relies on
the latest FDIC financial data.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Assuming a two-notch upgrade to assets with below-investment grade
ratings or rating estimates (WARF of 549)
Class A-1: +2
Class A-2: +2
Class B-1: 0
Class B-2: 0
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 1272)
Class A-1: -1
Class A-2: -2
Class B-1: 0
Class B-2: 0
WFRBS COMMERCIAL 2013-C11: S&P Affirms B+ Rating on Cl. F Certs
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on 14
classes of commercial mortgage pass-through certificates from WFRBS
Commercial Mortgage Trust 2013-C11, a U.S. commercial
mortgage-backed securities (CMBS) transaction.
S&P's rating actions on the principal- and interest-paying
certificates follow its analysis of the transaction, primarily
using its criteria for rating U.S. and Canadian CMBS transactions,
which included a review of the credit characteristics and
performance of the remaining assets in the pool, the transaction's
structure, and the liquidity available to the trust.
The affirmations on the principal- and interest-paying certificates
reflect S&P's expectation that the available credit enhancement for
these classes will be within its estimate of the necessary credit
enhancement required for the current ratings. The affirmations
also reflect S&P's views regarding the current and future
performance of the transaction's collateral, the transaction
structure, and liquidity support available to the classes.
S&P affirmed its 'AAA (sf)' rating on the class X-A and its
'A- (sf)' rating on the class X-B interest-only (IO) certificates
based on S&P's criteria for rating IO securities, in which the
ratings on the IO securities would not be higher than the
lowest-rated reference class. The notional balance on class X-A
references classes A-1, A-2, A-3, A-4, A-5, A-SB, and A-S and the
notional balance on class X-B references classes B and C.
TRANSACTION SUMMARY
As of the Dec. 17, 2015, trustee remittance report, the collateral
pool balance was $1.41 billion which is 97.8% of the pool balance
at issuance. The pool currently includes 81 loans (reflecting
cross-collateralized and cross-defaulted loans), the same as at
issuance. One loan ($14.0 million, 1.0%) is with the special
servicer, three ($81.3 million, 5.8%) are defeased, and six ($137.8
million, 9.8%) are on the master servicer's watchlist. The master
servicer, Wells Fargo Bank N.A. reported financial information for
99.4% of the nondefeased loans in the pool, of which 53.7% was
partial-year September 2015 data and 46.3% was partial- and
year-end 2014 data.
S&P calculated a 1.91x Standard & Poor's weighted average debt
service coverage (DSC) and 78.8% loan-to-value (LTV) ratio using a
7.81% Standard & Poor's weighted average capitalization rate. The
DSC, LTV, and capitalization rate calculations exclude the one
specially serviced loan and three defeased loans.
The top 10 nondefeased loans have an aggregate outstanding pool
trust balance of $822.3 million (58.5%). Using servicer-reported
numbers, S&P calculated a Standard & Poor's weighted average DSC
and LTV of 2.05x and 79.4%, respectively, for the top 10
nondefeased performing loans.
To date, the transaction has experienced no principal losses. S&P
expects losses to reach approximately 0.3% of the original pool
trust balance in the near term, based on losses S&P expects upon
the eventual resolution of the specially serviced loan.
CREDIT CONSIDERATIONS
As of the Dec. 17, 2015, trustee remittance report, one loan in the
pool was with the special servicer, Midland Loan Services. Detail
of the specially serviced loan is:
The Minot Hotel Portfolio loan ($14.0 million, 1.0%) is the sole
loan with special servicer and has a total reported exposure of
$14.0 million. The loan is secured by two lodging properties
totaling 238 rooms located in Minot, N.D. The loan was transferred
to the special servicer on Nov. 4, 2015, due to imminent monetary
default. The reported DSC and occupancy as of year-end 2015 were
0.67x and 60%, respectively. S&P expects a moderate loss (26% -
59%) upon the loan's eventual resolution.
RATINGS LIST
WFRBS Commercial Mortgage Trust 2013-C11
Commercial mortgage pass-through certificates series 2013-C11
Rating Rating
Class Identifier To From
A-1 92937EAA2 AAA (sf) AAA (sf)
A-2 92937EAB0 AAA (sf) AAA (sf)
A-3 92937EAC8 AAA (sf) AAA (sf)
A-4 92937EAD6 AAA (sf) AAA (sf)
A-SB 92937EAE4 AAA (sf) AAA (sf)
A-S 92937EAF1 AAA (sf) AAA (sf)
X-A 92937EAS3 AAA (sf) AAA (sf)
X-B 92937EAU8 A- (sf) A- (sf)
B 92937EAG9 AA- (sf) AA- (sf)
C 92937EAH7 A- (sf) A- (sf)
D 92937EAJ3 BBB- (sf) BBB- (sf)
E 92937EAL8 BB (sf) BB (sf)
F 92937EAN4 B+ (sf) B+ (sf)
A-5 92937EAZ7 AAA (sf) AAA (sf)
WG HORIZONS I: Moody's Hikes Class D Debt Rating From 'Ba1(sf)'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by WG Horizons CLO I:
US$16,000,000 Class C Floating Rate Notes Due May 24, 2019,
Upgraded to Aa2 (sf); previously on August 13, 2015 Upgraded to A1
(sf)
US$12,000,000 Class D Floating Rate Notes Due May 24, 2019,
Upgraded to Baa3 (sf); previously on August 13, 2015 Upgraded to
Ba1 (sf)
Moody's also affirmed the ratings on the following notes:
US$296,000,000 Class A-1 Floating Rate Notes Due May 24, 2019
(current outstanding balance $35,710,378), Affirmed Aaa (sf);
previously on August 13, 2015 Affirmed Aaa (sf)
US$24,000,000 Class A-2 Floating Rate Notes Due May 24, 2019,
Affirmed Aaa (sf); previously on August 13, 2015 Affirmed Aaa (sf)
US$21,000,000 Class B Deferrable Floating Rate Notes Due May 24,
2019, Affirmed Aaa (sf); previously on August 13, 2015 Affirmed Aaa
(sf)
WG Horizons CLO I, issued in May 2006, is a collateralized loan
obligation (CLO) backed primarily by a portfolio of senior secured
loans. The transaction's reinvestment period ended in May 2013.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since August 2015. The Class A-1
notes have been paid down by approximately 46.8% or 31.4 million
since then. Based on Moody's calculations, the OC ratios for the
Class A, B, C and D notes are currently 208.5%, 154.2%, 128.7% and
114.5%, respectively, versus August 2015 levels of 172.4%, 140.1%,
122.6% and 112.1%, respectively.
The portfolio includes a number of investments in securities that
mature after the notes do. Based on Moody's calculations,
securities that mature after the notes do currently make up
approximately 12.73% of the portfolio. These investments could
expose the notes to market risk in the event of liquidation when
the notes mature.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets reported by the trustee and those that Moody's
assumes as having defaulted could result in volatility in the
deal's OC levels. Further, the timing of recoveries and whether a
manager decides to work out or sell defaulted assets create
additional uncertainty. Moody's analyzed defaulted recoveries
assuming the lower of the market price and the recovery rate in
order to account for potential volatility in market prices.
Realization of higher than assumed recoveries would positively
impact the CLO.
6) Long-dated assets: The presence of assets that mature after the
CLO's legal maturity date exposes the deal to liquidation risk on
those assets. This risk is borne first by investors with the lowest
priority in the capital structure. Moody's assumes that the
terminal value of an asset upon liquidation at maturity will be
equal to the lower of an assumed liquidation value (depending on
the extent to which the asset's maturity lags that of the
liabilities) or the asset's current market value.
7) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which could
lengthen owing to the manager's decision to reinvest into new issue
loans or loans with longer maturities, or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis. Life extension
can increase the default risk horizon and assumed cumulative
default probability of CLO collateral.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% (2098)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C: +1
Class D: +2
Moody's Adjusted WARF + 20% (3148)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C: -2
Class D: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $122.4 million, defaulted par of
$10.4 million, a weighted average default probability of 12.70%
(implying a WARF of 2623), a weighted average recovery rate upon
default of 51.41%, a diversity score of 34 and a weighted average
spread of 3.19% (before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
[*] Moody's Upgrades $125MM of Subprime RMBS Issued 2002-2005
-------------------------------------------------------------
Moody's Investors Service has upgraded the rating of 20 tranches,
from 8 transactions issued by various issuers, backed by Subprime
mortgage loans.
Complete rating actions are as follows:
Issuer: Ace Securities Corp. Home Equity Loan Trust, Series
2002-HE2
Cl. M-2, Upgraded to B1 (sf); previously on Jul 28, 2014 Upgraded
to Caa1 (sf)
Cl. M-3, Upgraded to B2 (sf); previously on Jul 28, 2014 Upgraded
to Caa2 (sf)
Cl. M-4, Upgraded to Caa2 (sf); previously on Jul 28, 2014 Upgraded
to Ca (sf)
Issuer: ACE Securities Corp. Home Equity Loan Trust, Series
2003-OP1
Cl. M-2, Upgraded to B3 (sf); previously on Apr 16, 2012 Downgraded
to Ca (sf)
Cl. M-3, Upgraded to Ca (sf); previously on Apr 16, 2012 Downgraded
to C (sf)
Cl. M-4, Upgraded to Ca (sf); previously on Mar 15, 2011 Downgraded
to C (sf)
Cl. M-5, Upgraded to Caa3 (sf); previously on Mar 15, 2011
Downgraded to C (sf)
Issuer: ACE Securities Corp. Home Equity Loan Trust, Series
2004-FM1
Cl. 2004-FM1-M1, Upgraded to Ba1 (sf); previously on Jun 24, 2014
Upgraded to B1 (sf)
Cl. 2004-FM1-M2, Upgraded to Caa1 (sf); previously on Jun 24, 2014
Upgraded to Ca (sf)
Cl. 2004-FM1-M3, Upgraded to Caa2 (sf); previously on Mar 15, 2011
Downgraded to C (sf)
Issuer: ACE Securities Corp. Home Equity Loan Trust, Series
2004-HE4
Cl. M-2, Upgraded to Ba1 (sf); previously on Aug 22, 2014 Upgraded
to B2 (sf)
Cl. M-3, Upgraded to B1 (sf); previously on Aug 22, 2014 Upgraded
to Caa3 (sf)
Cl. M-4, Upgraded to B3 (sf); previously on Apr 16, 2012 Downgraded
to C (sf)
Issuer: ACE Securities Corp. Home Equity Loan Trust, Series
2004-RM2
Cl. M-3, Upgraded to B2 (sf); previously on Mar 15, 2011 Downgraded
to Caa3 (sf)
Issuer: Argent Securities Inc., Series 2003-W5
Cl. M-2, Upgraded to Ba3 (sf); previously on Mar 18, 2011
Downgraded to B2 (sf)
Cl. M-3, Upgraded to Caa2 (sf); previously on Apr 13, 2012
Downgraded to Ca (sf)
Cl. M-4, Upgraded to Ca (sf); previously on Apr 13, 2012 Downgraded
to C (sf)
Cl. M-5, Upgraded to Ca (sf); previously on Apr 13, 2012 Downgraded
to C (sf)
Issuer: Argent Securities Inc., Series 2003-W8
Cl. M-2, Upgraded to B2 (sf); previously on Mar 18, 2011 Downgraded
to Caa2 (sf)
Issuer: New Century Home Equity Loan Trust 2005-3
Cl. M-5, Upgraded to B3 (sf); previously on May 1, 2014 Upgraded to
Caa3 (sf)
RATINGS RATIONALE
The upgrades are a result of improving performance of the related
pools and/or faster pay-down of the bonds due to high
prepayments/faster liquidations. The actions reflect recent
performance of the underlying pools and Moody's updated loss
expectations on the pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in November 2013.
Factors that would lead to an upgrade or downgrade of the rating:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 5.0% in November 2015 from 5.8% in
November 2014. Moody's forecasts an unemployment central range of
5% to 6% for the 2015 year. Deviations from this central scenario
could lead to rating actions in the sector. House prices are
another key driver of US RMBS performance. Moody's expects house
prices to continue to rise in 2015. Lower increases than Moody's
expects or decreases could lead to negative rating actions.
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.
[*] S&P Discontinues Ratings on 24 Classes From 7 CDO Transactions
------------------------------------------------------------------
Standard & Poor's Ratings Services, on Jan. 6, 2015, discontinued
its ratings on 16 classes from six cash flow (CF) collateralized
loan obligation (CLO) transactions and eight classes from one CF
collateralized debt obligation (CDO) transaction backed by
commercial mortgage-backed securities (CMBS).
The discontinuances follow the complete paydown of the notes as
reflected in the most recent trustee-issued note payment reports
for each transaction:
-- Black Diamond CLO 2005-1 Ltd. (CF CLO): Senior-most tranche
paid down, other rated tranches still outstanding.
-- Cent CDO 10 Ltd. (CF CLO): Optional redemption in December
2015.
-- CIFC Funding 2006-IB Ltd. (CF CLO): Optional redemption in
December 2015.
-- Franklin CLO V Ltd. (CF CLO): Senior-most tranches paid
down, other rated tranches still outstanding.
-- Latitude CLO II Ltd. (CF CLO): Senior-most tranche paid
down, other rated tranches still outstanding.
-- LCM V Ltd. (CF CLO): All rated tranches paid down.
-- ROCK 1--CRE-CDO 2006 Ltd. (CF CDO of CMBS): Optional
redemption in December 2015.
RATINGS DISCONTINUED
Black Diamond CLO 2005-1 Ltd.
Rating
Class To From
B NR AAA (sf)
Cent CDO 10 Ltd.
Rating
Class To From
A-1 NR AAA (sf)
B NR AA+ (sf)
C NR AA- (sf)
D NR BBB- (sf)
E NR BB+ (sf)
CIFC Funding 2006-IB Ltd.
Rating
Class To From
A-2L NR AAA (sf)
A-3L NR AAA (sf)
B-1L NR AA+ (sf)
B-2L NR A+ (sf)
Franklin CLO V Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
Latitude CLO II Ltd.
Rating
Class To From
A-2 NR AAA (sf)
LCM V Ltd.
Rating
Class To From
C NR AAA (sf)
D NR AAA (sf)
E NR AAA (sf)
ROCK 1--CRE-CDO 2006 Ltd.
Rating
Class To From
C NR A+ (sf)
D NR A (sf)
E NR A- (sf)
F NR BBB- (sf)
G NR B (sf)
H NR CCC- (sf)
J NR CCC- (sf)
K NR CCC- (sf)
NR -- Not rated.
[*] S&P Takes Rating Actions on 11 Classes From 3 RMBS Deals
------------------------------------------------------------
Standard & Poor's Ratings Services, on Dec. 29, 2015, took various
rating actions on 11 ratings from three U.S. residential
mortgage-backed securities (RMBS) transactions backed by various
collateral types. Each class benefits from a guarantee by Fannie
Mae, which guarantees the payment of current interest and principal
as well as the payment of any outstanding principal remaining on
each class' final distribution date. S&P lowered two ratings,
affirmed five ratings, and placed four ratings on CreditWatch with
negative implications.
IMPUTED PROMISES CRITERIA
When a class of securities supported by a particular collateral
pool is paid interest based on a weighted average coupon (WAC) and
the interest owed to that class is reduced because of loan
modifications or other credit-related events, S&P imputes an amount
of interest owed to that class of securities by applying its
"Methodology For Incorporating Loan Modifications And Extraordinary
Expenses Into U.S. RMBS Ratings," published April 17, 2015, and
"Principles For Rating Debt Issues Based On Imputed Promises,"
published Dec. 19, 2014, criteria. Based on S&P's criteria, it
applies a maximum potential rating (MPR) cap to those affected
classes of securities in S&P's analysis. If S&P applies an MPR cap
to a particular class, the resulting rating may be lower than if
S&P had solely considered that class' interest owed based on the
applicable WAC.
The two downgrades reflect the application of S&P's imputed
promises criteria. The ratings on classes A-I-7 and A-I-8 from New
Century Home Equity Loan Trust Series 2004-A were lowered to 'A-
(sf)' and 'CCC (sf)', respectively, from 'AA+ (sf)'. The interest
payments to these bondholders have been reduced due to loan
modifications and the ratings reflect each class' MPR cap. While
each class benefits from a guarantee by Fannie Mae as to the
payment of current interest, Fannie Mae is obligated to pay only
the lesser of the stated rate and the WAC, and does not cover the
reduction in the WAC due to loan modifications (the Fannie Mae
guarantee).
The five affirmations reflect the Fannie Mae guarantee for the
payment of current monthly interest and principal along with the
payment of any outstanding principal balances remaining on the
final distribution date in May 2034. The interest owed on these
classes has not been affected by loan modifications.
The four CreditWatch placements reflect the lack of information
needed to impute an amount of interest owed to each class and
calculate an MPR cap. On Aug. 24, 2015, S&P published "S&P's Steps
For Obtaining Necessary Information To Apply Recently Effective
U.S. RMBS Criteria," which described S&P's process for requesting
information on loan modifications and the potential outcomes if S&P
was unable to collect the necessary information from either the
trustee or servicer. Per the release, S&P may consider withdrawing
the ratings on these classes if it do not receive the requested
information within 30 days following the CreditWatch placements.
Each of the classes placed on CreditWatch also benefits from the
Fannie Mae guarantee but, as stated above, Fannie Mae does not
cover the reduction in the WAC due to loan modifications.
Therefore, even if the requested information is received and S&P is
able to calculate an MPR cap, the rating may be lowered.
S&P will resolve the CreditWatch placements based on the data it
receives and the application of its criteria, or take the
appropriate rating actions, including withdrawal, if S&P do not
receive the requested information.
ECONOMIC OUTLOOK
When determining a U.S. RMBS collateral pool's relative credit
quality, S&P's loss expectations stem, to a certain extent, from
its view of how the loans will behave under various economic
conditions. Standard & Poor's baseline macroeconomic outlook
assumptions for variables that it believes could affect residential
mortgage performance are:
-- An overall unemployment rate of 5.3% for 2015, declining to
4.8% in 2016;
-- Real GDP growth of 2.5% for 2015, increasing to 2.7% in
2016;
-- The inflation rate will be 1.8% in 2015 and 1.9% in 2016;
and
-- The 30-year fixed mortgage rate will average about 3.9% in
2015, and rise to 4.4% in 2016.
S&P's outlook for RMBS is stable. Although S&P views overall
housing fundamentals positively, it believes RMBS fundamentals
still hinge on additional factors, such as the ultimate fate of
modified loans, the propensity of servicers to advance on
delinquent loans, and liquidation timelines.
Under S&P's baseline economic assumptions, it expects RMBS
collateral quality to improve. However, if the U.S. economy were
to become stressed in line with Standard & Poor's downside
forecast, it believes that U.S. RMBS credit quality would weaken.
S&P's downside scenario reflects these key assumptions:
-- Total unemployment will tick up to 5.4% for 2016;
-- Downward pressure causes GDP growth to fall to 1.3% in 2016;
-- Home price momentum slows as potential buyers are not able
to purchase property; and
-- While the 30-year fixed mortgage rate inches up to 4.0% in
2016, limited access to credit and pressure on home prices
will largely prevent consumers from capitalizing on these
rates.
RATINGS LOWERED
New Century Home Equity Loan Trust Series 2004-A
Series 2004-A
Rating
Class CUSIP To From
A-I-7 64352VHL8 A- (sf) AA+ (sf)
A-I-8 64352VHM6 CCC (sf) AA+ (sf)
RATINGS AFFIRMED
Fannie Mae REMIC Trust 2004-W3
Series 2004-W3
Class CUSIP Rating
A-20 31393XWW3 AA+ (sf)
A-36 31393XWY9 AA+ (sf)
A-37 31393XWZ6 AA+ (sf)
A-38 31393XXA0 AA+ (sf)
A-39 31393XXB8 AA+ (sf)
RATINGS PLACED ON CREDITWATCH NEGATIVE
Fannie Mae REMIC Trust 2002-W1
Series 2002-W1
Rating
Class CUSIP To From
1A-IO 31392CMK7 AA+ (sf)/Watch Neg AA+ (sf)
2A 31392CMS0 AA+ (sf)/Watch Neg AA+ (sf)
2A-IO 31392CMU5 AA+ (sf)/Watch Neg AA+ (sf)
3A 31392CMV3 AA+ (sf)/Watch Neg AA+ (sf)
[*] S&P Takes Various Rating Actions on 21 U.S. Alt-A RMBS
----------------------------------------------------------
Standard & Poor's Ratings Services, on Dec. 29, 2015, took various
actions on 85 classes from 21 U.S. residential mortgage-backed
securities (RMBS) transactions. S&P raised 38 of these ratings,
affirmed 35, and placed two on CreditWatch with negative
implications. In addition, S&P discontinued its ratings on 10
classes.
All of the transactions in this review were issued between 2002 and
2007, and all but one are supported by a mix of fixed- and
adjustable-rate scratch-and-dent mortgage loan collateral.
Alternative Loan Trust 2004-J13 is backed by alternative-A mortgage
loan collateral. Scratch-and-dent transactions generally fall into
four categories: outside-the-guidelines, document-deficient,
reperforming, and nonperforming liquidation trusts. The
scratch-and-dent deals in this review are backed predominantly by
reperforming and outside-the-guidelines residential mortgage loans
secured by first liens on one- to four-family residential
properties.
Subordination, overcollateralization (where available), excess
interest (as applicable), and bond insurance provide credit
enhancement for the transactions in this review. When the bond
insurer is rated lower than what S&P would rate the respective
class, it relied solely on the underlying collateral's credit
quality and the transaction structure to derive the rating.
ANALYTICAL CONSIDERATIONS
S&P routinely incorporates various considerations into its
decisions to raise, lower, or affirm ratings when reviewing the
indicative ratings suggested by S&P's projected cash flows. These
considerations are based on specific performance or structural
characteristics, or both, and their potential effects on certain
classes.
APPLICATION OF U.S. RMBS PRE-2009 CRITERIA WHEN LOAN-LEVEL DATA IS
NOT AVAILABLE
When performing S&P's credit analysis to determine the foreclosure
frequency for all pools within this review, it segmented the
collateral into current loans (including reperforming) and
delinquent loans. S&P further segmented the current bucket based
on payment pattern.
When loan-level data was available, S&P derived the foreclosure
frequency as described in "U.S. RMBS Surveillance Credit And Cash
Flow Analysis For Pre-2009 Originations," published Feb. 18, 2015
(pre-2009 surveillance criteria). In instances where loan-level
data was not available, to derive the foreclosure frequency for the
current bucket, S&P made certain assumptions regarding the
percentage of current loans that are reperforming, the percentage
of current loans that have impaired credit history, and the
adjusted loan-to-value ratio of perfect payers.
S&P used pool-level data to compare each pool's performance to the
cohort average. For pools with high delinquencies and normalized
cumulative losses relative to the cohort average, S&P assumed a
higher foreclosure frequency than that associated with the cohort
average. Conversely, S&P assumed a lower foreclosure frequency for
pools with better observed performance relative to the cohort
average.
With respect to delinquent loans, because S&P uses cohort-specific
roll rate assumptions, it used pool-level data to derive the
foreclosure frequency of these loans as set forth in its pre-2009
surveillance criteria.
In this review, S&P did not have loan-level data available for
these transactions:
-- ACE Securities Corp. Home Equity Loan Trust, Series 2006-SD3
-- CBASS 2003-CB2 Trust
-- GSAMP Trust Series 2007-SEA1
-- MASTR Specialized Loan Trust 2004-01
-- MASTR Specialized Loan Trust 2006-02
-- RAAC Series 2005-RP1 Trust
-- RAAC Series 2005-RP2 Trust
-- RAAC Series 2005-RP3 Trust
-- RAAC Series 2006-RP1 Trust
-- RAAC series 2006-RP2 Trust
-- RAAC Series 2006-RP4 Trust
-- Truman Capital Mortgage Loan Trust 2004-2
UPGRADES
S&P raised its ratings on 38 classes from 14 transactions, and four
of these upgrades were by six or more notches. The projected
credit enhancement for the affected classes is sufficient to cover
our projected losses at these rating levels. The upgrades reflect
one or more of:
-- Improved collateral performance/delinquency trends;
-- Increased credit support;
-- Expected short duration; and
-- Increased prepayments.
S&P raised four of the ratings to 'CCC (sf)' from 'CC (sf)' because
it believes these classes are no longer virtually certain to
default, as set forth in "Standard & Poor's Ratings Definitions,"
Nov. 20, 2014.
AFFIRMATIONS
For certain transactions, S&P considered specific performance
characteristics that, in its view, could add volatility to its loss
assumptions and, in turn, to the ratings suggested by S&P's cash
flow projections. In these circumstances, S&P affirmed, rather
than raised, its ratings on those classes to promote ratings
stability. In general, the bonds that were affected reflect one or
more of:
-- Historical interest shortfalls;
-- A low priority of principal payments;
-- A high proportion of re-performing loans in the pool; and
-- Low subordination or overcollateralization, or both.
S&P affirmed eight ratings in the 'AAA' through 'A' categories on
classes from five transactions. In addition, S&P affirmed ratings
in the 'BBB' through 'B' categories on seven classes from six
transactions. These affirmations reflect S&P's opinion that its
projected credit support is sufficient to cover its projected
losses in those rating scenarios.
S&P affirmed 20 'CCC (sf)' or 'CC (sf)' ratings. S&P believes that
its projected credit support will remain insufficient to cover its
projected losses to these classes. As defined in "Criteria For
Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012,
the 'CCC (sf)' affirmations indicate that S&P believes these
classes are still vulnerable to default, and the 'CC (sf)'
affirmations reflect S&P's belief that these classes remain
virtually certain to default.
DISCONTINUANCES
S&P discontinued its ratings on eight classes from three
transactions because these classes have been paid in full. In
addition, S&P discontinued its ratings on class M-4 from RAAC
series 2006-RP2 Trust and class B-2 from MASTR Specialized Loan
Trust 2006-02 according to the Standard & Poor's surveillance and
withdrawal policy. S&P views a subsequent upgrade to a rating
higher than 'D (sf)' to be unlikely under the relevant criteria.
CREDITWATCH NEGATIVE PLACEMENTS
S&P placed its 'BBB (sf)' rating on class B-1 from C-BASS 2002-CB1
and its 'CC (sf)' rating on class M-3 from MASTR Specialized Loan
Trust 2004-01 on CreditWatch negative. The CreditWatch placements
reflect S&P's ongoing review of the transactions' histories of loan
modifications and its assessment of the potential impact to the
interest imputed to these classes.
ECONOMIC OUTLOOK
When determining a U.S. RMBS collateral pool's relative credit
quality, S&P's loss expectations stem, to a certain extent, from
its view of how the loans will behave under various economic
conditions. Standard & Poor's baseline macroeconomic outlook
assumptions for variables that it believes could affect residential
mortgage performance are:
-- An overall unemployment rate of 5.3% for 2015, declining to
4.8% in 2016;
-- Real GDP growth of 2.5% for 2015, increasing to 2.7% in
2016;
-- An inflation rate of 1.8% in 2015 and 1.9% in 2016; and
-- A 30-year fixed mortgage rate averaging about 3.9% in 2015
and rising to 4.4% in 2016.
S&P's outlook for the U.S. RMBS sector is stable. Although S&P
views overall housing fundamentals positively, it believes RMBS
fundamentals still hinge on additional factors, such as the
ultimate fate of modified loans, the propensity of servicers to
advance on delinquent loans, and liquidation timelines.
Under S&P's baseline economic assumptions, it expects RMBS
collateral quality to improve. However, if the U.S. economy were
to become stressed in line with Standard & Poor's downside
forecast, it believes that U.S. RMBS credit quality would weaken.
S&P's downside scenario reflects these key assumptions:
-- Total unemployment will tick up to 5.4% for 2016;
-- Downward pressure causes GDP growth to fall to 1.3% in 2016;
-- Home price momentum slows as potential buyers are not able
to purchase property; and
-- While the 30-year fixed mortgage rate inches up to 4.0% in
2016, limited access to credit and pressure on home prices
will largely prevent consumers from capitalizing on these
rates.
A list of the Affected Ratings is available at:
http://bit.ly/1muA6o3
*********
Monday's edition of the TCR delivers a list of indicative prices
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then-ending.
*********
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